Kenya’s Pension Schemes losses KSh350 Billion at the Stock Market in 3 Months

Kenya’s pension schemes lost over Ksh35 billion ($350 million) to falling stock prices and rising inflation as the coronavirus pandemic wreaks havoc on the economy for the past three months.

According to a survey carried out by Zamara Consulting Actuaries shows that the returns on retirees’ investments dropped drastically in the last three months starting March 21, prompting a shift from equities to bonds.

The survey looked into 415 pension schemes with a total of Ksh852.4 billion in assets under management

Sundeep Raichura, Zamara Group chief executive said that pension funds have been heavily exposed to equities, thus the drastic downturn in the market directly impacts them in a major way.

“We have seen the average returns for pension schemes during quarter one decline by 4.2 percent 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 normalizes,” Raichura said.

The findings of the survey showed that the returns on equity and offshore investments dropped by 23.9 percent and 15.6 percent respectively during the period under review, while that on fixed-income investments (Treasury Bills, Bonds and bank deposits) rose by 2.6 percent.

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

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

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

Moderate pension schemes hold between 65 percent and 80 percent 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.