Pension fund managers downplay risk concerns

Life Insurance and Pension Association of Malawi says despite their investments facing concentration risks on the Malawi Stock Exchange (MSE), the risk should be determined case by case because different institutions assess the risk individually and plan mitigation measures. The reaction comes amid analysts’ concerns that the plummeting of shares on the 16-counter MSE could have an affect pension funds and life insurance companies’ investments, which range between 50 percent and 60 percent. The association’s president Lilian Moyo said in an interview on Thursday that each of the investors has their own investment strategies and how they deal with investment returns.

She said investors have the plan in their investment policies. “They can disinvest or crystallise the gains to hedge against market volatility which if they did during bullish market period then there should be reduced impact,” said Moyo, who is Vanguard Life Assurance Company Limited managing director. In a separate interview, chartered insurer Eric Chapola said while it is too early to worry about the MSE performance, concerned institutional investors must have hedged their investment against such weak market performances.

“What is happening on the stock market is normal and one must expect the shares will rise, drop or indeed stay fixed at times. But then it’s also too early in the year to start talking about how 2026 will turn out to be,” he said. Chapola, a former chief executive officer for Nico Life Insurance Company Limited, said there is need to look at the performance of the shares over a period of time and gauge the performance trend.

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“One must also diversify investments to hedge against negative performance of a particular class of investment,” he said. However, market analyst Brian Kampanje said pension funds and life insurance companies have enjoyed massive capital gains on the MSE, giving them a chance to accelerate balance sheet growth and the emerging trend is likely to affect them. “The downward trend on MSE is a cause of concern as the institutional investors are likely to realise lower capital gains which are now taxable.

Coupled with the lowering of interest rates on the money market, it paints a gloomy picture for the pension funds and life insurance companies,” he said. Kampanje said the ultimate impact will be felt by the members who will likely get less returns and suggested developing innovative ideas to preserve the members’ value in the current turbulent economic environment. The pension sector recorded a 54.4 percent jump in funds to K5.4 trillion as at June 2025 from K3.5 trillion the previous year after MSE returns increased to 247 percent by the end of the year in December 2025, according to the Reserve Bank of Malawi Financial Stability Report. The central bank attributed the increase to strong investment income returns and improved total contributions, which increased by 7.2 percent to K129.5 billion, although pension arrears continued to pile.

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