Factors Affecting Investment Decisions of Pension Schemes in Kenya

Abstract

This study sought to determine the factors affecting investment decisions of Pension schemes in Kenya. Its objectives were to: establish the effect of risk-return tradeoff on investment decisions of pension schemes in Kenya and determine the effect of macroeconomic factors on investment decisions of pension schemes in Kenya. It was conceptualized that investment decisions in pension schemes (dependent variable) were dependent on risk-return trade off and macroeconomic factors (the independent variables). The investment decisions of pension schemes depend on the overall influence of these factors. The study adopted the descriptive research design. The study sampled 125 fund managers from 1232 pension schemes using simple random stratified sampling techniques. Data was collected using questionnaire. Statistical Package for the Social Sciences (SPSS) was used to analyze the data. On the basis of the study findings, it was evident that risk-return trade off affected investment decisions of pension schemes in Kenya. It was made apparent that successful pension schemes investment should be one whose returns justify the risk taken. In this regard, it was evident that fund managers balanced the risk to ensure optimal return. Regarding the effect of macroeconomic factors on investment decisions of pension schemes in Kenya, it was evident that pension schemes investment decision were influenced by interest rates, capital markets performance, the rate of national economic growth and other macroeconomic factors before making investment decisions.

What Influences Pension Funds’ Investment Decisions in Tanzania?

“…In their panel study, Zhao and Sutcliffe (2021) focused on examining the factors that influence equity allocation in UK pension funds, and reported that scheme maturity, funding ratio, and time trend had the most significant impact on the allocation of assets, particularly equity allocation. Chepkoech et al (2017) conducted a study to examine the factors influencing investment decisions of pension schemes in Kenya, and the findings indicated that the risk-return tradeoff had a significant influence on the investment decisions of pension schemes in Kenya, and that fund managers carefully balance the level of risk associated with investments to ensure optimal returns, while macroeconomic factors such as interest rates, performance of capital markets, and the rate of national economic growth playing a crucial role in shaping the investment decisions of pension schemes. Wanjohi and Kariuki (2019) conducted a study in Kenya aiming at providing valuable insights to the government and stakeholders in the pension sector regarding the screening and adoption of appropriate investment policies and strategies to effectively enhance the wealth of pensioners.…”