Year: 2025
Type: article
Abstract: This study investigated the influence of investment strategies on the financial performance of Kenyan pension schemes, specifically analyzing the moderating role of members' savings. Employing a robust descriptive correlational design, the research conducted a census of all pension schemes registered with Kenya's Retirement Benefits Authority (RBA) between 2017 and 2022. This comprehensive approach yielded a substantial 5,624 panel data observations from a total of 1,075 registered pension schemes as of December 2023, ensuring a broad and in-depth analysis of diverse scheme characteristics and investment approaches. The findings revealed distinct impacts of various investment strategies. Equity investment strategies were found to positively enhance the Portfolio Performance Composite (PPC), although their effectiveness was observed to diminish as members' savings increased, suggesting that smaller funds might benefit more from higher-risk investments. Conversely, real estate investment strategies demonstrated a clear positive correlation with PPC, proving effective in delivering stable returns, particularly in volatile market conditions. Larger pension funds notably reaped greater benefits from conservative real estate approaches, underscoring the advantages of scale and diversification. Fixed income investment strategies significantly improved financial performance, contributing to a 1.45% increase in PPC. However, certain scheme types, particularly defined benefit plans, showed a detrimental impact on PPC, experiencing a significant 34.37% decrease, highlighting inherent inefficiencies within these structures. The success of fixed income strategies was also found to be contingent on members' savings, with smaller funds potentially struggling to implement them effectively. These results underscore the critical role of members' savings as a moderating factor, emphasizing the need for tailored investment strategies based on a pension fund's specific characteristics, especially its size, to optimize performance. The study concludes that while all three investment strategies can contribute positively to financial performance, their optimal application varies significantly with the size of the pension scheme. Policy recommendations include strengthening governance frameworks, implementing customized investment approaches, promoting portfolio diversification, and encouraging fund consolidation to leverage economies of scale, ultimately enhancing the financial health and sustainability of Kenyan pension schemes.
Authors: Bernard Kipkogei Kibet, Kalundu Kimanzi
Language: English
Subfield: Accounting
Domain: Social Sciences
Open Access status: diamond
OpenAlex ID: W4410758709