Pension funds in Kenya reap big from equities

NAIROBI: Pension fund managers posted improved returns from equity and offshore markets during the first three months of this year. The latest Alexander Forbes Consulting Actuaries Schemes Survey released yesterday, says 317 pension schemes that participated in the survey control assets worth Sh490.4 billion. “We have seen impressive performance of companies at the Nairobi Securities Exchange including good earnings for listed firms,” said Alexander Forbes Kenya Ltd Chief Executive Sundeep Raichura.

“Although the offshore markets have been volatile over the past three years, they still offer high returns and have remained attractive.”

The average equity return for all schemes over the year to March 2015 was 23.7 per cent - an increase compared to 18.7 per cent as at December 2014. However, the average fixed income performance posted a drop to 10.2 per cent as at March 2015, compared to 13.8 per cent as at December 2014. Offshore performance rose to 12.2 per cent as at March 2015 compared to 6.8 in December 2014.

This is the 37th Investment Performance Survey. Out of these, small schemes accounted for Sh13.3 billion  or 2.7 per cent of the assets under management, medium schemes Sh54.8 billion or 11.2 per cent while large schemes accounted for Sh422.3 billion or 86.1 per cent of the assets under management. While large schemes represented 32 per cent of the survey sample by number, they comprised 86 per cent in terms of assets under management.

Figures indicate the pension industry has grown over the last decade with an estimated 60 per cent of total pension industry assets in Kenya are currently invested in listed securities with a vast majority placed in Government Securities.

Key fund managers who participated in the survey were African Alliance Securities, Apollo Asset Managers, British American Asset Managers, Genesis Kenya Investment Management Ltd and ICEA Lion Asset Management.

Others were Old Mutual Investment Group Ltd, Pan Africa Asset Managers, PineBridge Investments East Africa Ltd and Stanlib Investments. Also providing huge opportunities for pension managers are devolved county governments that are in the process of crafting county-focused investment vehicles.

“Whereas over the past decade and a half, the focus of pension fund trustees has been to ensure schemes were properly run and compliant with the new legislation, it is time to shift focus to improving the outcomes for members of retirement funds,” said Raichura in March this year. Experts say returns for the pension schemes could be enhanced if fund managers invest in other financial products away from the traditional equities and bonds.