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Performance Review

For the third quarter of 2019, the average return achieved by the 420 pension schemes with total fund value of about Kshs.756 Billion(excluding property) participating in the survey was 2.5% compared to 2.3% in the previous quarter.

The improved performance in this quarter was largely due to better returns in equity than in Q2 2019.

The highest performing scheme over the quarter recorded a return of 11.6% .

Over the 3 year period, pension schemes have recorded a return of 11.7% 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 better strategies in order to maximize members’ returns.


Overall Returns

Equity performance improved from -3.0% recorded in Q2 2019 to 2.1% this quarter helped in part by dividend payouts. NSE 20 fell 7.6% while NASI lost 2.8% from Q2 but dividends paid from positive half year earnings compensated investors for declining stock prices.

The offshore returns significantly declined in this quarter with a weighted return of 0.4% compared to the 6.2% recorded in Q3.The decline was due to the global economic slowdown caused by the trade tension between China and USA, Brexit deal standoff and heightened geopolitical tensions.

The fixed income returns in the quarter also declined from 4.3% in Q2 to 2.6% in this quarter due to uncertainties around the removal of the interest rate cap law and falling yields on government securities.


Asset Allocation

For the current quarter, it was noted that pension schemes invested most of their funds in fixed income, their allocation increasing slightly to 75.6% from 74.7% in Q2 2019 . Member funds were reallocated to fixed income as stock market failed to offer indications of upturn in the short-run.

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

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


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© Actuarial Services Limited 2019