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Kenyan pension schemes lost over Ksh11 billion (US$76,92 million) in bond and equity investments in the three months to June 2023, due to rising interest rates, which lowered valuations and share prices on the Nairobi Securities Exchange (NSE).
A quarterly survey by actuarial services firm Zamara Consulting shows that fund management firms are feeling the heat of their heavy exposure to bonds and equity investments at a time when a mixture of global and domestic macroeconomic factors have weakened the local business environment.
The study, which sampled 423 schemes with a total of Ksh1,05 trillion (US$7,34 billion) of assets under management, reveals that the schemes which usually invest employees’ retirement funds, lost about Ksh4,89 billion ($34,19 million) and Ksh6,74 billion (US$47,13 million) in bond and equity investments respectively, during April-June.
Government bonds have become more attractive because of the state’s huge appetite for borrowing to fund its operations and plug the Ksh718 billion (US$5,02 billion) budget deficit for the current fiscal year (2023/24).
But the bond valuations have been hit by the Central Bank’s monetary policy tightening stance seeking to anchor inflation expectations as the shilling dropped to its lowest against the Dollar trading at Ksh143 against the greenback last week.
The Central Bank Monetary Policy Committee retained the Central Bank Rate at 10,50 percent, noting that the impact of the policy rate increase in June to anchor inflationary expectations was still transmitting in the economy.
According to the Zamara survey findings which were released last week the fund management schemes invested 78,3 percent (Ksh822,15 billion (US$5,74 billion) in bonds and 14,6 percent (Ksh153,3 billion, $1,07 billion) in listed companies during the period under review. – The East African.
Online Reporter