Mortgage loans growth spurt

Mortgage loans have been growing as an asset class for pension funds, sufficient for the regulator Financial Services Commission to make note of it.

They remain a tiny portion, only 0.13 per cent, of pension fund portfolios. But that’s after spiking by over 3,100 per cent from just $32 million in March to $1 billion in June.

Prior to that period, mortgage loans as an investment class hovered between $30 million and $50 million of the more than $800 billion of assets under management across the pension industry.

“Notably, mortgage loans, which now represent 0.13 per cent of total investments, recorded a significant increase of 3,105.9 per cent,” the FSC stated in newly released statistics for the pension industry for the June 2025 quarter.

The rise was “primarily attributed to a reallocation from securities of governments and other asset classes to fund a new investment opportunity”, the FSC said.

Pension fund portfolios are typically comprised of 40 per cent unit trusts and mutual funds, 20 per cent government securities, 20 per cent stocks, five per cent real estate, five per cent bonds, with the remainder in repos. Now, mortgage loans have been added to the mix in some portfolios, though at a relatively small share, and large pension fund managers are monitoring the development.

Sagicor Group Jamaica, one of the country’s leading players in the management of pension funds, said any move into mortgage loans would be “carefully” considered.

“If we were to move forward with holding mortgage loans as part of our investment portfolios for pension funds, the rationale would be tied to the value proposition of the instrument,” Sagicor Group told the Financial Gleaner. “At this stage, any considerations would be guided by the needs of the pension funds and the appropriate governance processes.”

Sagicor added that it is “always assessing the best approach for its pension portfolios”, including “innovative solutions”.

Overall, the Jamaican pension industry remained “fairly resilient” in the quarter ended June 2025, despite local and global economic challenges and geopolitical tensions, the FSC noted.

“Amidst a fairly stable interest rate environment and anticipated marginal growth in real economic output, small growth potential is expected over the next quarter ended September 2025,” the statistical report stated.

There was no mention of the potential impact from Hurricane Melissa, which passed through Jamaica on October 28, but preceded the public release of the pension industry report, which was posted to the FSC’s website on November 4.

In the June quarter, pension fund assets were valued at $829 billion across the industry, reflecting annual growth of eight per cent and quarterly growth of nearly one per cent quarter. Eight of the 11 asset classes registered growth, led by mortgage loans, and followed by repurchase agreements up 14.7 per cent, real estate, up 3.8 per cent, and investment arrangements, up 1.24 per cent.

Deposits fell 5.6 per cent, while stocks and shares declined 3.4 per cent, reflecting weakness in the stock market and relatively high interest rates. The central bank continues to hold the policy rate steady at 5.75 per cent since May. Prior to that, the policy rate was cut in increments after peaking at 7.0 per cent in 2024.declines

The reductions came after “a protracted phase of elevated interest rates”, which “has hindered growth potential for overall invested pension assets”, the FSC stated.

There are 820 pension plans across the industry, of which 739 held assets.

Industry membership expanded by about two per cent to 174,820, while active pension coverage edged up to 12.05 per cent of the labour force, reflecting both increased participation and employment growth.

Of the 328 solvent plans, three-quarters, or 234, reported solvency levels between 100 and 120 per cent, while 94 had solvency levels above 120 per cent.

Insolvent defined-contribution plans decreased from six to five over the quarter, the FSC said.

steven.jackson@gleanejrm.com