Stock market wipes out Kenyan pensioners’ $350m

0
238
Kenyan pensioners protest in Nairobi last November. Pension funds have been heavily exposed to equities leading to massive losses. PHOTO/COURTESY

Kenyan retirees lost over Ksh35 billion ($350 million) to falling stock prices and soaring inflation as the Covid-19 pandemic wreaked havoc on the country’s economy in the past three months.

A survey conducted by Zamara Consulting Actuaries covering 415 pension schemes with a total of Ksh852.4 billion ($8.52 billion) in assets under management shows that the returns on pensioners’ investments in the three months to March 31 dropped, prompting a shift from equities to bonds.

“Pension funds have been heavily exposed to equities. And with this kind of downturn in the market, they are also heavily impacted,” Sundeep Raichura, Zamara Group chief executive, said.

“We have seen the average returns for pension schemes during quarter one decline by 4.2 per cent largely due to the poor performance of the equities market. Nobody knows how long this Covid-19 situation is going to last because it is an unusual situation. However, we expect a good rebound of the market if the situation normalises,” he added.

According to the findings of the survey released last week, the returns on equity and offshore investments dropped 23.9 per cent and 15.6 per cent respectively, during the period under review, while that on fixed income investments (Treasury Bills, Bonds and bank deposits) rose by 2.6 per cent.

At the end of the quarter, schemes had shifted about 75 per cent of their assets to fixed income investments, 18.8 per cent to equities, 5.7 per cent to property and 0.5 per cent to offshore investments.

During the period, conservative schemes, which hold over 80 per cent of their assets in fixed income investments, allocated 83.4 per cent of their assets to fixed income, 13.6 per cent to equity, 2.9 per cent to property and 0.1 per cent to offshore.

Aggressive schemes (risk takers), which hold less than 65 per cent of their assets in fixed income, allocated 48.1 per cent of their assets to fixed income, 29 per cent to equities, 20.3 per cent to property and 2.6 per cent to offshore.

Moderate pension schemes hold between 65 per cent and 80 per cent of their asset portfolio in fixed income.

The fund managers that participated in the survey included African Alliance Kenya Investment Bank Ltd, Apollo Asset Managers, British American Asset Managers, CIC Insurance, Co-op Trust Investments, GenAfrica Assets Managers, Old Mutual Investment Group Ltd and Sanlam Investments East Africa Ltd.

Chief executive of Standard Investment Bank James Wangunyu said pension funds should take advantage of the prevailing low valuations on the stock market to boost their investments with a long term view.

“This is the time to buy and own companies that are cheaply priced,” he said.

UNDERPRICED

While the bear-run on the Nairobi Securities Exchange in the past three months has largely been attributed to the Covid-19 pandemic, the Capital Markets Authority says that both the coronavirus and locust invasion will have an adverse effect on agriculture, tourism, manufacturing and transport companies.

“This is therefore an excellent opportunity for long-term investors to take advantage of the underpriced shares for future capital gains and dividend payments,” said the CMA in its latest Capital Markets Soundness report for Quarter 1.