The Effect of Property Investment on Asset Growth of Pension Funds in Kenya

Abstract

The study addresses the effect of property investment on pension funds assets growth in Kenya. Scheme trustees have a duty to ensure they invest the scheme assets prudently and maximize returns. Hence a deliberate decision has to be made on investment portfolio that maximizes the returns. Pension funds invest based on the investments guidelines and the investment policy statements. Investment in real estate offers considerable advantages for example it is a tangible asset with low volatility; and it generates an attractive income stream and long term capital appreciation and strong diversification benefits compared to stocks and bonds Investment in real estate has been shown to reduce risk. Pension scheme schemes investment in the long run with main goals being to preserve the member’s benefits and grow the funds. The study assessed the effects of property investment on pension funds assets growth for a period of 5 years between 2009- 2013. The analysis of the correlations results seemed to support the hypothesis that each independent variable in property investment has its own particular informative value in the ability to explain assets growth. The significance of the coefficients was calculated at the level of 95%. The study findings indicate that property investment variables are statistically significance to asset growth as indicated by the positive and strong Pearson correlation coefficients. A Pearson coefficient measure showed a strong, significant, positive relationship between property investment and asset growth of pension schemes in Kenya.