Zimbabwe asset management landscape shifting

The asset management landscape in Zimbabwe is undergoing a significant transformation, with notable shifts in the allocation of funds under management (FUM), signaling a more cautious and strategic approach by asset managers.

According to the latest data from the Securities and Exchange Commission of Zimbabwe (SECZim), the exposure of funds to the stock market has dropped substantially, from 42.58% in the previous year to just 32.33% by December 31, 2024. This reduction reflects asset managers' growing hesitation towards equities, driven by factors such as market volatility, economic challenges, and poor liquidity momentum. Additionally, Zimbabwe's stock market has been grappling with hugely undervalued stocks, making the equity market less attractive for investors looking to avoid risk.

In contrast, property investments have gained traction, with allocations rising from 45.81% to 47% in the same period. Real estate has emerged as a more stable and less volatile investment option, making it a preferred choice for asset managers seeking to mitigate risk amidst uncertain market conditions.

Ngoni Mahaka, the Head of Asset Management and Collective Investment Schemes (CIS) supervision at SECZim, shared these insights at an Asset and Investment Management Zimbabwe (AIMZ) meeting. Mahaka also noted a rise in alternative investments, which now account for 4.26% of the total FUM, while money market investments made up 6.97%, and bonds contributed 6.37%. Cash and other investments accounted for the remainder.

Despite these shifts, the total FUM has increased significantly, growing from ZWG16.88 trillion in FY2023 to ZWG90.16 billion by December 31, 2024. However, the FUM saw a slight decline in the fourth quarter, dipping from ZWG92 billion in Q3 2024. In US dollar terms, the FUM stood at US$1.87 billion, showing little change compared to the same period the previous year.

As of December 31, 2024, the Zimbabwean asset management industry boasted a total of 34 licensed securities investment managers, a modest increase from 32 in Q1 2024 and 31 in Q2 2024. The latest additions to the sector include Redwood Asset Management (led by Farai Gwaka), Capital Sterling Management (led by Mike Mudondo), Dendere Asset Management (led by Jubelah Magutakuona), Nhoro Asset Management (led by Ken Sharpe), and Arctic Blue Asset Management.

Alongside the analysis of shifting investment trends, the SECZim presentation highlighted ongoing regulatory developments affecting asset management firms. Newly established guidelines have been introduced to enhance audit disclosures and improve the management of offshore investments. These steps reflect SECZim's commitment to creating a more robust and compliant asset management sector.

Despite these positive strides, challenges persist. Mahaka acknowledged the need for a clearer fee structure for alternative investments and the formation of a technical committee to address capital adequacy directives. Regulatory concerns, including late return submissions and inconsistencies in financial statements, continue to create obstacles for asset managers.

As Zimbabwe's asset management sector evolves, the growing preference for less risky investments such as property, alternative investments, and money markets illustrates a shift towards stability. However, the sector must continue to address regulatory issues and ensure compliance as it adapts to a changing economic landscape.