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NSSF pays fund managers Sh310 million annual fees

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The State-controlled pension fund, whose total assets stood at Sh221.3 billion as of June, continues to manage Sh66 billion internally. FILE PHOTO | NMG

The National Social Security Fund (NSSF) pays five fund managers about Sh310 million annually to oversee its assets worth Sh155.2 billion, sources in the industry told Business Daily.

The asset managers, whose annual fees range from Sh53.4 million to Sh76 million, are Gen Africa Asset Managers, British-American Asset Managers, Stanlib Investments Kenya Limited, Old Mutual Asset Managers (Kenya) Limited and African Alliance Kenya Investment Bank Limited.

NSSF has not disclosed what it pays the fund managers but sources in the industry said the fee is set at a minimum of 0.2 per cent of assets under management (AUM).

This means that fund managers growing their asset allocation at the fastest pace from capital gains and investment income stand to earn the highest fees. The compensation structure lacks an explicit incentive for short term outperformance.

Statistics from the Retirement Benefits Authority (RBA) show that the five institutions were managing a total of Sh155.2 billion on behalf of NSSF in the year ended June, indicating that they earned a total of Sh310 million over the period.

Gen Africa, which managed Sh30.4 billion, earned Sh76 million while British-American and Stanlib were paid Sh60.8 million each for their portfolio of Sh30.4 billion each.

Old Mutual, which managed Sh29.6 billion, earned Sh59.2 million while African Alliance was paid Sh53.4 million on its portfolio of Sh26.7 billion.

African Alliance earlier this year replaced ICEA Lion Asset Managers which was dropped by NSSF after growing its portfolio at a relatively slower pace compared to its rivals.

“During the period, new fund manager, African Alliance Kenya Investment Bank Limited was brought on board while ICEA Lion Assets Management was dropped,” RBA said in its latest industry report.

The move has seen ICEA, which last managed Sh25.9 billion for NSSF in December 2017, lose out on annual fees amounting to some Sh52 million. The review of external fund managers came after three years.

The State-controlled pension fund, whose total assets stood at Sh221.3 billion as of June, continues to manage Sh66 billion internally.

“The overall NSSF portfolio is heavily invested in government securities, quoted securities and immovable property at 41.23 percent, 29.58 percent and 19.68 percent respectively. The portfolio allocation complies with the investment guidelines,” RBA said.