The country’s second-largest pension scheme is changing how it invests retirement savings, with the Public Service Superannuation Fund (PSSF) putting more money into shares, property, offshore markets and private investments as it seeks better returns over the long term.
The fund, which manages Sh340.4 billion for more than 529,000 public servants, has reduced the portion of its portfolio held in government securities from 99 per cent in 2023 to 74 per cent.
The change comes under a new investment plan that seeks to spread members’ savings across several areas instead of relying heavily on Treasury securities.
PSSF chief executive Jonah Aiyabei said the strategy is meant to support the growth of members’ savings while protecting them from the effects of inflation.
The Fund is now looking beyond government bonds by increasing its investment in listed companies, property, offshore assets and other private investments.
“Under the new investment policy, PSSF plans to reduce the strategic allocation to government securities further to 57.5 per cent from the current exposure of 78.6 per cent, while increasing room for investments in equities and alternative assets,” said Aiyabei.
The new investment limits allow PSSF to put as much as 20 per cent of its assets into listed equities. It can also invest up to 15 per cent offshore, 20 per cent in property and 10 per cent in alternative investments.
These alternative assets include private equity, infrastructure projects and private debt.
The Fund said the decision is also linked to the age of its membership, with most contributors still having many years before they reach retirement.
The average age of a PSSF member is 39 years, while 99.5 per cent of contributors have more than 10 years before retirement.
This gives the Fund more time to deal with short-term market changes while pursuing stronger gains over a longer period.
PSSF has set a target of earning at least four percentage points above inflation, after investment costs, over rolling three-year periods.
The new direction is already visible in the Fund’s portfolio.
Listed shares now account for 14 per cent of its investments, compared with almost zero in 2023. Corporate bonds make up five per cent, while offshore investments account for three per cent.
Private equity represents two per cent of the portfolio, with property making up one per cent.
The Fund said spreading investments across different areas has gone hand in hand with improved performance.
For the year ended June 30, 2025, PSSF recorded an investment return of 17.68 per cent. Its annualised return over a three-year period stood at 19.7 per cent.
The Board also approved a 17.89 per cent income distribution to members’ individual accounts, compared with 11.9 per cent in the previous year.
PSSF attributed the performance to gains from several parts of the market, including bonds and equities, as well as investments held in Kenya and overseas.
The growing shift in the Fund’s investment choices could have an effect beyond the pension scheme itself.
As less of its money goes into government securities, more pension savings could find their way into businesses, infrastructure, property and capital markets.
The Fund could therefore become a bigger source of long-term financing for private businesses and major projects as its assets continue to increase.
The Nairobi Securities Exchange and other investment markets could also benefit from increased funding from the pension scheme.
PSSF was created in January 2021 when public servants moved to a contributory pension system.
Since then, the Fund has expanded rapidly and grown into Kenya’s second-largest pension scheme.
It had assets worth Sh340.4 billion as at June 30, 2025, with more than 529,000 public servants contributing to the scheme.
The latest investment strategy marks a clear move from the Fund’s earlier dependence on government securities as it seeks to balance safety, growth and stronger returns for members whose retirement is still years away.