Informal sector weighing on wealth managers

GROWING informalisation of Zimbabwe’s economy, limited geographical presence in potential unserved markets and inadequate investor education are weighing on thegrowth of Zimbabwe’s investment industry, market analysts have said.

Presenting a topic on the current state of the country’s investment industry during theannual conference of the Association of Investment Managers of Zimbabwe (AIMZ) in Cape Town, South Africa last week, Intellego Investment Consultants Mr Welcome Mavingire said the informalisation of the economy had significantly reduced the pool of potential investors with many individuals opting forinformal investment avenues, such as Ponzi schemes, due to a lack of trust informal investment products.

Mr Mavingire noted the proliferation of Ponzi schemes, which has surged in recent years highlights the public’s appetite for investment opportunities, but also underscores the need for greater financial literacy.

“The regulator has done alot in terms of investor education and awareness initiatives, but much moreneeds to be done to tap into the potential of the underserved market,” he said.

“The proliferation of Ponzi schemes shows that people are willing to invest. However, they lack the necessary education and knowledge to make informed investment decisions.

“There is significant potential to grow the market by expanding our geographical reach to capture newmarkets, such as tobacco farmers and informal miners, who currently have limited access to our services.

“We must take proactive steps to protect our market share.”

Another major challenge facing the industry was the reluctance of pension funds to outsource a portionof their portfolios to asset management companies. Mr Mavingire proposed a series of measures to revitalise the asset management industry. These include encouraging large funds like NSSA and stand alone pension funds to outsource part of their investment management to professional firms. The practiceis common in South Africa, where a significant portion of civil service retirementsaving is managed by investment companies.

“We need tocollectively lobby when it comes to actively participating in the management of public funds,” he said.

Mr Mavingire also suggested re-designing products to better meet investor needs, particularly focusing on member benefits.

Additionally, he proposed offeringtailored wealth planning solutions for high-net-worth individuals and retirement savings and investment products for company executives.

To boost investor confidence and market reach, Mr Mavingire emphasised the importance ofinvestor education.

He called for collaboration with regulators to implement comprehensive programmes.

Furthermore, he highlighted the need to expand the retail market and develop cost-effective strategies to tap into the diaspora market.

Total funds under management (FUM) as of September 30, 2024 stood at ZiG92,84 billion, representinga 99,64 percent increase from ZiG46,50 billion recorded in the previous quarter. The total FUM as of September 30, 2024 includes US dollar-denominatedFUM of US$1,76 billion, which were translated to local currency at theprevailing exchange rate.

The industry average FUM for the period ended September 30 2024 stood at ZiG3,2 billion. The sector’s exposure to the stock market increased to 40,53 percent from37,21 percent recorded in the prior quarter.

This was attributable to the general increase in stock prices during the quarter as evidencedby a 90,25 percent increase in the Zimbabwe Stock Exchange (ZSE) All-ShareIndex.

There was a slight decline in the sector’s property investment exposuresfrom 45,91 percent reported as of June 30 2024 to 43,64 percent recorded as of September 30, 2024.

Moneymarket investments marginally increased from 4,71 percent recorded in June2024, to 4,72 percent reported on 30 September 2024.

Investment in unquoted equities declined marginally to 3,68 percent from 3,91 percent recorded as of June 30 2024.

Exposure to bonds declined from 5,38 percent recorded in the prior quarter to 4,97 percent.

Cash or call deposits and other investments all account for the remaining 2,47 percentinvestment exposures for the asset management industry.

-herald