Pension Funds hedge in equities and investment properties

Pension Funds hedge in equities and investment properties

Staff Writer

HARARE, Quoted equities and investment properties have been the main drivers of growth of the Pension’s industry asset base in 2021 with quoted equities now constituting a bigger portion of the investment.

During the period these had a  combined share of 81,15% of the industry’s total assets as new contributions were  being channeled to the stock market since equity has proven to be a value preserving asset in an inflationary environment.

Quoted equities are shares that can be bought and sold on a particular stock market.

The Zimbabwe Stock Exchange is on record for surpassing inflation and the best performing stock market within the Southern African region.

In its 2021 Q4 pensions report, Insurance and pensions commission (IPEC) said Quoted equities, which constituted 55% of the industry’s asset portfolio, increased by 318.45%.

“Investment property grew by 87.36%, to ZW$96.74 billion from ZW$51.63 billion as at 31 December 2020. Its contribution to the industry’s total assets declined to 30.33% from 46.84% as at 31 December 2020.

Investments in prescribed assets by the industry stood at ZW$13 billion as at 31 December 2021, translating to a prescribed assets ratio of 4.08%, which is below the prescribed regulatory minimum of 20%.” Ipec said

This comes as the Ministry of Finance and Economic Development approved a number of bankable instruments on prescribed assets, which is expected to go a long way in enhancing availability of instruments to ensure that the industry comply with prescribed asset requirements.

The industry’s asset base grew in nominal terms by 189% to ZW$318,96 billion from ZW$110.24 billion recorded in December 2020 as the values for major asset classes adjusted in response to inflation.

The figure translates to an average asset share per member (including beneficiaries) of ZW$337,824.58 compared to ZW$121,852 as at 31 December 2020.

Given the annual rate of inflation of 24.9% for December 2021, Ipec said the 177% increase in average asset per member indicates that the asset values are generally tracking inflation.

“However, it is important to note that pension values are still very low, and the Commission is working together with the industry to improve member’s benefits through various initiatives.” Ipec said.