TAURAI MANGUDHLA
Zimbabwe’s largest life insurance group, Old Mutual Zimbabwe Limited could have reported a good set of results for the first half of 2018 with growth on all key indicators, but its main worry remains on what to do with $2,9 billion funds under the group’s management in the face of market volatility.
The group reported a 7 percent growth in funds under management to $2,9 billion as at June 30, compared to the same period prior year driven by growth in net client cash flows.
Sitting on one of the largest funds in the history of Zimbabwe, Old Mutual now has to navigate, carefully, the turbulent local macroeconomic environment, characterised by volatility, uncertainty, complications and ambiguity.
The idea is to strike a balance in terms of the investments mix with a view to extract value and protect investors’ interests.
Already, since 2017, the group launched its alternative investment boutique which now accounts for 3 percent of total funds under management to try and diversify its portfolio.
Old Mutual Investment Group managing director Marjorie Mayida said the alternative investments asset classes gave a return on investment of 20 percent for the first half which is a pleasing performance. Investments under the boutique are distributed all over in energy, agriculture telecoms, financial services light and heavy manufacturing.
To protect the investments, Old Mutual targets 26 percent and above shareholding, which at least gives the group negative control and ensures board representation.
Mayida told Business Times on the sidelines of the analyst briefing on Tuesday that 85 percent of the $2,9 billion funds under management was between equities and property. Alternative investments portfolio is still very small, sitting at 3 percent while the balance is in interest bearing investments.
She said the group’s strategy is to invest more in real assets which is equities and property given past experiences where value for clients was lost in the hyperinflationary era of 2008.
“As long as we continue having these monetary challenges that we are having, inflation as well as the currency issues, we will remain skewed towards real assets,” she said.
But equities have their own risks especially in the Zimbabwean scenario.
“We understand the risks that are there especially with the equities but it’s a better devil than investing in money markets given that in the past, during hyperinflation, we lost quite a bit on our monetary assets,” Mayida said.
Speaking on the role of alternative investments in the strategic focus of the group, she said; “We are thinking big, we renewed our efforts last year. We relaunched our alternative investments boutique last year and we resourced it very well.
As you saw from the numbers our portfolio is growing very significantly from $46 million in June 2017; now we are sitting at $66 million and we are targeting between 5 and 10 percent of funds under management for alternative investments.”
Suppose other variables were sitting in the right place, Mayida said, targets wouldn’t change for alternative investments, but the group would change the scenario for real assets, property and equity.
“Definitely we will increase our exposure in monetary assets if the economics of the country were Okay,” she said.
In the period under review, Old Mutual’s after tax profit slumped to $53,9 million from $89,4 million recorded in the comparable period in 2017. Profits took a knock largely due to the impact of lower fair value gains on listed equities particularly on the insurance business and the holding company.
Gross written premiums grew 8 percent to $103 million for life and short term insurance. The group’s banking business reported a net surplus growth of 25 percent to $20,7 million.
