Pension funds lose big as stocks dip

A fall in share prices at the Nairobi Securities Exchange (NSE) wiped out some of the gains made by pension schemes in the first nine months of the year, new data shows.

The stock market saw a bear run - a period of time when prices fall on a financial market - reducing the pension schemes’ returns to eight per cent by September this year compared with a high return of 15 per cent in September 2017.

“Over one year, the median return of the participating schemes was eight per cent compared with 15.5 per cent over a similar period in 2017. The decline is a result of the stock market plummeting since the first quarter of 2018,” said the Zamara Consulting Actuaries Schemes Survey released yesterday.

As of June this year, about 20.7 per cent of industry investment portfolio of about Sh241 billion were in quoted equities, with a huge chunk of the pension scheme’s funds being sunk in government securities.

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Massive sell-off

Data from the Capital Markets Authority (CMA), the capital markets regulator, shows that foreign portfolio outflow stood at Sh22 billion compared with Sh11.5 billion in the entire 2017 amidst a nervy economic environment characterised by a protracted electioneering period.

About two weeks ago, the NSE’s benchmark index, NSE 20, dropped to a decade-low of 2,775 in what is attributed to a massive sell-off by foreigners exiting the bourse as they sought improved returns at home.

The survey covered 404 schemes, with a total of Sh727.7 billion of assets under management, Sh352.4 billion less than the total retirement benefit assets under management.

“Over three years, the median return of the participating schemes was an annualised 11.8 per cent with a range of returns of 10.3 per cent. However, the range between the 25th and 75th percentile was only 1.9 per cent,” read the report.

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Nairobi Securities ExchangeCapital Markets AuthorityPension funds