Investment of Pension Funds Assets

A Presentation From

Who is Amana Capital Limited? Founded in 2003 as first independent FM in Kenya

Licensed and Regulated by CMA and RBA

Board of Directors 3 non-executive/independent directors Good skills mix at board level

Qualified & Experienced Fund Management Staff Head of FM is ex-AIG, ALICO Staff combined experience > 40 years

Located at Barclays Plaza, M4

General investment philosophy Portfolio diversification – overall risk is minimized

Active portfolio management to generate long term capital growth in line with client’s investment guidelines.

Principal asset allocation set for a few years

Tactical investment strategy – manager takes advantage of market opportunities

Research-driven investment strategy, e.g. stock picking

Collective investment decisions – investment committee

Use of derivative instruments for efficient portfolio management – reduced portfolio volatility

Investment manager role Advise Trustees on available investments

Assist Trustees in developing the Scheme’s Investment Policy & Guidelines

Construct and actively manage the Scheme’s investment portfolio in line with RBA Investment Guidelines and Trustees’ Investment Policy

Report to Trustees on the performance of the Scheme’s investment portfolio on regular basis

To liaise with Custodian on matters relating to investment of Scheme assets

Ensure Members’ monthly contributions are remitted to Custodian within RBA’s stipulated period

Risk-reward profilemore

R

e

w

a

r

d

less

less more

Risk

balanced

cash

stocks

bonds

Investment process GDP Interest Corporate Top Growth Inflation Rates Profits Currencies Cash Bonds Equities Asset Allocation Investment Decision Point

Stock Selection Company Credit Risk Sectoral Analysis Analysis Analysis Bottom

Derivatives overlay

Return on Investment (1975 - 2004)

Asset Average return (%)

3-month Bank deposit 10.5

91-day Treasury bill 13.5

Treasury bond 13.1

Stock market (NSE 20 Share Index) 16.8

CPI (Inflation) 13.4

Insured Schemes 8.0

Managed Schemes (3-yr average) 15.0

Stock market performance

NSE 20 Share Index

0

1,000

2,000

3,000

4,000

5,000

1976 1980 1984 1988 1992 1996 2000 2004Year

Industry asset allocation

Asset Class

Current Allocation (%)

RBA Maximum

Allocation (%)

Government securities (Treasury bills & bonds)

43.0% 70.0%

Commercial paper & Corporate bonds

4.8% 30.0%

Quoted equities 24.0% 70.0%

Immovable property 5.8% 30.0%

Offshore investments 5.6% 15.0%

Term deposits & cash 4.6% 30.0%

Guaranteed funds 12.1% 100.0%

Unlisted equities & other assets

0.1% 5.0%

Comparative asset allocation

Asset Class USA (%) Japan (%) Kenya (%)

Quoted equities (Domestic & international)

62.0% 44.0% 27.0%

Bonds (Government & corporate)

34.0% 45.0% 50.0%

Immovable property 2.0% 1.0% 5.8%

Term deposits & cash

1.0% 5.0% 4.6%

Other assets 1.0% 5.0% 12.6%

Why asset allocation is important Retirement benefits schemes are a major

source of long term capital in any economy

Plays an important economic development role – efficient asset allocation job creation & strong GDP growth

Plays an important role in capital markets deepening – source of long term capital

Has a direct impact on scheme members’ final retirement benefits – inflation protection an important consideration

Thank You