Staff Writer
HARARE: Zimbabwe’s pension funds are now heavily invested in investment properties, a shift away from equity investments where traditionally the funds had the highest concentration.
According to the Insurance and Pensions (Ipec) 4th quarter 2024 pension report, the pension industry’s assets were concentrated in investment properties and quoted equities, which together made up 68 per cent of the total asset portfolio.
The report shows that as of December 31, 2024, the value of investment properties increased by 6.92 per cent to US$1.06 billion (ZWG 27.4 billion), up from US$0.99 billion.
But whilst the value of investment properties increased, the proportion of this asset class to total assets declined to 47 per cent from 50 per cent reported in the comparative period. On the other hand, quoted equity investments marginally declined by 0.51 per cent, whilst unquoted equity investments increased by 19.63 per cent from US$ 66.22 million to US$ 79.22 million.
The industry’s prescribed asset investments increased by 47 per cent, from US$180.19 million on 31 December 2023 to US$264.4 million (ZWG 6.8 billion), driven by revaluation gains and new acquisitions.
Zimbabwe’s property market is viewed as a safe haven for investors seeking long-term value and as a way to act as a hedge against inflation and preserve wealth in a dynamic economic environment.
Analysts believe the increase in property investment by pension funds can be attributed to convincing returns, but at the same time, equities will always be a key asset class.
Lloyd Mlotshwa, the head of research at broking firm IH Securities, in an interview said global portfolio allocation to property typically averages around 10 per cent, with an aggressive weighting to property that can range to 20 per cent.
“That clearly suggests an above-normal proclivity to property in our market. This is explained by our history of adverse monetary events linked to currency volatility and hyperinflation, which have decimated portfolios in the past.
“Brick and mortar is favoured as a long-term currency hedge, and this will likely become more pronounced as we head towards 2030 if anxiety around currency is not abated,” he said.
Mlotshwa noted that property does have its own complexities; the risks are liquidity, and an overallocation to property may negatively impact the liquid requirements of the investor.
“Sub-economic rental yields can also negatively impact valuations and cash flow. Rising vacancies and voids if location dynamics shift, similar to what has happened in the CBD, also remain another key risk,” he said.
Mlotshwa said equities will always be a key asset class, and they remain the best conduit to investing in the underlying economy.
Globally, there are many emerging trends and opportunities in the investment landscape that the pension industry is well-positioned to capitalise on.
In Zimbabwe, Mlotshwa said the emergence of Real Estate Investment Trusts (REITs) is a welcome development.
“This allows pension funds to blend the desire for capital preservation through real estate with the liquidity profile of equities whilst receiving an assured dividend yield, which is effectively a disbursement of the rental income back to the investor,” he said.
According to the pensions report, pension funds’ investments in unquoted equities increased by 19.63 per cent to US$79.22 million (ZWG 2.04 billion) from US$66.22 million during the same period last year.
This resulted in an increase in the proportion of unquoted equities to total assets from 3.32 per cent to 3.51 per cent.
Financial economist Malone Gwadu said the increase in property investment by pension funds can be attributed to convincing returns that are currently being earned in portfolios such as rental income and continuous revaluation gains.
“Therefore, the nature of this return aligns much with the investment objective of pensions, which is long-term investment returns that will then be able to cater for contributions when they crystallise.
“In addition, properties have been somewhat immune to market volatiles such as inflation and exchange rate movements, and the resilience has acted as a hedge instrument for pension funds for value preservation,” he said.
Gwadu, on the other hand, noted that concentration risk becomes a key concern if pensions continue to invest in properties, as they may become overinvested in the property sector and not well diversified in other sectors with good returns.
“There are high-return sectors such as stock markets, the mining sector, and the banking sector, among others. Whilst relatively riskier, they offer high returns, and the Public Investment Corporation in South Africa is an example of a pension fund-backed investment vehicle with assets beyond property, such as banks like Nedbank and Ecobank,” he said.
Gwadu added, “Pension funds have the necessary muscle, individually or in a syndicated way, to capitalise on almost every sector due to the huge capital base and patient nature of their funding positions.”
Pensions were also allowed to invest offshore last year to protect some of the values that they hold on behalf of customers.
However, there has been low uptake of the investment class due to the tough procedures to invest offshore.
According to Imara Capital’s second quarter 2025 strategy notes, post the approval of offshore designated instruments with an upper limit of 15 percent of fund values by IPEC, it has been actively looking for ideally suited foreign assets for its clients.
Imara said in 2023, its fund managers identified an offshore-administered, USD-denominated trade financing instrument being managed by a multilateral institution.
“We applied for and received all the various applicable regulatory approval processes to place some of our client’s funds in the paper. The asset has performed extremely well for our clients to date – earning above-inflation returns.
“For the twelve months up to the end of March 2025, the asset posted a competitive 9.8 per cent real return,” reads part of the strategy paper.
Imara noted that following its inaugural offshore foray into the TDB ESATAF fund and as part of its continuous process to preserve value and diversify portfolios, it has identified an additional long-term offshore investment that it believes is ideal for some of its clients.
“While IPEC should be applauded for giving a nod to this asset class, the modalities still need some adaptation, with the current setup still a bit arduous and not appropriate for investments in certain asset classes,” Imara said.
Investment analyst Enock Rukarwa said in a situation where investment classes are limited for value preservation, pension funds are inclined to property investments.
He said the economy is operating in a near dollarised state, and one of the emerging investment options has been around offshore investments, though regulatory quantums are still lower at 15 per cent of the total portfolio value.
“Offshore investments have presented higher yields, stability and limited market risks compared to local investments,” he said.
Rukarwa also noted that quoted equities remain strategic for diversification, value preservation and liquidity purposes; however, since the introduction of ZIG, the stock market has been generally bearish as investors take short positions to create operational expenditure liquidity.(online)
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