Capitalise on evolving market dynamics: Fidelity Life Asset Management
Staff Writer
Fidelity Life Asset Management says in the short term, allocating funds to USD money market investments can serve as a prudent strategy, offering competitive returns and liquidity amidst immediate economic uncertainties.
However, for investors with a longer investment horizon, exploring the alternative investment space, including REITs, private equity, and venture capital, can be rewarding.
“These alternative investments often exhibit lower correlation with traditional asset classes, potentially enhancing portfolio diversification and offering the prospect of higher returns.
“Overall, diversifying portfolios with a mix of growth-oriented assets and alternative investments enables investors to optimise returns while managing risks effectively in the dynamic market environment of 2024.
“By carefully balancing short-term stability with long-term growth potential, investors can navigate the evolving economic landscape with confidence and resilience,” Fidelity said in its February 2024 economic insights report.
The Asset management firm said on the recent sanctions removal, the country stands to benefit in the long term hence it advocates for a diversified investment approach that encompasses various asset classes to capitalise on evolving market dynamics.
It said investing in real assets, such as real estate and infrastructure, offers tangible assets that can withstand economic uncertainties and provide stable returns over the long term.
“Similarly, growth compounder stocks in sectors demonstrating resilience and potential for expansion, present opportunities for sustained growth despite prevailing challenges.”
Pension Industry overview
IPEC’s Q3 statistics for the pension sector reveal significant growth in assets, primarily driven by revaluation gains on investment property. Total assets surged by 1072% in nominal terms and 33% in real terms, reaching ZW$10.62 trillion by September 2023. Investment properties saw a notable increase of 1270% in nominal terms and 56% in real terms. Quoted equities and unquoted equities also experienced substantial growth, along with prescribed assets, reflecting increased appetite for private equity. Total income surged to ZW$8.59 trillion, mainly propelled by fair value gains on investments, which accounted for 82% of total income. Compliance with regulatory thresholds remains a focus for the industry.
Life Assurance Industry
In its Q3 report on the life assurance sector, IPEC disclosed that direct Life Assurers recorded Insurance Revenue of ZW$281 billion, with 95% coming from recurring business and only 5% from new business. Funeral Assurance and Group Life Assurance products remained key revenue drivers. Direct life assurers also reported US$32.1 million in foreign currency business, predominantly from Funeral Assurance, led by Nyaradzo Life Assurance Company. Life Reassurers’ assets totalled ZW$41.4 billion, with investment property comprising 52% of sector assets. Prescribed assets compliance ratios improved for Life Assurers but declined for Reassurers, with only a few entities meeting the 15% threshold. The PA status accorded to the Eagle REIT makes it an attractive proposition for the sector. Nominal profit before tax for Life Assurers amounted to ZW$963 billion, while Life Reassurers reported ZW$32 billion. Adjusted for inflation, these figures equated to ZW$805 billion and ZW$27 billion, respectively.
Short Term Insurance Industry
According to IPEC’s data on short-term reinsurers, foreign currency denominated business increased by 37% from US$92.34 million in the nine months ending September 2022 to US$126.73 million in 2023, with US$118.54 million originating from the local market and US$8.19 million from abroad. ZW$ denominated business constituted 8% of total business written, amounting to ZW$28.88 billion, while the remaining 92% was in foreign currency. Total assets for short-term insurers surged by 1,060% to ZW$883.05 billion by September 2023, with investments in prescribed assets skyrocketing by 3,764% to ZW$63.76 billion. Nine out of twenty insurers were compliant with the minimum prescribed asset ratio, and nineteen reported capital positions above the minimum capital requirement of ZW$37.5 million. Short-term reinsurers’ asset base reached ZW$907.64 billion, marking a 1,401% increase from the previous year, with prescribed asset investments rising by 847% to ZW$91.19 billion.
Funeral Assurance Sector
The foreign currency business in the sector saw total gross premium of US$2.41 million and ZAR 0.75 million, with only one company transacting in South African Rand. United States denominated business surged by 989.84%, reaching US$2.41 million, while South African Rand denominated business increased by 359.87% to ZAR 0.75 million for the period ending September 2023. Six out of seven Funeral Assurers met the Minimum Capital Requirement (MCR) of ZW$62.50 million, but all were non-compliant with the minimum Prescribed Asset requirements, averaging a ratio of 0.18% against the required 10%. Total assets for the Funeral Assurance sector increased by 23.13% to ZW$30.81 billion by September 2023, partly driven by inflation-induced revaluation gains. The Commission expressed concern over the persistent non-compliance with prescribed asset requirements.
