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Team seeks 70pc State bonds assets cap for pension funds
The total pension industry assets under management (AUM) for the year ended December 31, 2024, was Sh2.25 trillion compared to Sh1.72 trillion a year earlier.
A team of experts is pushing for the gradual reduction of allowable investments in government securities by pension funds to incentivise the schemes to diversify their portfolios.
Financial sector players led by the President of the Association of Pension Trustees and Administrators of Kenya Hosea Kiili and who were part of a National Treasury taskforce exploring ways to tap into public private partnership (PPPs) projects, want the maximum allowable investments in government securities cut to 70 percent from the current 90 percent.
This, the taskforce says in a report tabled in Parliament last month, will encourage them to channel more funds into infrastructure.
The committee of experts, which also includes Liaison Group Chief Executive Officer Tom Mulwa wants a set minimum of 30 percent of total assets under management (AUM) for infrastructure, ensuring consistent capital flows to projects.
The team proposes the lowering the exposure to quoted equities to a maximum of 60 percent from 70 percent currently to balance growth potential with stability.
Currently, the Retirement Benefits Authority (RBA) sets statutory investment limits, including a 100 percent investment threshold/limit on guaranteed funds.
The RBA Act further allows investments in alternative asset classes but at lower levels including immovable property at 30 percent, listed corporate bonds at 20 percent, fixed deposits at 30 percent and offshore at 15 percent.
Schemes can also invest in cash up to five percent of their AUM, unquoted equities up to five percent, private equity at 10 percent, real estate invest trusts (Reits) at 30 percent, unlisted corporate bonds at 10 percent and other assets at 10 percent.
The total pension industry AUM for the year ended December 31, 2024, was Sh2.25 trillion compared to Sh1.72 trillion a year earlier.
The bulk of the AUM was invested in government securities and accounted for 52.5 percent of the asset base ahead of guaranteed funds at 19.4 percent, immovable property at 11 percent and quoted equities at nine percent.
Pension schemes had invested less than one percent of their asset classes including listed corporate bonds, unquoted equities, private equity, Reits, and non-listed commercial paper.
