Asset Allocation Strategies Adopted by Pension Schemes in Kenya

Abstract

Asset allocation strategies adoption in pension schemes management present cardinal importance. This study sought to examine asset allocation strategies adopted by pension schemes in Kenya. The study used descriptive cross sectional survey design. Yamane model and systematic sampling technique were used to draw a sample of 80 pension schemes. Structured questionnaires’ were administered to fund managers of sampled pension schemes of which 74 successfully responded (92.5% response rate). Descriptive statistics; mean, standard deviation, minimum, maximum, frequency and percentages were used to analyze the data. The study established that various asset allocation strategies were adopted by pension schemes in Kenya: Strategic asset allocation strategy (Composite Mean = 4.202), Dynamic asset allocation strategy (Composite Mean =3.395), Tactical asset allocation strategy (Composite Mean = 4.69), Constant weighted asset allocation strategy (Composite Mean = 4.215), Insured asset allocation strategy (Composite Mean = 4.55), Integrated asset allocation strategy (Composite Mean = 4.61) and Asset and Liability management strategy (Composite Mean = 4.855). Factor analysis ascertained latent variables in the study. The study data had KMO value of 0.678, slightly above the KMO standard threshold of 0.6, denoting substantial correlation in the data, thus considered satisfactory for Factor Analysis. Bartlett`s test shown significance at 0.000, implying that any identified factor accounted for ascertaining asset allocation strategies adopted by pension schemes in Kenya. The six factors after rotation still cumulatively accounted for by 92.242% of total rotation variance. The study recommended that pension scheme fund managers, trustees, regulator- retirement benefits authority and other pension scheme practitioners ought to regularly monitor and evaluate asset allocation strategies that best suits respective pension schemes to guarantee continuous growth and provision of pension benefits to members.