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Pensions Scheme returns on stock market

by Brian Yatich

Retirement schemes’ equity allocation increased over the quarter ending 30 June 2017. This was mainly caused by the rally in the stock market over the period.

The Zamara Consulting Actuaries Schemes Survey (Z – CASS) for the second quarter of 2017 shows that the allocation of equity investments increased to 21.5 per cent from 19.1 per cent in the first quarter as prices of the held investments increased.

“The Nairobi Securities Exchange (NSE) has rallied since April of this year mainly driven by Banking Stocks delivering profits, strong sustained performance from Safaricom which led to increased local and foreign investor confidence. The offshore asset class also performed well over the 12 month period. Although following the results of the supreme court judgement nullifying the election results on 1 September, the stock market took a plunge, ”said Zamara Group Chief Executive Officer Sundeep Raichura.

Fixed income assets accounted for 72.9 per cent of the average pension fund allocation followed by property at 4.3 per cent and offshore at 1.3 per cent.

The Z-CASS Survey additionally showed that participating schemes had a median return of 14.3 per cent over a one-year period and a 9.4 per cent return over a three-year period. Schemes in Kenya have varying risk profiles, the survey classifies the schemes in to three categories – Conservative, Moderate and Aggressive. During the 12 month period, schemes with moderate risk had the highest median performance and conservative schemes had the highest 3 year median performance.

Offshore investments, despite the low asset allocation, had the highest median return over a one-year period at 22.6 per cent followed by fixed income at 15.2 per cent and equity at 12.5 per cent.

Fixed income assets recorded the highest return over a three-year period at 12.9 per cent, followed by offshore investments at 10.1 per cent and equities at 1.7 per cent.

At least 382 Schemes were covered in the in the Z – CASS Survey in the second quarter of 2017 and the assets under management covered by the survey were at Ksh655 billion.

The Z- Cass Survey enables trustees to compare the performance of their retirement scheme relative to their peers within the broader retirement scheme industry.

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