Pension funds should consider sectoral equity investments

Pension funds should consider sectoral equity investments among others as it has become imperative to invest in near inflation proof assets, Insurance 24 has learnt.

Staff Reporter

Under the consideration that not all equities are equal as some are more inflation-proof than others pensions funds this week were urged to avoid Zim Inclusive type of stocks.

These, according Gandy Gandidzanwa and Itai Mukadira (Risk and Investment Management Consultants Actuaries) are stocks directly impacted by the economic fortunes of the country Examples include retailers and banks.

The duo was speaking during the Zimbabwe Association of Pension Funds virtual conference which took place this week.

“Minerals are a good hedge to exchange rate-driven inflation. Both precious and basic metals with an offshore market  and any other counters with an export focus to the extent they are allowed to retain
their forex earnings,” they said.

The duo also noted hospitality and tourism industry as a good hedge however pointed out that such a portfolio might not be readily available.

On the other hand , property investment had been noted as largely one of the asset classes that traditionally have provided a significant hedge against inflation “Recent experience has though challenged that. New school of thought
argues inflation follows property booms and not precedes them.

There are also much bigger issues now (new behaviours) work-from-home (telework), further issues with valuations, illiquidity and indivisibility,” the duo said.

They added that property may no longer be the big real-return generator of yesteryear especially malls and office buildings.

“But, maybe, distribution centres and hotels, pension funds can also make use  of the likely offshore provisions once/if they are gazetted:20% offshore provision for pension funds and other institutional investors.” the duo said

However they pointed out challenges with securing the foreign currency (preferential treatment from RBZ?) added that there was need to start considering investment destinations for example south Africa ,first world financial system in an emerging market economy.

The newly launched Victoria Falls Stock Exchange was also considered as one of the other options for pension funds.