State-owned National Social Security Fund (NSSF) spent Sh615.8 million in investment management expenses for the year ending June 2022, with the sum shared among six fund managers who oversee the bulk of the fund’s portfolio.
A report by the Auditor-General on the NSSF’s financials for the period shows that the management fees went up by 21 percent from the previous year, keeping the fund’s overall expenses above the allowable threshold of two percent of net assets.
NSSF employs the services of Old Mutual Asset Managers (Kenya) Limited, Gen Africa Asset Managers, African Alliance Kenya Investment Bank Limited, Sanlam Investment East Africa Ltd, Co-op Trust and CIC Asset Management Ltd as external asset managers to take care of about 85 percent of its assets under management. The remainder is managed internally by the fund.
By the close of the financial year, NSSF had net assets worth Sh285.7 billion on its books, a marginal increase of 0.4 percent compared to the net assets of Sh284.5 billion at the beginning of the year.
Its net return on investment showed a loss of Sh3.15 billion in the period, compared to again of Sh32.7 billion in 2021, owing to a fall in the market value of investments, chiefly equities and State securities.
“The statement of net assets available for benefits reflects investment management expenses of Sh615.79 million and operating costs of Sh6.85 billion, all totalling to Sh7.47 billion or 2.6 percent of the fund’s net assets of Sh285.72 billion as at June 30, 2022,” read the Auditor-General report in part.
“The fund’s total expenses exceeded the allowable limit of Sh5.71 billion (two percent of fund’s net assets) by an amount of Sh1.75 billion.”
The NSSF Act of 2013 stipulates that the fund’s total administration expenses ought not to exceed two percent of assets.
The latest pensions industry data from the Retirement Benefits Authority (RBA) shows that by the end of December last year, Gen Africa was managing the largest share of NSSF assets at Sh57.3 billion, followed by Old Mutual at Sh49.2 billion.
Co-op Trust and African Alliance managed Sh47.8 billion and Sh43.8 billion worth of assets respectively, while Sanlam and CIC Asset managed assets valued at Sh39.5 billion and Sh12.5 billion respectively.
British American Asset Managers Limited was until December 2020 the biggest manager of NSSF assets but was dropped from the list of investment managers contracted by the fund to oversee its portfolio.
The cost of the external management of assets also rose in the NSSF’s financial year despite a tough investment environment in which the value of both government securities and equities was eroded by falling prices.
