Quarterly Newsletter - Q2 2017
GLOBAL TRENDS
The aggregate value of pension assets went up 4.3% to $36.435 trillion during the year 2016, according to a study of 22 major pension markets by global investment consulting firm, Willis Towers Watson. About 48% of the schemes were Defined Contribution (DC) with countries like Japan, Netherlands and Canada predominantly Defined Benefit (DB), though now shifting towards DC. The report also highlights that the average asset allocation in the major markets were 46% equities, 28% bonds, 24% “other” assets and 3% cash.
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 33%. 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 fund secretaries-administered pension funds are compliant with the minimum 10% prescribed asset holdings requirement as at 30 December 2016 as shown on Table 2.1 below.
Regulatory Updates
There were no major regulatory changes from the Insurance and Pensions Commission (IPEC) in as far as investments by pension funds are concerned, during the period under review.
INVESTMENT MANAGEMENT INDUSTRY DEVELOPMENTS
Industry Overview
The Securities & Exchange Commission of Zimbabwe (SECZ) released the names of registered capital market players for 2017. The only change on the asset management space is the change in name for Ecobank Asset management to Akribos Wealth managers following its acquisition by Akribos Incorporated towards the end of last year, otherwise the number of firms is constant at 16. There were also no major changes for Securities Custodians and Securities Trustees save for the fact that Old Mutual Custodial Services rebranded to CABS Custodial Services (Pvt) Limited. A new Securities Exchange, Financial Securities Exchange (Pvt) Limited (Finsec), was also registered to bring to 2 the number of exchanges in the country. Three more Securities Investment Advisor firms were added, to bring the number to 31. There were no changes on Securities Dealing firms and Securities Transfer Secretaries as the numbers of registered firms is constant at 13 and 3, respectively.Table 3.1 below summarises latest developments at some investment management houses during the review period;
Below is a summary of the latest developments at some investment management houses during the review period;
Old Mutual Investment Group (OMIG)
Hired Mr. Chengetai Zvobgo as Fund Manager, joining OMIG from Smartvest Wealth Managers, where had spent the past 9 years. Chengetai is a holder of an MBA and an Honours degree in Mathematics from the University of Zimbabwe as well as a Certificate in Treasury Management.
Smartvest Wealth Managers
Replaced Mr. Chengetai Zvobgo (portfolio manager) with Mr. Kumbirai Makwembere. Kumbirai was with TFS Asset Management (Tetrad) for 7 years up to the period it went under in 2014 and he joined Smartvest from deVere Group Zimbabwe where he had joined just over a year ago. He holds an Honours degree in Business Management from MSU and a certificate in Investments and Portfolio Management from UZ.
Financial Market Developments
Following an equites market Bull Run towards the end of 2016, the Zimbabwe Stock Exchange (ZSE) ran out of steam and retreated in the first quarter of 2017, losing 3.83% of its value during the period. Amongst the 5 most capitalised companies on the ZSE, only BAT Zimbabwe managed to rise during the period, adding a marginal 0.3%, with Delta, Innscor, National Foods, and Seedco all falling in value during the period, by -2.8%, -6.2%, -1.8% and -5.9%, respectively. Diversified financial services group, ZB Financial Holdings, rose most (132.3%), whilst Econet fell the most, shedding off 46.5% of its value during the first quarter of the year.
The Econet Wireless Zimbabwe Limited Rights Offer dominated the equities market during the period under review. Econet wanted to raise a total of approximately US$130 million through an offer to its shareholders, pro rata to their respective existing shareholdings, of 1,082,088,944 ordinary shares plus 263,050,614 Class A Shares at a subscription price of 5.00 US Cents per share, on the basis of around 82 ordinary shares for every 100 shares already held. Each Rights Offer share was linked to a redeemable accrual debenture with a subscription price of 4.665 US cents at a coupon rate of 5% p.a. The Rights Offer initially raised concerns as subscription for the Rights Offer were only acceptable through payment of the required amounts through a foreign bank account held by Econet abroad. This was going to be very difficult for local investors as it is so difficult to make foreign payments in the country. The conditions for the Rights Offer subscription were later revised and the Rights Offer then went ahead smoothly. The results of the Rights Offer will be released on 20 April and the shares and debentures will be listed on the ZSE anytime between 21 April and July 2017.
Money market rates are falling and they are now averaging below 4% p.a. for placements for 90 days among top tier banks in the country. The ZSE is yet to list any bonds on the exchange but the framework for the listing of the bonds is now in place following its approval by the regulators.
