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Pension funds raise investments in offshore, PE
Total assets under management held by the pensions industry grew by Sh275.1 billion to close June 2024 at Sh1.98 trillion, the closest it has come to breaching the Sh2.0 trillion mark.
Pension funds raised their offshore and private equity investments in the year to June 2024, new data shows, underlining a quest to cushion their investment from forex-related erosion and protect shareholder returns.
Data by the Retirement Benefits Authority (RBA) shows that offshore investments by pension funds grew by 68.8 percent in the 12 months to June 2024 closing at Sh39.04 billion, making them the fastest-growing asset class in the period under review.
Offshore investments closed June 2024 accounting for two percent of the assets under management held by pension funds, up from one percent at the close of June 2023.
“The significant growth in offshore investment is attributable to the exchange rate movement where the shilling had considerably lost value against the dollar hence making offshore investments more attractive”, states the RBA in its report.
Investments in private equity and venture capital posted the second fastest growth at 63.4 percent to Sh8.8 billion as schemes sought to diversify their portfolio away from the traditional favourites of government paper and stocks.
Investment in government securities and guaranteed funds registered a distant third at 24.2 percent to Sh1.01 trillion and 23.7 percent to Sh405.2 billion, respectively. In June 2024, holdings in government paper crossed the 50 percent market of the industry’s total assets under management closing at 51.1 percent.
The market regulator says that the recession of Finance Bill 2024 and the widening of the 2024-25 fiscal deficit from the earlier planned Sh597.0 billion to Sh770.7 billion will see the government lean more than expected towards domestic borrowing and trigger higher appetite from pension funds for government paper in the hunt for attractive yield.
“The setback from the withdrawal of the Finance Bill 2024 puts the government in a tight fiscal space. This will force the government to resort to borrowing to bridge the revenue gap. Schemes are, therefore, likely to acquire more government papers into their portfolios”, RBA states.
In the same period, unquoted equities posted the largest contraction with the holdings by pension funds closing June 2024 at Sh3.94 billion down 22.5 percent compared to a year earlier, and fixed deposits which closed June 2024 at Sh53.2 billion down 21.4 percent compared to a year earlier.
Total assets under management held by the pensions industry grew by Sh275.1 billion to close June 2024 at Sh1.98 trillion, the closest it has come to breaching the Sh2.0 trillion mark.
Investment by one scheme in Kenya’s debut Sukuk issuance, the Sh3.0 billion Linzi instrument, pushed the market's appetite for non-listed bonds by private companies upward.
