Fixed income lifts pension schemes return in Q1 to Kes1.088 trillion

By Steve UMIDHA

Retirement Schemes’ median return grew by 6.3% in the quarter period ended March 2024, up from 3.1% in December 2023, according to Zamara Consulting Actuaries Schemes Survey (Z-CASS).

The first quarter’s resurgent performance was attributed to improved performance majorly in the fixed income and equity asset classes. Fixed Income performance during the quarter was 3.3% down from 4.0% in December 2023.

The average allocation for Fixed Income was 78.2%, showing a slight decrease from 80.3% in the previous quarter.

A total of 405 schemes took part in the Zamara Consulting Actuaries Schemes Survey (Z-CASS) Survey during the period under review with assets under management covered by the survey jumping to KShs 1.088 trillion.

The survey profiles schemes into categories based on their asset allocation.

Aggressive schemes (schemes with a higher proportion of assets invested in Equity and Offshore asset classes) had a median return of 6.2% compared to a 6.0% return for schemes with a lower allocation (schemes with a conservative risk profile).

Moderate schemes had the highest average return over the quarter, as both equity and fixed income asset classes performed well over the quarter.

Out of the participating schemes only 15 qualified to be categorized as aggressive during this period.

We have noted a steady reduction in the number of aggressive schemes over the past few years because of a preference for fixed income allocations among the participating schemes.

The equity performance was 29.5%, 5.6%, -2.2% and 0.6% for the quarter, 1 year, 3 years and 5 years respectively. This quarter there has been a positive performance in the equity asset class on account of the optimistic investor sentiment supported by prospects of economic recovery.

Participating Retirement Schemes recorded an increase in performance with a median return of 6.8% over the one year ending 31 March 2024 compared to 3.5% in March 2023. The increase was driven by the positive fixed income and equity market performance.

Participating Retirement Schemes recorded an annualized median return of 6.4% over the three years and 7.9% over the five years.

In contrast to a similar period, this average has exhibited a downward trend for the 3 years and an upward trend for the 5 years return. Schemes were only able to beat inflation over the 1- and 5-years periods, with inflation at 5.7% over 1 year, 7.2% over the three years and 6.5% over the five years.