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Pension funds nearly double alternative assets to Sh126bn
RBA attributed the growth in assets to a stable macro-economic environment, pointing to a mix of a stable exchange rate, favourable interest rates, and mild inflationary pressure.
Pension funds nearly doubled their exposure to alternative investments such as private equity (PE) funds, offshore assets and real estate investment trusts in the year to June 2025, as they sought to diversify their portfolios to bring in high growth assets.
An industry report by the Retirement Benefits Authority (RBA) for the half year ending June, shows that the investment in these assets rose by 91.8 percent to Sh126.6 billion in June 2025, from Sh66.01 billion in June 2024.
Offshore assets account for the largest share of alternative investments for the schemes at Sh84 billion, having grown by 115.2 percent from Sh39.04 billion in June 2024.
The growth was bolstered by the stable shilling against the dollar, which protected the external assets from valuation losses.
PE investments grew by 129.2 percent to Sh20.1 billion, driven by funds seeking high returns, while the value of Reits investments was up 14.2 percent to Sh12.7 billion.
Other alternative assets held by the pension funds include commercial paper-whose outstanding value grew by 62.3 percent to Sh5 billion and unquoted shares which grew by 14.2 percent to Sh4.5 billion. Smaller assets, which are referred to as ‘other assets’ by the RBA, grew five-fold to Sh300 million, from Sh60 million in June 2024.
“Alternative assets offer schemes avenues for diversification. Although uptake has been slow over the years, there was a noticeable increase in activity across some classes between June 2024 and June 2025,” said the RBA in the industry report.
“The significant uptick in offshore investments and private equity, reflects a strong shift toward high-growth opportunities. The drastic growth in the “other assets” category was mainly driven by investments in Shariah-compliant funds, which have received increased interest from schemes.”
However, despite the growing popularity of the alternative investments, pension funds remain highly exposed to traditional assets such as government bonds, guaranteed funds, listed equities and property, which offer both a guarantee of long term low risk and stable returns for their savers.
By the end of June, the investments in these traditional assets accounted for 94.2 percent of the sector’s total assets of Sh2.53 trillion, led by government securities at Sh1.33 trillion, guaranteed funds at Sh495.9 billion, listed shares at Sh255.2 billion and property at Sh235.6 billion.
Other traditional asset allocations include fixed deposits at Sh64 billion, cash at Sh20.3 billion and listed corporate bonds at Sh3.8 billion. Overall, the sector’s total assets grew by 27.9 percent fromSh1.98 trillion over the one year period.
The RBA attributed the growth in assets to a stable macro-economic environment, pointing to a mix of a stable exchange rate, favourable interest rates, and mild inflationary pressure.
Bonds and shares saw significant capital gains in the period, helping boost the value of portfolios even as the funds accessed higher inflows from members thanks to higher deductions towards the National Social Security Fund (NSSF).
The third-year implementation of the NSSF Act, 2013, which saw the lower limit contribution go up to Sh8,000 and the upper limit to Sh72,000 also boosted the cash available to schemes for investment.
By the end of June, the NSSF held assets worth Sh558.07 billion, up from Sh402 billion in June 2024.
Out of these assets, Sh517.96 billion is externally overseen by private fund managers on behalf of NSSF, while Sh40.11 billion is internally managed by the State controlled fund.
