Pension funds that eschew risk are reaping the benefits of their conservative approach to investments, outperforming their more aggressive peers whose returns are being dented by bigger exposure to underperforming equities and offshore assets.

Conservative schemes, which on average allocate over 80 percent of their assets under management to risk-free, stable yielding government securities, recorded a return of 2.9 percent in the year to June 2022, industry analysis done by fund administrator Zamara shows.

Schemes with a moderate approach to investment, which seeks to strike a balance between risky and safe investments, had a return of negative 0.3 percent in the period. These types of schemes (215) are the majority among the 436 polled by Zamara.

Meanwhile, those that aggressively seek returns by going overweight in offshore, listed shares, and property investments returned a negative 2.3 percent. These schemes put in just 39.2 percent of assets under management into fixed income instruments, while allocating equities, property, and offshore investments 21.6 percent, 21.5 percent, and 17.7 percent respectively.

The risk-averse schemes on the other hand allocated equities 13.2 percent, property three percent, and offshore assets 0.4 percent while putting the remaining 83.4 percent in fixed income. Overall, the sector made a 0.5 percent return in the one-year period.

“Conservative schemes posted the highest median returns over all the periods (quarter/annual/three/five-year) aided by a higher allocation towards fixed income that performed strongly over these periods,” said Zamara.

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