Pension Scheme Survey Performance – Q1, 2023

Performance Review

For the current quarter, the average return achieved by the 425 pension schemes with total fund value of about Kshs. 950Billion (excluding Property) participating in the survey was 0.8% compared to 2.3% in the previous quarter. This lower return was largely due to the decline in Equities from Q4 2022 attributable to foreign investor outflows following the Dollar liquidity constraints and high interest rate environment in developed markets. The rise in Fixed Income was attributable to rising yields as investors pushed for compensation against a weakening Shilling, sustained inflationary pressures and high domestic borrowing.

The highest performing scheme over the quarter recorded a return of 5.1%.

Over the 3 year period, pension schemes have recorded a return of 7.0% p.a. The 3-year performance is a better gauge of performance as the volatility of returns is smoothened.

It would be useful for Trustees to implement better strategies in order to maximize members’ returns.

Fixed Income asset class increased to 2.6% from 1.1% in the same quarter last year. The increase in Fixed Income was attributable to high returns bid at the auction as market liquidity tightened.

Equities achieved a lower quarterly return of -7.2% compared to -0.1% in the previous quarter. The negative returns were attributable to elevated inflation and a Dollar liquidity crunch that threatened foreign dividend and return repatriation.

Offshore achieved a higher quarterly return of 16.0% compared to 7.4% in the previous quarter. The uptick was majorly as a result of improved investor sentiment as inflation cooled, monetary policy stance eased and hopes of China’s economic rebound.

Asset Allocation

For the current quarter, it was noted that pension schemes invested most of their funds in Fixed Income, increasing their allocation to 77.4% compared to 76.5% in the previous quarter.

Allocation to Equities dropped to 18.8% in the current quarter compared to 21.8% in the previous quarter.

Overall, ideal asset allocation is required to ensure pension schemes meet their targeted returns.

For a more detailed report on their performance, download the report here.