Effect of Portfolio Mix on Perfomance of Pension Funds in Kenya

Abstract

The primary role of pension funds in the country Kenya is to ensure that staffs both in public and private corporations have a form of regular income or lump sum on retirement. Recently most of the pension funds prefer the pensions system that guarantees a regular income for life to the pensioners. This has been informed by the poor saving culture of Kenyans. Retirement Benefits Authority (RBA) regulates all pension funds in Kenya. Lately there has been a concern on the financial performance of pension funds in Kenya holding assets worth 609.8 billion as at June 2017. With the NSSF Act 2013 in place the portfolio is expected to grow into trillions by the year 2022. Where there are doubts on the financial performance of pension schemes, RBA recommends adoption of an pension through an insurance company or any other financial provider approved by the Insurance Regulatory Authority (IRA) and the Central Bank of Kenya. This study set out to establish the effect of portfolio mix on performance of pension funds in Kenya. The study was guided by the following objective; to determine the effect of portfolio mix on financial performance of pension funds in Kenya Using a sample of 33 pension schemes, the study established that portfolio size significantly affects the performance of pension funds in Kenya. Secondary data was collected and made use of in the research. The majority recommendations proposed to address the level of financial management knowledge to the trustees of the various pension fund boards, lobbying for the government to reduce the tax burden to the pensioners and increased member education.