Pension industry assets grew by 9.8 percent in the nine months to September 2018 to hit Sh1.186 trillion. However, the growth rate is likely to be below that of 2017 due to underperforming equities and real estate.
The Retirement Benefits Authority’s (RBA) third quarter 2018 report shows that among the major investment classes, fixed income had the best growth rate in the period at 28 percent to stand at Sh505.3 billion.
Assets in the form of quoted equities went up by 11 percent to Sh232.9 billion, while guaranteed funds rose by 19 percent to Sh169.8 billion. Immovable property assets on the other hand contracted by a third to Sh153 billion.
The pension funds held assets worth Sh1.08 trillion at the end of 2017, having grown them by 18.3 percent during the year. It means that between January and September last year, the industry accumulated an extra Sh106 billion worth of assets.
“The overall retirement assets under management grew by two percent in quarter three of 2018 from Sh1.1667 trillion [in quarter two] to Sh1.186 trillion. This growth was not however so impressive owing to the dismal performance in the capital markets during the quarter under review,” said the RBA in its report.
Market cap decline
In 2018, the stock market had a strong performance in the first quarter before tailing off significantly for the rest of the year to close with a market cap decline of 17 percent or Sh400 billion to Sh2.1 trillion.
In addition to pension funds, this decline will also hurt the earnings of insurance firms which have a significant outlay in the equities market.
In the quarter three report, the pensions regulator also voiced concern over the slow growth of the assets under management as a percentage of GDP.
The asset base is currently at 14 percent of GDP, having grown by just one percentage point in the past two decades.
“This figure is still below the average in non-OECD countries of about 18 percent and the desired level by the RBA of about 30 percent,” the RBA said.