The pension industry assets for the first time in many years grew by a single-digit rate at 3.3 per cent in 2015, as a tougher investment climate saw equities and offshore investments drop in favour of property and fixed deposits.
Official industry data from the Retirement Benefits Authority (RBA) shows the schemes held Sh814.11 billion in assets at the end of December 2015, compared to Sh788.15 billion at the end of 2014.
Between 2012 and 2014, the industry had posted double-digit growth in assets — 26 per cent in 2012, 27 per cent in 2013 and 13 per cent in 2014 — fuelled by higher valuation of their equity investments during the bull run years of the NSE.
“A turbulent 2015 (was) characterised by significant currency instability and an aggressive bout of monetary tightening. Specifically the bourse has been fluctuating in value with most of the counters recording poor returns and some of the corporate bonds not performing as expected,” said RBA in the industry report.
“There was a slight growth in some of the asset classes, especially in the fixed deposits and immovable property asset class categories each registering 34 per cent and 16 per cent increase in total assets under management. However, there was a sharp decline in investments in offshore investments, unquoted and quoted securities at -51 per cent-39 per cent and -8 per cent respectively.”
On the gain side, the value of assets under government securities, fixed deposits and property stood at Sh242.4 billion, Sh55.6 billion and Sh150.8 billion respectively in 2015 from Sh241 billion, Sh41.5 billion and Sh130.4 billion the previous year.
On the other hand, the value of quoted securities dropped from Sh203.7 billion in 2014 to Sh186.8 billion last year, and that of offshore investments from Sh14.7 billion to Sh7.2 billion.
The schemes also put in a total of Sh170 million in private equity and venture capital, a new segment that was introduced as an investment class last year.
The equities market had enjoyed robust three-year bull run which saw major investors who include pension funds book billions in paper wealth.
The bull run culminated in the market hitting a four-year high at the beginning of March 2015, before starting off on a slide that has persisted since.
Analysis of returns done by Alexander Forbes Financial Services (AF) shows that the average return from the equities market in the one year period since March 2015 was negative 14.3 per cent compared to a gain of 23 per cent the previous year.
The indicative NSE 20 share index dipped 21 per cent last year, and is currently 5.1 per cent down this year to date.
The AF survey, which included 373 fund managers holding Sh535.3 billion, showed that pensioners were badly hit in the one year to March 2016 with the overall return at negative 0.2 per cent, far below the average 6.8 per cent average rate of inflation over the period.
The slow growth in 2015 raises doubts on an optimistic growth forecast made by the RBA earlier this year.
Source: Business Daily