CIO's Business

Gerald Paul Kasaato


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Fund growth from UGX 15.56Tn to UGX 17.25Tn, 10.86% growth. It is important to note that, while the strong gross positive returns are encouraging in a period of gloom and uncertainty in many markets and projections of doom in many parts of the world following the pandemic and prevailing geopolitical tensions, our focus is always on the long-term sustainability of the Fund.


On behalf of the Fund’s Investment team, I am pleased to report on the investment performance and initiatives for the year ended 30 June 2022. Most members save to finance retirement with the Fund being their main, if not the only, source of retirement savings. Given that the Fund is about 11% of Uganda’s GDP, this is extremely important in an economy with gross savings to GDP of about 22% and coverage at less than 19%. Members’ time horizons can span decades.


Yet, we are facing challenges at every turn—almost every year: a pandemic whose effects we continue to see and probably will continue for some years to come, unprecedented change in the legislative environment—the NSSF Amendment Act 2022, global and regional geopolitical tensions, mounting inflation, climate change—negative effects of landslides—unpredictable rains and flooding—changes to planting seasons and the effect on food supply, and elections in neighbouring countries.


While all this turmoil has serious ramifications, the Fund`s investments continue to be resilient. It is now the 7th year of the 10-year Strategic Plan, and the Fund continues to grow in all dimensions.

The remarkable growth can be explained by five factors:

  • Relationship management resulting in improved compliance levels and contributions collected
  • Prudent investment strategy leading to the consistent growth in investment returns
  • Leveraging technology to build efficiencies leading to better cost management
  • Robust customer engagements leading to higher satisfaction rates
  • Responsible investing and a conscious consideration of ESG related matters

Robust performance despite a challenging economic environment

A total portfolio return performance of 11.62% with the changes in legislation and current economic woes, is remarkable.  This translated into a net increase in the Fund for the fiscal year of UGX 1.68Tn compared to UGX 2.23Tn in the previous year. The 12-month returns were led by fixed income investments at 15.11%, real estate returns came in at 4.56%, while equity investments were negative at 2.60%. The performance of the equity returns over the 1 year to 30 June 2022, compared to some other markets in Africa (excluding South Africa) and frontier market benchmarks is depicted in Figure 1 below.

Figure 1: How the Fund`s equity return compares with different markets over the one year to 30 June 2022

Source: Bloomberg

Essentially, the year-on-year performance of the equity markets to 30 June 2022 justifies our diversification strategy. Despite the gloomy performance of the Uganda, Nairobi, and Rwanda Stock Exchanges, the Dar es Salaam Stock Exchange performed relatively well in the fiscal year. As a result, the overall equity portfolio performance relative to the indexes (market as a whole) was impressive and also benefited from robust stock selection and country weighting. For example, although the Tanzania Market gained by 7.5% in the fiscal year, the performance of our key positions in CRDB Bank and NMB Bank was 56.71% and 49.10%, respectively. 


The fair value loss on equity investments was UGX 248.74Bn. This was compounded by a currency appreciation of the Uganda Shilling against the Kenya Shilling, something that had a drag on returns. But it is clear from Figure 1 above that compared to the market, the -2.60% overall performance of the Fund`s equities portfolio was impressive.

Emphasis on long-term sustainability

It is important to note that, while the strong gross positive returns are encouraging in a period of gloom and uncertainty in many markets and projections of doom in many parts of the world following the pandemic and prevailing geopolitical tensions, our focus is always on the long-term sustainability of the Fund.


Capital markets are naturally subject to volatility in the short-term, which is why our focus is, and always will be, on long-term performance. The Fund invests for decades to match its liability profile, not a single year. To this end, one-year returns (11.62%) which are beating inflation are just part of the results picture for a retirement scheme like ours. Even returns over 3 years (13.73% annualised return), 5 years (14.63%) and 7 years (14.21%), as shown in Table 1 below, represent only short-time and intermediate-time periods for measuring results.


When we consider the results over 10 years (15.06%) or 15 years (13.34%), the outcomes have a greater bearing on the retirement benefits we can sustainably provide. To this end, the returns recorded in the year ended 30 June 2022, in a very challenging environment for the Fund, are testament to the sustainability and robustness of the investment strategy (we managed to fend off the extent of negative sentiment seen in the 2008 financial crisis, yet the challenges of the last fiscal year and the one before, are arguably way more serious).

Table 1: A review of the historical return performance

Periods Through 30/06/2022 The Fund`s Investment Total/Annualised Average return Average 10-year/Annualised Average inflation Average 10-year inflation + 200 basis points Interest to Members
1 Year
3 Years
5 Years
7 Years
10 Years
15 Years
3-Years after 2008

Source: Internal

The downsides and trade-offs made were: a spike in benefits payout, the appreciation of the Uganda Shilling, low compliance, and slow progress on projects. The robust performance is contextualised when you examine the challenges faced in the fiscal year.

Spike in benefits pay-out

The NSSF Amendment Act 2022, among other provisions, provided for midterm access to members’ benefits who met the qualifying criteria. This effectively shortened the asset and liability duration of the Fund. It required immediate liquidity/cash to fund the pay-outs.  Yet as seen in Figure 2 below, benefits pay-out almost doubled in the fiscal year. This certainly caused a drag on investment performance as our fixed income activities were constrained from February 2022 up to the end of the fiscal year. We tactically pivoted to investing in T-bills for some months—something last done over 10 years ago.

Figure 2: Benefit payments (count and amount)

Source: Internal

The trade-off was that the spike in benefits paid impacted the investment programme. In the fiscal year, the benefits payments increased by 89% to UGX 1,189Bn compared to UGX 642Bn the previous year. The number of claimants increased by 77% to 53,035 from 29,914. This constrained the ability of the Fund to maximise the available investment opportunities.

Indeed, the quarter ended 31 March 2022 saw the Fund having the lowest activity in the financial markets for over 7 years as most of the emphasis was on hoarding cash to pay benefits. Yet, towards the end of the fiscal year, the stock market was at the cheapest it has been for years—cheaper than after Covid-19 struck.  Midterm access is a structural reform which is a change in the design of the scheme. Indeed, we have since reviewed the strategic asset allocation.

In essence, midterm access has a significant impact on the Fund’s risk appetite—in the short-term it reduces—because of the need for more liquidity. Consequently, we revised the optimal asset class weights from 70% fixed income, 22.5% equities and 7.5% real estate to 75%, 17.5% and 7.5%, respectively. It is important to note that the Fund has matured in the sense that investment income more than outweighs contributions.