INVESTMENT MANAGEMENT STRATEGIES AND NET INVESTMENT RETURNS OF UMBRELLA RETIREMENT BENEFIT SCHEMES IN KENYA
Nancy Nduta Muiruri - Department of Accounting and Finance, School of Business, Economics and Tourism, Kenyatta University, Kenya
Dr. Francis Gitagia (Ph.D, CPA) - Lecturer, Department of Accounting and Finance, School of Business Economics and Tourism, Kenyatta University, Kenya
ABSTRACT
The ability Umbrella retirement benefit schemes in Kenya to remain effective is tied to the consistency of net investment returns, yet recent evidence points to a worrying decline that threatens sustainability. Between 2015 and 2019, net returns were relatively strong, averaging between 10 and 13 percent, but this performance weakened during the pandemic and fell to 0.1 percent in 2023 before a short-lived recovery to 13.2 percent in 2024. The declining trend demonstrates persistent weaknesses in investment management and raises concerns about the adequacy of retirement income for contributors. The overall objective of the study was to examine the effect of investment management strategies on the net investment returns of umbrella retirement benefit schemes in Kenya. Specifically, the study sought to determine the effect of asset allocation strategies, portfolio diversification strategies, investment expense management strategies, and liquidity management strategies on net investment returns. The research was anchored on Modern Portfolio Theory and Liquidity Preference Theory. A descriptive and explanatory research design was adopted, and a census approach was applied to all fifty-four umbrella retirement benefit schemes registered by the RBA. The research utilized secondary data obtained from audited financial statements and regulatory reports covering the period 2015 to 2024, yielding 540 scheme year observations. Data were analyzed using Stata, applying descriptive statistics. The regression results indicated that asset allocation strategies had a positive and statistically significant effect on net investment returns, while portfolio diversification strategies also had a favorable and statistically significant effect. Investment expense management strategies had a negative and statistically significant effect on net investment returns while liquidity management strategies exerted a positive and statistically significant effect. The study concluded that investment management strategies significantly influenced the net investment returns of umbrella retirement benefit schemes in Kenya and recommended that scheme managers strengthen asset allocation and diversification practices, enhance cost control mechanisms, and maintain prudent liquidity management, while regulators reinforce oversight frameworks focusing on efficiency and governance. Ethical principles relating to responsible use of secondary data, confidentiality, and academic integrity were fully adhered to in the research.