Kenya’s Public Service Superannuation Fund (PSSF) has unveiled a new Investment Policy Statement (IPS) that will see the pension scheme adopt a more diversified and growth-oriented investment strategy, reducing its reliance on government securities while increasing exposure to equities, property, offshore markets and alternative assets.
The new policy marks a shift from the Fund’s predominantly conservative fixed-income approach towards a multi-asset portfolio designed to generate inflation-beating returns while protecting members’ capital over the long term.
PSSF Chief Executive Officer Dr Jonah Aiyabei said the strategy reflects the Fund’s long-term investment outlook and the youthful profile of its membership. With the average member aged 39 and about 99.5 per cent of members having more than a decade before retirement, the Fund has greater capacity to withstand short-term market volatility in pursuit of stronger long-term returns.
The IPS targets real returns of at least four per cent annually, net of investment costs, over rolling three-year periods.
Although the Fund remains cautious about risk, it describes the new investment approach as “moderately aggressive.” A key change is the reduction of its target allocation to government securities from the current exposure of 78.6 per cent to 57.5 per cent.
Under the revised framework, PSSF can allocate up to 20 per cent of its portfolio to listed equities, providing greater exposure to potential growth in the capital markets. Offshore investments can account for up to 15 per cent, allowing the Fund to diversify geographically and reduce concentration risks associated with the domestic economy.
The policy also permits investment of up to 20 per cent in property assets, which can provide long-term income and potential capital appreciation. A further 10 per cent may be invested in alternative assets, including private equity, infrastructure projects and private debt.
The Fund will also have the flexibility to invest in infrastructure-linked instruments and Environmental, Social and Governance (ESG)-aligned investments. For the first time, ESG considerations have been formally integrated into investment decision-making, with fund managers required to provide quarterly ESG updates on the portfolio.
The revised strategy is expected to support stronger retirement outcomes by giving the Fund greater access to assets with higher long-term growth potential. This is particularly important for members of a defined contribution scheme, where retirement benefits are directly influenced by investment performance.
The strategy could also have wider implications for Kenya’s economy and capital markets. As PSSF reduces its concentration in government securities, more pension capital could potentially be directed towards productive sectors, including infrastructure, real estate, private businesses and listed companies.
Such investments could contribute to deeper capital markets, increased liquidity at the Nairobi Securities Exchange and greater availability of long-term financing for strategic projects in sectors such as housing, transport, energy and climate-related infrastructure.
The new IPS also strengthens governance through enhanced monitoring, performance reviews and ESG reporting. The measures are intended to promote transparency and accountability as the Fund expands its investment activities.
PSSF’s latest policy signals the broader evolution of Kenya’s pension industry, as institutional investors increasingly seek diversified portfolios capable of delivering sustainable real returns over several decades while maintaining appropriate risk controls and strong governance.