The National Social Security Fund (NSSF) is planning to deepen its investments in offshore listed share and private equities as it looks to diversify its portfolio from domestic government securities and property markets.

The State-backed pension fund is seeking to appoint an investment manager to establish and manage an offshore multi-asset portfolio, largely denominated in foreign currencies like the US dollar and will form the foundation of its alternative investments programme.

This will help the fund reduce its exposure to government securities, which currently constitutes 70 percent of its portfolio, with a total of Sh389 billion invested, as of June 2025.

The fund is also seeking to deploy its new found cash after workers’ annual contributions jumped over Sh100 billion on higher monthly savings, which rose from Sh200 per worker in 2023 to Sh6,480 in February.

Now, NSSF is seeking to cap its investments at not more than 60 percent and reduce reliance on blue chips like Safaricom, KCB, EABL and Equity Bank to drive its returns.

“Reduce the fund’s structural concentration in domestic government securities and a narrow listed equity base, and provide diversification of returns and currency exposure away from the Kenya Shilling and Kenya sovereign credit,” NSSF said in a disclosure, as part of the objective of the assignment the contractor it seeks will get.

Among the asset classes it seeks to expand its exposure in are global equities, most of which it expects to come from North America, largely the United States, some in Asia-Pacific and a few in Africa.

It also wants an increased portfolio in regional and local private equity and venture capital, trade finance and increased participation in privatisation, including initial public offerings (IPOs) of State Corporations.

The plan sets a target net return of 3 to 4 percent above the Secured Overnight Financing Rate (SOFR) - a US interest benchmark on the cost of capital, for the offshore multi-asset portfolio over three-to-five-year periods.

The broader diversification programme is expected to target a minimum average 6.5 percent net return.

SOFR currently prevails at 3.64 percent, meaning that the overall targeted return on the offshore and alternative investment portfolio will be at least 10 percent.

Last year, NSSF realised a net return of 17 percent on all its investments.

Currently, it has only Sh2.5 billion in offshore investments, accounting for 0.47 percent of its portfolio. The Retirement Benefits Authority (RBA) allows up to 5 percent of a fund’s assets to be invested in offshore equities.

Its offshore investments rose from Sh1 billion in 2024, or 0.27 percent of its assets. Similarly, its portfolio in private equity and venture capital more than doubled from Sh3.3 billion in 2024 to Sh7.3 billion, rising from a share of 0.85 percent to 1.31. RBA allows up to 10 percent exposure in this asset class.

NSSF also targets to invest some of the Kenyan workers’ money in infrastructure projects and affordable housing, in which it currently has zero exposure, with its recently commenced joint venture with China Road and Bridge Corporation in the construction of the Rironi-Mau Summit toll road set to be the first.

For infrastructure, NSSF plans to invest alongside development finance institutions through equity, fund commitments, mezzanine debt or joint-venture structures like the one with CRBC.

NSSF declined to comment on what level of exposure it targets for the offshore, venture capital, and infrastructure investments in the long run, saying it does not comment on ongoing procurement processes.

Its disclosures on the tender, however, reveal that the fund manager it settles on will have discretion to execute trades within parameters set by NSSF’s Investment Management Agreement and Alternative Investments Policy Statement. The offshore strategy will include active positioning and rebalancing across approved markets and asset classes.

The fund also disclosed that the fund manager will also need to build NSSF’s internal investment capacity to manage the offshore and VC activities, indicating that it plans a long-term participation in those markets.

The successful manager will be required to transfer investment processes and systems to the fund’s investment team, provide software, dashboards and reporting templates, and conduct at least three formal training sessions each year covering areas including offshore investing, alternatives, foreign-exchange risk and performance attribution.

→ vogweno@ke.nationmedia.com

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