Investment Survey – Q4 2019

Performance Review

For the fourth quarter of 2019, the average return achieved by the 423 pension schemes with a total fund value of about Kshs.790 Billion(excluding property) participating in the survey was 5.0% compared to 2.5% in the previous quarter.

The improved performance in this quarter was largely due to better returns in equity and offshore than in Q3 2019. The highest-performing scheme over the quarter recorded a return of 10.0%.

Over the 3-year period, pension schemes recorded a return of 11.3% p.a. The 3-year performance is a better gauge of performance as the volatility of returns is smoothed.

It would be useful for trustees to engage in better strategies in order to maximize members’ returns.

Equity performance improved from 2.1% recorded in Q3 2019 to 17.4% this quarter due to gains in the banking and telco stocks following the repealing of the law capping interest rates. NASI gained 14.4% from Q3 on the rally while NSE 20 and NSE 25 gained 9.1% and 18% respectively.

The offshore returns significantly rose in this quarter with a weighted return of 6.2% compared to the 0.4% recorded in Q3 as aggressive central bank stimulus and easing trade tensions towards the end of the year saw global stocks generate the best returns in a decade.

The fixed income returns in the quarter however declined from 2.6% in Q3 to 1.4% in this quarter as equities recovered.

Asset Allocation

For the current quarter, it was noted that pension schemes invested most of their funds in fixed income, their allocation however declined to 64.6% from 75.6% in Q2 2019. Member funds were reallocated to Equities as the stock market recovered in Q4.

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