Pinebridge beats NSSF in portfolio size for first time

A private fund manager has overtaken the National Social Security Fund (NSSF) in terms of the portfolio size, the first time this has ever happened.

Data from Retirement Benefits Authority (RBA) shows that Pinebridge Investment was managing Sh156 billion at the end of last year compared to NSSF’s Sh136 billion.

The mandatory workers’ pension fund has been the dominant player in the sector as it collects statutory fees from all employees in the country but has performed poorly in growing the assets due to low contributions, corruption and misappropriation of funds.

Last year, NSSF grew its portfolio by Sh15 billion compared to Pinebridge’s Sh40 billion. The investment policy of the two are different with NSSF heavy on equities at 38 per cent and real estate, 31 per cent, while Pinebridge has invested heavily on government securities, 42 per cent, 32.4 per cent equities with real estate at 8.3 per cent.

“The manager with the largest assets under management remained AIG Pinebridge with 27.6 per cent of the market share at Sh156.1 billion of assets,” said RBA in its full year report.

ICEA manages more schemes than Pinebridge but has a smaller portfolio of Sh103 billion underlining the financial strength of Pinebridge clients. ICEA manages 356 schemes, being 27.3 per cent of the registered schemes.

Other large funds include Genesis, which is majority owned by listed investment firm Centum, CFC Stanbic, Old Mutual and Co-op Trust. The six, who are also contracted by NSSF to manage some of its funds (Sh43 billion) control 75 per cent of the assets held by the 17 registered fund managers.

“Mega schemes have on average become aggressive in the last three quarters. There has been an increase in the equity, offshore and property allocations,” said Acturial Services in an interim survey of the industry.

Private funds, however, benefit from having contributions from employees pegged on salaries unlike NSSF which receives a flat figure of Sh400 for each employee.

This means that the private fund asset grow from not only new memberships and investment income but also on salary reviews of members. Retirement packages have become an integral line in remuneration negotiations of employees.

Employers have the option of voluntarily contributing more than the statutory figure to NSSF, but financial scandals that have dogged it, especially in management of its real estate projects have seen many of them give it a wide berth.

NSSF administrative expenses, especially wages have been the largest consumers of workers’ contribution leaving it with little to invest. As at last year the administrative costs took up an estimated 45 per cent of its collections.

NSSF will, however, be hoping to reverse the rankings with the NSSF Act, which was set to take effect at the beginning of last month, before it was suspended following protest from employers.

READ: NSSF considers paying interest on pension funds

The Act requires the fund to cap its administrative costs at two per cent of its size. The new Act also widens NSSF membership mandate to include casual workers and increases contributions from each employee.

Under the new regulations, monthly contribution will increase from the flat figure of Sh400 to 12 per cent of the employee’s salary, shared equally by between the employer and employee.

Companies with private pension schemes will be allowed to opt out for amounts exceeding Sh720 upon approval by the RBA.

NSSF has been collecting approximately Sh600 million each month from its more than 1.5 million members.

As at the end of last year the pension industry had assets worth Sh696 billion, up from Sh548 billion in 2012, with fund managers holding Sh564 billion while NSSF was managing Sh136 billion.

“The growth of the industry was as a result of a stable performance of the Nairobi Securities Exchange, revaluation of the assets held under property investments and good performance of the bond market,” said RBA chief executive Edward Odundo.

Last year, the indicative NSE 20 Share Index grew by 19 per cent following positive investor sentiments after a peaceful election.