Zimbabwe: Pension Funds Battle for Survival

PENSION funds have turned into investments in property and equities to stay afloat, the Insurance and Pensions Commission (Ipec) pension industry report for the 2019 third quarter has revealed.

The report shows that pension funds recorded a 34,23% increase in assets, which now stand at $9,45 billion for the period ended September 30.

Pension funds are the biggest local investors in the market and have been struggling to make returns from their investments due to the unstable local currency.

Ipec said equities investments and investment in property continued to be the major investment classes during the period under review.

"The pension industry had a total asset base of $9.45 billion as at 30 September 2019, increasing by 34.23% from $7.04 billion as at 30 June 2019," reads part of the report.

"The increase was mainly driven by an increase in the values of investment properties and equities."

The nominal increase in the industry's asset base was rapid from March 31 to September 30, 2019, emanating from the change in the functional currency from United States dollar to the re-introduced local currency.

"Equities investments and investment property continued to be the major investment classes as the industry seeks to preserve long term value and hedge against inflation," Ipec added.

"The two asset classes totalled $7.21 billion as at 30 September 2019, accounting for 76.48% of total industry assets."

The revaluation translated into higher property prices and pension funds are hoping to make significant returns from the portfolio.

"Investment property increased from $2.05 billion as at 30 June 2019 to $3.04 billion as at 30 September 2019," Ipec said.

"The value of the property portfolio is increasing in nominal terms in line with developments in inflation.

"However, rental yields are reportedly depressed on account of the recent inflation developments and low occupancy levels.

There was also significant growth in equities invest, which rose by 22.4 % during the period under review.

"Quoted equities investment increased by 22.44% from $3.03 billion as at 30 June 2019 to $3.71 billion as at 30 September 2019 on account of an increase in the values of shares on the Zimbabwe Stock Exchange," Ipec said.

"The industry's equities portfolio grew at a higher rate than the 12.88% increase in the ZSE's market capitalisation.

"The industry's equities portfolio as at 30 September 2019 accounted for 12.06% of the total market capitalisation of listed equities."

According to IPEC, the industry's equities portfolio as at September 30, 2019 accounted for 12.06% of the total market capitalisation of listed equities.

IPEC warned that the pension industry is now exposed to relatively high liquidity risk on account of the concentration of the asset portfolios in properties and equities.

As at the end of the period under review, IPEC reported that there were 1 094 pension funds with 628 active funds.

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