PENSION funds’ foreign currency business generated US$29 million in the second half of the year, according to the Insurance and Pensions Commission (Ipec).
It said interest from investments and contributions from members were the major drivers.
Pension funds have over the years been looking for alternative investments to boost access to foreign currency at a time when the performance of available asset classes has been affected by the economic crisis.
High inflation, which at 286% in August is the highest in Africa, has been the biggest hurdle.
For a long time, local pension funds lobbied to be able to invest a portion of their pool of funds on the international markets to unlock opportunities to improve operations.In line with this, government last year approved offshore investments for pension’s funds.
“During the half year-ended 30 June 2022, total foreign currency denominated income amounted to about US$29 million, with major contributors being interest from investments and contributions constituting 57% and 33%, respectively,” Ipec said.
“Foreign currency denominated expenses for the period under review were US$1,5 million with major drivers being benefit payments, administration expenses and board expenses, accounting for 43%, 32% and 6%, respectively.”
It said total foreign currency denominated assets for the pensions industry amounted to US$347 million during the period with the major asset classes being equities, prescribed assets and cash at bank constituting 52%, 24% and 12%.
Money markets and other assets stood at 5% and 7% respectively.
“The Victoria Falls Stock Exchange, private equity, newly issued gold coins and offshore markets, are some of the investment opportunities available for foreign currency investments,” said Ipec, which regulates the pensions and insurance sectors.
Overall, equities had a nominal increase of 250% from $343 million as at 30 June 2022 from $98 million as at 30 June 2021.
This was attributed to fair value gains and acquisition of equities from contributions received by pension funds.
The industry’s assets as at 30 June 2022 stood at $800 billion, which was a nominal increase of 304% from a value of $198 billion during the prior comparable period.
Investment properties accounted for $298,56 million during the period compared to $74 million during the comparative period last year, which was a nominal increase of 303%.
“Prescribed assets amounting to $63 billion, constituted 8% of the industry’s total assets as at 30 June 2022.
This was an increase of 772% from the prescribed assets investments of $7 billion as at 30 June 2021.
The increase was mainly due to the industry investing in prescribed assets in compliance with regulatory requirement of 20%.
As at 30 June 2022, 16 pension funds had met the required regulatory minimum capital requirements.
The commission said it continued to enforce industry compliance.