Effect of Real Estate Investments on Financial Performance of Pension Funds in Kenya
Abstract
The pension fund market in Kenya has grown exponentially in the recent past and this
trend is expected to continue. Pension funds are increasingly making investments in the
real estate sector with the expectation of obtaining better returns. Kenya has
experienced a wave of real estate investments as investor confidence has increased. The
main motivation for investment in the real estate sector by pension funds is
diversification with an aim of enhancing their return on investments. The purpose of
this study was to determine the effect of real estate investments on the financial
performance of pension funds in Kenya. Real estate investments, fixed income
investments, listed equity, and fund size were all considered independent variables in
this analysis. Descriptive research design was used. The target population was the 1340
pension funds in Kenya. The sample size was 134 pension funds which represented
10% of the entire population. Research variables data were derived from Retirement
Benefits Authority (RBA) from 2016 to 2020. Regression and correlation analysis were
used to test the study hypotheses by establishing the relationship between real estate
investments and performance. The study found that real estate investments (β=0.095,
p=0.000), fixed income investments (β=0.082, p=0.001) and listed equity (β=0.033,
p=0.008) had a positive and significant effect on the performance among pension funds
in Kenya. The study also found that fund size (β=0.118, p=0.312) had no significant
effect on the performance among pension funds in Kenya. The results also indicated R2
of 0.4735 which implied that the selected independent variables contributed 47.35% to
variations in pension funds’ performance. The study recommends that pension funds’
policy makers should design policies that increase real estate investments as this will
lead to an increase in financial performance. The study further recommends that trustees
and managers of pension funds should develop strategies aimed at increasing both fixed
income and listed equity investments as these lead to an increase in financial
performance.
Publisher
University of Nairobi
Rights
Attribution-NonCommercial-NoDerivs 3.0 United StatesUsage Rights
http://creativecommons.org/licenses/by-nc-nd/3.0/us/Collections
- School of Business [1411]
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