adminRumbidzayi Zinyuke Business Reporter
Investments now play the biggest role in pension management in Zimbabwe and pension funds should have a solid investment process to guide them in achieving their objectives, a recent investment performance survey for pension funds has said.
The survey, done by Atchison Actuaries and Consultants for the period between 2009 and 2013, sought to monitor investment performance for 35 pension funds.
According to the survey, the best performing pension fund achieved an average annual return of 20,84 percent per annum over two and a half years while its effective growth for three years was 48,37 percent.
The fund achieved real return of 39 percent over the three years with an average asset allocation of between 60-70 percent in equity and 30-40 percent in the money markets.
The fund gradually reduced equity and increased money market value over the period under review and the results showed that it was evidently reasonably diversified in terms of investment portfolio.
Atchison said the results were buoyed by the huge jump in equities in 2013 which had been previously modest. The top five performers focused their investments on equity and money markets while only a small percentage was directed towards private equity, unit trusts and fixed property.
According to the survey, the best performing pension funds experienced a decline in the investments in listed equities between 2009 and 2012 to stabilise in 2013. However, there was a sharp increase in the money markets investments from 2009 to 2010 which has been steadily rising to date.
Last year, investments in property in units declined to below 10 percent while private equity slightly increased.
“Trustees realised that listed equities were suffering from low confidence due to a number of factors and gradually reduced exposure to these. They took advantage of high yields in money markets and hence delivered very good outcomes for their members,” the report said.
The report said the outlook for members of the top performing funds was positive as contributions were generally up to date and the funds had taken advantage of available opportunities to establish minimum pensions funded from investment surpluses.
The worst performing pension fund recorded an effective tri-annual return of 1,74 percent over four years with an average asset allocation of 30 percent in equity, 60 percent in fixed property and 10 percent in property units.
“Trustees were slower in reading into the prevailing market conditions and were slower in implementing asset allocation changes to utilise available opportunities”
This led to a poorly diversified investment portfolio with a 0 percent interest declaration for the last three years. Investments in money markets went up between 2009 and 2013 and experienced a sharp increase in 2013.
“In 2009, average allocation was 95 percent equities and 5 percent everything else for worst performers. This was ok in the hyper-inflationary period. However, conditions have changed and so should investment strategy,” the report said.
The company said diversification was an effective risk management tool which all pension funds should adopt.
Online Reporter