Pension industry posts lower returns as sector continues to experience volatility

Kenya's pension industry posted a decline in performance this year. Returns on schemes declined as the sector continued to experience volatility over the last seven years.

The average annual return on schemes declined from 21 per cent in 2013 to 17.8 per cent as at September 30, this year. This is according to recently released Alexander Forbes Consulting Actuaries Schemes Survey 2014.

This survey covered eight fund managers including African Alliance, British American Asset Managers, Co-op Trust Investment Managers, Genesis, ICEA Lion Asset Managers, Old Mutual, Pinebridge and Stanlib Investments, all together covering some 383 pension schemes with a total of Sh524.9 billion in assets under management.

According to the survey, the best time for the pension industry over the last six years was in 2010 when average returns for the pension industry reached 37.2 per cent.

Volatility has been  witnessed in the market over the last six years, with the average annual return on schemes declining from 5 per cent in 2008 to 1.2 per cent, then increasing to 37.2 per cent in 2010, declining to negative 11.4 per cent in 2011 to  25.7 per cent  in  2012 and finally to 21 per cent  last year.

A comparison of the market value of assets under management as at September 2013, 2012, 2011, 2010, 2009 and 2008 clearly demonstrate the zigzag of returns the Kenyan pension industry has witnessed, the resulting market shifts and the various points of inflection

The invested assets of the schemes participating in this year's survey totaled  Sh524.9 billion, of which small schemes accounted for Sh 17.3 billion (or 3.3%) of the assets under management, medium schemes Sh 54.1 billion (or 10.3%) and large schemes Sh 453.6billion (or 86.4%) of the assets under management.

The average return for funds invested in equities was 24.9 per cent in September this year.

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