A survey of asset liability management among defined benefits pension schemes in Kenya
This study sought to examine the strategic asset allocation and the asset/liability management in pension schemes in Kenya. The study specifically surveyed the asset liability management in defined benefits schemes in Kenya The study sought to compare the asset liability structure of defined benefit schemes in the period January 2002 to December 2008, a period of 7 years. The population of the study consisted of all defined benefits pension funds in Kenya, registered with the retirement benefits authority (RBA), a number of 142. Preference was given to schemes that are at least five years old by the end of year 2008. The data collected was secondary data from the financial records of the pension schemes. For every pension fund, age structure data, solvency margin data and asset allocation information was collected. Correlation and regression analyses were carried out and their significance analyzed. The majority of the pension funds under study held their assets were held in liquid assets as evidenced by the 40.12% average cash and cash equivalents holding. In the same period equity holdings and fixed income holdings averaged 21.04% and 10.66% respectively. The relationship between cash assets, fixed income and equity were all negatively correlated. The regression analysis indicates that there is a statistically significant positive relation between the proportional fixed income investment and the average age (significant at 5% level). One year's increase in the average age increases the proportion of fixed income investment by 1.2 percent. The relation between the proportional equity investment and the average age is negative, and it is statistically significant at 5% level. One year's increase in the average age decreases the proportion of equity investment by 1.1 percent. The results indicate that there is a relationship between the liability structure and the asset allocation. While pension funds with younger participants have more equity exposure, more mature pension funds have more fixed income investments.