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Retirement schemes performance in Kenya Q4 2023
Kenya's retirement scene is showing signs of life after a challenging year with many schemes seeing positive returns in the fourth quarter of 2023 as per the latest report by Zamara Group. CNBC Africa is joined by Adil Suleman, General Manager, Umbrella & Retail Solutions, Zamara Group for more.
Thu, 15 Feb 2024 14:53:09 GMT
Disclaimer: The following content is generated automatically by a GPT AI and may not be accurate. To verify the details, please watch the video
AI Generated Summary
- The key factors driving the improved performance of retirement schemes in Kenya this year include offshore investments and stabilizing interest rates, with fixed income investments playing a crucial role in influencing overall returns.
- Offshore investments were the best performing sector in Q4, although pension schemes have limited exposure to such assets. Fixed income, on the other hand, saw significant gains after a negative performance in Q3, driving more stable returns for pension schemes.
- A gradual shift towards increased allocations to fixed income investments over the past few years reflects trustees' risk aversion towards the underperforming stock market. Policy changes, such as new regulations ignoring bond market volatility, aim to enhance stability and sustainability in Kenya's retirement system.
Kenya's retirement scene is showing signs of life after a challenging year, with many schemes seeing positive returns in the fourth quarter of 2023, according to the latest report by Zamara Group. Adil Suleman, General Manager of Umbrella & Retail Solutions at Zamara Group, highlighted the key factors driving the improved performance of retirement schemes this year in an interview with CNBC Africa. One of the strongest performing sectors was offshore investments, despite pension schemes having limited exposure to such assets. The depreciation of the Kenyan shilling against the dollar boosted dollar returns for these schemes. Additionally, fixed income investments showed strong performance following stabilizing interest rates, with expectations of potential reductions this year. Given that fixed income typically forms the largest investment class for pension schemes, its performance has a significant impact on overall returns. In the fourth quarter, offshore investments were the best performing asset class, although with limited exposure. Fixed income, which makes up a significant portion of a scheme's assets, saw improved returns of about 4% in Q4 after a negative performance in Q3. This shift towards fixed income investments has been gradual over the past few years, as trustees have become more risk-averse towards the underperforming stock market. Increased allocations to fixed income have led to more stable returns, with expectations of returns falling within a narrower band in the future. Policy changes, such as new regulations that ignore bond market volatility when declaring member interests, aim to bring further stability to the retirement system. As Kenya aims to ensure the long-term sustainability of its retirement system, expanding coverage to reach more individuals who currently do not have access to pension benefits is a critical step for the future.
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