Ugandan pension funds now control 19 per cent of the shares listed on the Uganda Securities Exchange, but experts warn that their concentration on a few securities poses a barrier to sustained growth.

New data from the Uganda Retirement Benefits Regulatory Authority (URBRA) shows that the industry’s equity portfolio grew from Ush525.9 billion ($153.5 million) in 2014 to Ush1.1 trillion ($313.5 million) in 2015, due to value gains on shares listed in Uganda and Kenya.

Tracking by SBG Securities Uganda Ltd, a stockbrokerage firm, shows Umeme Limited's share price gained 25 per cent last year to close at around Ush620 ($0.18) in December, while DFCU Ltd’s rose by 39 per cent to roughly Ush950 ($0.28) during the same period. Bank of Baroda Uganda’s share increased by 31 per cent.

But Stanbic Bank Uganda’s share fell by 6 per cent last year, as some retail investors exited the counter due to modest returns. But the stock has recently registered more positive returns.

Meanwhile, the share prices of KCB Bank and Equity Bank dropped by about 25 per cent and 21 per cent respectively.

“The average return on investment for the industry was 18.2 per cent, versus average annual inflation of 5.2 per cent at the end of 2015. The growth in the share of listed equities in the industry portfolio resulted in a Ush42 billion ($12.3 million) in dividend contribution to local schemes,” said Benjamin Katende, URBRA’s head of research and sector development.

But analysts, however, are downbeat about the stockmarket’s performance this year, with blue-chip companies’ stocks in the region having been sluggish on the market in the first half of this year.

Umeme’s shares are currently trading at an average of Ush500 ($0.15) at the USE, compared with Ush620 ($0.18) at the end of 2015. This has seen fund managers reallocate some funds from the equities portfolio to the fixed deposit segment to secure stronger returns.

“Local fund managers have switched from equities this year to fixed deposits in pursuit of better returns on assets. Fixed deposits are likely to yield an average return of 8 per cent this year, with investors sticking to optimism towards the economy,” said Joram Ongura, a stockbroker at SBG Securities.

Despite the growth in listed equity holdings in 2015, government securities retained the lion’s share of industry asset allocations — a reflection of conservative attitudes among fund managers, driven by high interest rates and inflation risks.

Private equity investments

Treasury bills and bonds accounted for 69.3 per cent of the total pension assets at the end of 2015, compared with the 63.3 per cent registered in 2014.

The share of private equity investments stood at 1.2 per cent in 2015, against 1.5 per cent in 2014. And the share of corporate bonds against total industry assets dropped from 3.28 per cent in 2014 to 2.51 per cent in 2015.

The proportion of fixed deposits fell from 15.49 per cent in 2014 to 5.84 per cent at the end of 2015, a trend attributed to significant withdrawals of bank deposits by pension schemes seeking to clear gratuity claims.

The share of investment property dropped from 4.07 per cent to 2.24 per cent while the proportion of “other investments” dropped from 0.98 per cent in 2014 to 0.84 per cent in 2015, URBRA said.

Total pension industry assets increased from Ush5.2 trillion ($1.5 billion) in 2014 to Ush6.5 trillion ($1.9 billion) at the end of 2015 while total industry liabilities grew from Ush62 billion ($18 million) to Ush75 billion ($21.9 million) during the same period.