Retirement funds’ returns climb to four-year high

Returns on pension funds rose 4.2 per cent in the quarter to September, the best third quarter performance in four years, on an improved economy following a gradual lifting of Covid-19 lockdowns.

By OTIATO GUGUYU
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Summary

• Offshore assets gave the highest returns at 11 per cent although Kenya’s relatively conservative pension funds remained largely invested in fixed income, including government securities.
• Fixed income which comprised 78.2 per cent of pension assets gave a return of 4 per cent while Equities which made up 20.8 per cent of the assets offered a return of 5.1 per cent.
• Actuarial Services East Africa Limited (ACTSERV), which surveyed 383 schemes with a total fund value of about Sh858 billion said overall return was driven by optimism of recovery post Covid-19.

Offshore assets gave the highest returns at 11 per cent although Kenya’s relatively conservative pension funds remained largely invested in fixed income, including government securities.

Fixed income which comprised 78.2 per cent of pension assets gave a return of 4 per cent while Equities which made up 20.8 per cent of the assets offered a return of 5.1 per cent.

Actuarial Services East Africa Limited (ACTSERV), which surveyed 383 schemes with a total fund value of about Sh858 billion said overall return was driven by optimism of recovery post Covid-19.

“The positive offshore returns were majorly as a result of investors optimism supported by signs of economic recovery and loose monetary policies by governments and central banks across the globe to spur economic development and repress the negative impact of Covid-19 on economies,” ACTSERV said.

Kenya’s economy shrank by 5.7 percent in the three months to June when businesses shut and people stayed at home but has seen improvement in the third quarter.

There has also been increased corporate activity buoyed by more firms resuming operations and others increasing factory floor activities after the easing of some restrictions imposed to stem the spread of Covid-19.

Kenya witnessed a recovery of business in the third quarter and into the fourth with Stanbic’s Purchasing Managers Index (PMI) climbing steadily from 52.9 in August to 54.1 in September.

The recovery is expected to continue following a record 59.1 in October.