Investment Strategies and Financial Performance of Pension Schemes in Kenya

The pension sector in Kenya has been expanding, but it continues to face key challenges such as low participation, limited investment diversification, and inconsistent financial performance. These issues raise concerns about retirees' financial security, especially with increasing life expectancy and demographic changes. This study examines how different investment strategies impact the financial performance of pension schemes in Kenya. Specifically, it evaluates the effects of equity, real estate, and fixed-income investments on returns while also assessing the role of member savings in shaping these outcomes. Using data from registered pension schemes covering the period from 2017 to 2022, the study employs the Fixed Effect Generalized Least Squares (FGLS) model to account for variations across schemes. The findings indicate that both equity and real estate investments positively influence returns, with larger pension funds performing better, emphasizing the importance of member savings in enhancing financial outcomes. Based on these insights, the study recommends strengthening governance structures, adopting investment strategies tailored to member needs, and promoting fund consolidation to improve overall efficiency and performance.