Quarterly Newsletter - Q1 2017
GLOBAL TRENDS
According to a study of 19 major pension markets by global investment consulting firm, Willis Towers Watson, the aggregate value of pension assets went up 5.3% to $35 trillion over the 10-year period from 2005 to 2015. 66% of the schemes were Defined Contribution (DC) although in countries like Japan, Netherlands and Canada over 90% of the assets are still in Defined Benefit (DB) schemes. The report also noted changes in asset allocation with exposure to Alternative Investments up from 7% to 24% over the period, at the expense of equities and bonds.
ZIMBABWE PENSIONS INDUSTRY OVERVIEW
Industry Asset Allocation
The general asset allocation for local pension funds appear to mirror the global trend, albeit with overweight exposure to one sub-class of Alternative Investments, that is fixed property, at 35%. There are, however, huge discrepancies among the different funds with smaller, fund administered schemes being more diversified than larger self-managed schemes which are heavily exposed to fixed properties, a legacy of hyper-inflationary era. This has also impacted compliance levels as only standalone pension funds are not compliant with the minimum 10% prescribed asset holdings requirement as at 30 September 2016.
Regulatory Updates
Whilst the regulator, the Insurance and Pensions Commission (IPEC), has maintained investment guidelines setting out maximum asset class exposures, it has also shown flexibility especially where the pension fund has an Investments Policy Statement (IPS) in place and Trustees show evidence of being fully aware and managing the pension fund’s risk exposures.
Meanwhile, the Zimbabwe Association of Pension Funds (ZAPF) Council is now taking an active role in encouraging its members to incorporate Environmental, Social and Governance (ESG) factors in their investment decision-making. This is in line with global trends towards responsible and sustainable investing, and entails incorporating relevant ESG guidelines in the funds’ IPS, investment guidelines and investment manager mandates.
INVESTMENT MANAGEMENT INDUSTRY DEVELOPMENTS
Industry Overview
The Securities & Exchange Commission of Zimbabwe (SECZ) is still to release the names of registered capital market players for 2017. We, however, do not expect major changes from the 2016 registered players.
Below is a summary of the latest developments at some investment management houses during the review period;
Ecobank Asset Management
Acquired by Akribos and set to change name to Akribos Asset Management (Pvt) Ltd. Deal awaits regulatory approval.
Smartvest Asset Managers
Officially launches new brand following scheme of arrangement and disinvestment from former AfrAsia Bank.
Financial Market Developments
After a lacklustre start to the year, the Zimbabwe Stock Exchange had a buoyant fourth quarter with the industrial index rising 46.05% to offset negative performances at the beginning and end the year up 25.85%. The other markets – notably fixed income and property markets – remained largely uneventful during the quarter under review.
The first licensed Alternative Trading Platform (ATP), became operational with the listing of Old Mutual Zimbabwe Class B shares on the Financial Securities Exchange (Pvt) Ltd (FINSEC). This should help widen options for investors.
