NSSF portfolio of stock market blue chips hits Sh56bn

The State-controlled retirement fund NSSF had a portfolio of Sh56.3 billion composed of mainly blue chip stock market companies as at June 2014, newly published financial statements of the agency have showed.

The National Social Security Fund’s (NSSF) portfolio of quoted equities stood at Sh51.1 billion the year before, with the increase resulting from new net purchases and valuation gains.

NSSF’s top investments include shares in KCB Group, Bamburi Cement, East African Breweries (EABL) and the National Bank of Kenya (NBK) where it is ranked among the largest owners.

At Sh56.3 billion, NSSF is one of the single-largest investors at the Nairobi bourse after the Treasury and Vodafone, which hold over Sh200 billion each on their Safaricom shares alone.

NSSF’s holdings, which have since dropped in line with the bear run that started last year, account for over two per cent of the total market capitalisation of Sh1.9 trillion.

Its influence in the market is expected to rise further in the coming years, with the fund investing hundreds of millions of shillings annually in buying shares in the open market.

NSSF has invested in 30 firms or nearly half the total of 64 companies listed on the Nairobi bourse.

The fund’s stock investment has earned it board seats in several firms, especially those where the Treasury is also a significant or controlling shareholder including NBK and East African Portland Cement Company (EAPCC).

A 6.1 per cent stake in KCB is the fund’s largest stock investment that was valued at Sh11.5 billion as of the June 2014 reporting date.

It was followed by Bamburi (Sh9.9 billion), EABL (Sh8.6 billion), NBK (Sh4 billion), British American Tobacco (Sh3.1 billion), Barclays Bank of Kenya (Sh2.7 billion) and the Nation Media Group (Sh2.6 billion) among others.

NSSF’s equities portfolio appears concentrated among established firms that are some of the most profitable and highest dividend-payers. The fund earns over Sh2 billion in dividends annually from its significant stakes in the companies.

KCB is the country’s largest bank by assets and absolute profits, paying a total dividend of Sh6 billion for the year ended December 2014.

Bamburi is Kenya’s largest and most profitable cement producer, paying a total dividend of Sh4.3 billion for its performance in the year ended December 2014.

At Sh56.3 billion, quoted equities tops the fund’s assets list followed by government bonds (Sh36.6 billion) and land and buildings (Sh20.6 billion). NSSF also has other assets including bank deposits, corporate bonds and commercial papers.

Most of the fund’s cash is currently invested through asset managers that buy stocks and bonds on its behalf. NSSF previously invested its money directly but hired the asset managers in 2011 in an effort to boost its returns.

The asset managers, who are paid a fee, are seen as having a larger and more experienced investment staff and research teams. NSSF, which is estimated to have 1.5 million active members, recorded net collections of Sh6.1 billion from members in the year ended June 2014.

This had risen from Sh5.6 billion the year before. Each member continues to pay flat monthly contributions of Sh200, which is matched by the employers after a new law that sought to raise the amounts starting 2014 were blocked by the courts.

Under the new NSSF Act, the fund was to transform from a provident fund to a pension scheme with more benefits as opposed to the current model where it mostly pays lump sum benefits.