Pension schemes move billions to NSE amid rally

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Pension schemes have increased their bets on quoted equities, moving billions of shillings from government securities to the Nairobi Securities Exchange (NSE) amid rising share prices and falling bond yields.

Fresh data by the Retirement Benefits Authority (RBA) shows the pension schemes’ holdings of quoted equities rose by Sh130.51 billion to Sh443.35 billion in the six months to June 2026, representing a 41.72 percent increase from Sh312.84 billion in December last year.

The increase lifted equities’ share of total pension assets to a five-year high of 14.37 percent from 11.13 percent at the end of last year.

The allocation was last higher in December 2021, when equities accounted for 16.45 percent of pension assets.

The increased exposure to shares came as holdings of government securities fell by Sh35.14 billion, or 2.4 percent, to Sh1.43 trillion from Sh1.47 trillion.

This reduced the share of government paper in pension portfolios to a four-year low of 46.35 percent from 52.14 percent.

The Sh443.35 billion allocation in equities is a 73.8 percent rise from Sh255.2 billion in June last year, showing that the shift to the NSE has persisted over a 12-month period.

The RBA attributed the reallocation partly to the easing monetary policy environment, which has put downward pressure on yields on new government debt and made equities relatively more attractive.

The indicative Central Bank Rate fell from 9 percent in January to 8.75 percent in February and remained at that level through June.

“For pension schemes, this lower-interest-rate environment continues to exert downward pressure on yields on new government debt and fixed deposits,” the RBA said.

“This dynamic is accelerating the reallocation of capital away from traditional fixed income instruments toward higher-yielding equities and alternative asset classes.”

The movement into shares has coincided with a strong recovery at the NSE, supported by improved corporate earnings, dividend payouts and renewed investor confidence.

The NSE 20-Share Index and Nairobi All Share Index each gained about 20 percent in the first half of the year, reaching 3,755.44 points and 224.15 points, respectively. Market capitalisation increased by 28 percent to Sh3.76 trillion during this period.

The listing of Family Bank in June, coming after the Kenya Pipeline Company initial public offering in March, also contributed to increased liquidity and investor participation.

The RBA said sustained price rallies in key blue-chip counters enabled equities to absorb part of the capital rotated from lower-yielding fixed-income assets.

“Building on a 41.72 percent growth in the first half of 2026, this 12-month period reflects market trajectory, strong confidence and sustained rallies in key blue-chip counters, allowing equities to absorb much of the capital rotated out of lower-yielding fixed-income assets,” said the RBA.

The pension industry’s exposure to quoted shares remains concentrated in a few sectors. Banking accounted for 47.04 percent of the Sh443.35 billion equity portfolio, followed by telecommunications and technology at 31.26 percent and energy and petroleum at 15.1 percent. The three sectors accounted for 93.41 percent of pension schemes’ quoted equity holdings.

The lower interest-rate environment has also affected fixed deposits, with pension schemes reducing their allocation to the asset class by 15 percent to Sh48.02 billion from Sh56.5 billion.

The movement out of traditional fixed-income assets formed part of a broader diversification of pension portfolios.

The four largest asset classes—government securities, guaranteed funds, quoted equities and property—accounted for 88.04 percent of total assets in June, down from 90.43 percent in December.

Guaranteed funds grew 14.29 percent during the six months to Sh597.07 billion, while offshore investments rose 24 percent to Sh105.69 billion.

Reporting originally appeared via Business Daily. Read the full source for additional context.