Systematic Risk and Investment Portfolio Performance of Pension Schemes in Kenya


  • Karen Kandie Catholic University of Eastern Africa
  • Dr. Joseph Macheru Catholic University of Eastern Africa
  • Dr. Cliff Osoro Catholic University of Eastern Africa

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Pension, Performance, Asset Allocation, Systematic Risk


Purpose: Life expectancy in Kenya has increased from 61 to 67 years, while the fertility rate has declined from 4.4 to 3.4 children from 2010 to 2020, implying an increasing number of pensioners at risk of old age poverty if they do not have sufficient pension. The study's general objective was to investigate the effect of systematic risk on the investment portfolio performance of pension schemes in Kenya. The specific objectives were to evaluate the relationship between interest rates, stock market index, inflation rate and economic growth as independent variables and the investment portfolio performance as the dependent variable. The study examined the moderating effect of asset allocation to various asset classes on the relationship between systematic risk and investment portfolio performance of pension schemes.

Methodology: The study applied Panel data Regression and Maclleland two-step model. It used a census of secondary data on 1,172 pension schemes registered with Retirement Benefits Authority from 2015 to 2021.

Findings: The R-Squared was 0.5451, meaning systematic risk variables simultaneously explained the investment portfolio performance by 54.51%. All the coefficients for the independent variables were significant at 5% level of significance. The Chi-Square test statistic showed that the moderating effect of asset allocation to Treasury Bills and Bonds quoted equities and immovable properties were not significant at 5% level of significance. Finally, the moderating effect of allocation to guaranteed funds was significant at 10% level of significance. The systematic risk variables are strong predictors of the performance of pension Schemes. Asset allocation to guaranteed funds is a strong moderator. Asset allocation to Treasury Bills and Bonds quoted equities, and immovable property are insignificant moderators.

Unique Contribution to Theory, Practice and Policy: The study integrated Capital Assets Portfolio Theory, Arbitrage Theory, and Efficient Market Theory with Modern Portfolio Theory to add to existing literature, particularly in emerging markets. Policymakers should consider the effect on pension performance when setting policy rates, inflation targets and asset allocation limits. Pension practitioners should consider allocation to different assets portfolio construction to diversify risk. 


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How to Cite

Kandie , K., Macheru, J., & Osoro, C. (2023). Systematic Risk and Investment Portfolio Performance of Pension Schemes in Kenya. International Journal of Finance and Accounting, 8(2), 51–70.