Skip to main content
MENU
Subscribe
  • Subscribe
  • Account
  • LOGIN
  • Topics
    • Alternatives
    • Consultants
    • Coronavirus
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Opinion
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Russia-Ukraine War
    • SECURE Act 2.0
    • Special Reports
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • Climate Change: The Inescapable Opportunity
    • Impact Investing
    • 2022 ESG Investing Conference
    • ESG Rated ETFs
  • Defined Contribution
    • Latest DC News
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2022 Defined Contribution East Conference
    • 2022 DC Investment Lineup Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Performance Data
    • P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
    • Future of Investments Research Series
    • Charts & Infographics
    • Polls
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
    • 2022 Retirement Income Conference
    • 2022 Managing Pension Risk & Liabilities
    • 2022 WorldPensionSummit
Breadcrumb
  1. Home
  2. Print
September 06, 1999 01:00 AM

SYSTEM REFORM: NEW RULES IN KENYA TO REQUIRE OUTSIDE MANAGERS FOR FUNDS

Beatrix Payne
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print

    NAIROBI, Kenya -- The government is on the brink of introducing radical reform to the 120 billion Kenyan shilling ($1.6 billion) pensions industry.

    The new regulations, to be published this month and expected to be passed into law at the end of the year, will require pension funds to appoint an actuary, a professional asset manager and a custodian independent of the money manager.

    The new law also will set limits on all asset classes and is expected to put a 10% limit on international investing and a 60% limit on holdings of domestic fixed income.

    Industry sources further expect the regulations to:

    * give fund trustees greater fiduciary responsibilities and make them accountable to plan participants;

    * force trustees to have the pension fund audited every year;

    * require trustee boards to include at least one employee representative, and issue statements to participants every year.

    The expected reform is attracting a host of international custodians and money managers hopeful of taking a slice of what is expected to become a $5 billion to $10 billion market.

    "There is a yearning need for professional fund management in Kenya," said Charles Ogalo, managing director for Nairobi-based Genesis Kenya Investment Management Ltd.

    Most of Kenya's 1,400 pension funds now have in-house managers with little investment experience, and there is no segregation between the money manager and the custodian. Once the new legislation comes into force, sources expect there to be a shift to external fund management.

    South African money managers Old Mutual Asset Managers and Stanbic Investment Management Services recently set up shop in Nairobi, and compete with Barclay Trust Investment Management Services Ltd. in Nairobi and emerging-market specialist Genesis Kenya, which has been actively managing Kenyan assets since 1996.

    All four money managers plan early next year to set up competing pooled investment vehicles for pension funds that are too small to be managed as segregated funds, those averaging 400 million to 500 million Kenyan shillings.

    Both SIMS' parent, Stanbic Bank Kenya, and Barclay Trust dominate Kenya's custody operations, but local sources say international banks with local branches such as ABN AMRO Bank NV, Amsterdam, Netherlands, are considering applying for licenses to set up custody operations in Kenya. An ABN AMRO spokesman confirmed the group had a banking license in Kenya, but said there were no concrete plans to launch custody services there.

    Even employee benefit consultants such as South Africa's Alexander Forbes Financial Services Pty. Ltd., Johannesburg, have been considering new business opportunities in this east African country.

    Until now, Kenya's pension industry has been completely unregulated, leading to widespread fear of mismanagement in the 60 billion Kenyan shilling state-run National Social Security Fund in particular.

    Sources close to the Retirement Benefits Authority, the government body drawing up the new legislation, say growing concern over management of the NSSF was one of the main reasons the government decided to introduce better regulation of the pension funds.

    "Because trustees were not accountable there was a lot of mismanagement in other pension funds besides the NSSF," said Wanjiru Kirima, general manager at Stanbic Investment Management Services East Africa Ltd.

    Little international

    Kenyan pension funds invest less than 5% of their assets internationally, said Jonathan Stichbury, chief executive of Old Mutual Asset Management Kenya. But he would like to see Kenyan funds able to invest at least 10% abroad as this would allow them to diversify their portfolios and reduce some of the market risk in the fund.

    "Offshore investment offers the opportunity to improve real returns as the Kenyan currency has been relatively weak of late," Mr. Stichbury said.

    But an upper limit on offshore investment comes as no surprise, as one of the objectives of the new pension law is to stimulate domestic economic development, Ms. Kirima said.

    The typical Kenyan pension fund has up to 50% of its assets in government Treasury bills, which have yielded more than 20% annually over the last five years, Mr. Stichbury said.

    Kenyan pension funds also have large exposures to property, typically investing up to 40% of their portfolios in this asset class, and as a result many funds have limited exposure to domestic equities. Mr. Stichbury is concerned many of the property assets are overvalued.

    It is unclear what limits will be imposed on equity and property investments.

    Trustees under pressure

    The new regulations will put increased pressure on pension fund trustees to ensure the funds are managed properly and both SIMS and Genesis have started running trustee workshops.

    Banks offering both custody and asset management will be forced to separate these services, and might struggle to maintain market share in a more competitive environment, according to Mr. Ogalo.

    He expects certain multinationals will be required to outsource their fund management and expects to pick up new mandates as a result. "I would be quite comfortable managing 20 billion Kenyan shillings in assets, and that is my ambition over the next five years," he said.

    Genesis has third-party assets under management of 1.4 billion shillings, split between domestic equity and fixed income.

    Offices in Nairobi

    Both Old Mutual Asset Managers and SIMS opened offices in Nairobi in early 1998. OMAM Kenya has 4 billion Kenyan shillings in assets under management invested offshore and in domestic equity and fixed income, according to Mr. Stichbury. The offshore assets are managed by Old Mutual Asset Managers (UK) Ltd.

    SIMS has some 860 million Kenyan shillings in assets under management, Ms. Kirima said. SIMS is owned by Stanbic Bank, which also runs a custody operation in Kenya, but the two businesses operate between Chinese walls, she added.

    Barclay Trust Investment Management is believed to have assets under management in Kenya of 20 billion shillings.

    Recommended for You
    Read the print edition of P&I
    Read the print edition of P&I
    How low is low? Projections say it's not low enough
    How low is low? Projections say it's not low enough
    FINRA honors Wharton's Olivia Mitchell with Ketchum Prize
    FINRA honors Wharton's Olivia Mitchell with Ketchum Prize
    An Active Approach to US Mid-Cap Equities for DC Plans
    Sponsored Content: An Active Approach to US Mid-Cap Equities for DC Plans

    Reader Poll

    June 6, 2022
    SEE MORE POLLS >
    Sponsored
    White Papers
    Nearing the finish line: Ideas on end-state investing for corporate DB plans
    The Meaning of "Portfolio Intelligence"
    Credit Indices: Closing the Fixed Income Evolutionary Gap
    Forever in Style: Benchmarking with the Morningstar® Broad Style Indexes℠
    Crossroads: Politics, Inflation, & Bonds
    Is there a mid-cap gap in your DC plan?
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    June 20, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2022. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Consultants
      • Coronavirus
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Opinion
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Russia-Ukraine War
      • SECURE Act 2.0
      • Special Reports
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • Climate Change: The Inescapable Opportunity
      • Impact Investing
      • 2022 ESG Investing Conference
      • ESG Rated ETFs
    • Defined Contribution
      • Latest DC News
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2022 Defined Contribution East Conference
      • 2022 DC Investment Lineup Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Performance Data
      • P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
      • Future of Investments Research Series
      • Charts & Infographics
      • Polls
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
      • 2022 Retirement Income Conference
      • 2022 Managing Pension Risk & Liabilities
      • 2022 WorldPensionSummit