NAIROBI - Kenya's 144 billion Kenyan shilling ($1.8 billion) pensions industry is scrambling to hire external money managers and custodians and wind down its heavy exposure to direct property holdings.
Kenyan pension plans have until Oct. 8 to register with the Retirement Benefits Authority and comply with new investment rules that will cap pension plans' investments in property and foreign assets at 30% and 15%, respectively.
There previously were no rules governing Kenya's retirement funds industry and a large number of pension plans had at least 50% of plan assets invested in domestic property, said Edward Odundo, chief executive of the RBA. There were previously no rules on international investing. According to Jonathan Stitchbury, managing director and CEO of AIG Global Investment Company (East Africa) Ltd., Nairobi, Kenyan pension plans invested on average less than 5% of asset internationally.
Parliament passed the rules a year ago, but the industry was given a year to prepare for Oct. 8, when the law comes into force. The RBA was set up around two years ago
Local money managers said they have been working on a flurry of mandates and beauty parades, although only 10 managers have been approved.
Kenya's largest pension plan, covering the country's 400,000 civil servants is not subject to regulation under the RBA and is a pay-as-you-go plan. Asset figures were not available. The Kenyan government is considering funding the plan and is in the process of appointing an actuary to consider restructuring the plan, said Mr. Odundo.
Government officials could not be reached for comment.
The new investment limits for local pension plans are: up to 70% of total plan assets in fixed income; up to 70% of total assets in equities; up to 30% of plan assets in fixed deposits offered by banks; a maximum of 15% of plan assets in corporate bonds; no more than 15% of total assets in foreign securities; no more than 5% of total assets in cash; and no more than 5% of plan assets in any asset class not previously specified by the RBA.
There is no limit on how much of the fund can be given to an insurance company or invested in guaranteed funds, said Mr. Odundo. He hopes the new guidelines will generate much-needed investment flows into domestic Kenyan companies.
But local money managers said it could take three to five years for local pension plans to reduce their property holdings and rebalance their investment portfolios. The Kenyan property market is very illiquid and the Kenyan economy is in recession.
Only a limited pool was up for grabs by authorized investment managers, said Jonathan Stitchbury managing director and chief executive officer of AIG Global Investment Co. (East Africa) Ltd., Nairobi. The National Social Security Fund accounts for just more than half of the local pension market, which left a market of around 50 to 60 billion shillings for the 10 managers that were approved about six months ago.
Plans can only select those money managers approved by the Retirement Benefits Authority. They are Stanbic Investment Management Services (East Africa) Ltd.; AIG; Genesis Kenya Investment Management Ltd.; Old Mutual Asset Managers (Kenya) Ltd.; ICEA Investment Services Ltd.; Co-op Trust Investment Services Ltd.; Barclaytrust Investment Services Ltd.; Kenindia Asset Management Co. Ltd.; CFC Financial Services Ltd.; and Jubilee Financial Services Ltd., all of Nairobi.
Mr. Odundo said there was no limit on the number of money managers that could be authorized. He is reviewing applications by money managers from South Africa, Germany and the United Kingdom, although he wouldn't identify them.
AIG currently has assets under management of 12 billion shillings, said Mr. Stichbury. Barclaytrust is believed to be the country's largest asset manager, with 20 billion shillings under management. Lydia Githinji, head of trust and investment at Barclaytrust, would not comment for this article.
Pension plans that are unable to meet the RBA investment rules by Oct. 8 will have to provide the RBA with long-term guidelines on how the plan intends to fall in line with the new limits.