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Pension schemes post 30pc return on equities rally
In the corresponding period 2024, the pension funds had annualised returns of 13.3 percent, as per analysis done by Actuarial Services East Africa (Actserv).
Pension schemes reported a return of 30 percent on their investments in the 12-months to June 2025 on account of the bullish performance of equities assets, setting savers up for improved interest payments on their funds this year.
This overall return on an annualised basis is the highest seen in at least 11 years, with the fixed income and offshore asset classes also reporting double digit growth to augment performance of the equities market.
In the corresponding period last year, the pension funds had annualised returns of 13.3 percent, as per analysis done by Actuarial Services East Africa (Actserv).
A rally in share prices at the Nairobi Securities Exchange (NSE) helped the funds record a weighted average return of 51.3 percent from equities, improving on the return of 9.8 percent seen in the corresponding period in 2024.
“The strong (equities) performance was driven by attractive valuations, robust corporate earnings, dividend declarations and continued monetary easing,” said Actserv in its report. “Offshore returns also improved significantly, largely driven by monetary policy easing in major economies and positive earnings growth, despite rising geopolitical and trade policy uncertainty.”
In the 12 months to June 2025, the stock market added Sh706.4 billion in investor wealth to Sh2.42 trillion, equivalent to a gain of 41 percent, backed by double digit price gains on large blue chips.
Pension fund equities investments are largely concentrated on these large stocks, which offer the long term stability on solid fundamentals and steady dividend returns that fit in with the lower risk strategies of pension funds.
In the period, Safaricom had a return of 44.5 percent, Equity Group 15.7 percent, KCB Group 49.12 percent and EABL 25.7 percent. Fixed income assets that include government bonds —which form the bulk of the pension investments— had a return of 27.2 percent, while offshore investments returned 21.7 percent.
Government bonds progressively saw their valuations in the secondary market go up as interest rates fell from the third quarter of last year.
Bond prices and yields move in opposite directions, where a fall in one results in the rise of the other.
This is because as returns on new issuances fall (in the primary market), those holding older bonds that had been issued at a higher interest rate are able to command a price premium to sell them to other investors at the NSE’s secondary market.
In the offshore market, interest rate cuts among larger economies boosted capital flow to equities markets. The MSCI World Index which tracks large and mid-cap firms across developed markets has had a one-year return of 20.4 percent by August 4.
The overall returns thus beat inflation, which averaged 3.56 percent in the 12-month period, by a wide margin.
In terms of asset class allocations, the 407 schemes surveyed by Actserv put 81.32 percent of their funds in fixed income assets, followed by equities at 15.81 percent, offshore at 2.67 percent and cash at 0.2 percent. These assets are valued at a total of Sh1.18 trillion, excluding property.
