Kenyan pension funds are moving more retirement savings into global markets, with offshore holdings rising 25 percent in the year to June,2026 to hit Sh104.99 billion as managers seek protection from domestic risks.

The shift puts a growing share of workers’ retirement savings into global technology and developed-market funds, including major portfolios managed by BlackRock and Franklin Templeton.

The trend comes as the pension industry crosses the Sh3 trillion mark, up from Sh2.5 trillion a year earlier, giving fund managers a much larger pool of capital to allocate beyond Kenya’s financial markets.

The Retirement Benefits Authority (RBA) data shows that offshore investments increased from about Sh84 billion in June 2025, with global equity trackers attracting new capital.

“Offshore investments grew strongly over the year, recording a 25 percent year-over-year growth to reach Sh104.99 billion, as fund managers targeted global tech and developed-market funds to hedge domestic risk,” said RBA.

“This expansion was anchored by large holdings in the BlackRock ISF Developed World Index Fund (Sh14.95 billion) and the Franklin US Opportunities Fund (Sh9.66 billion), alongside strong new capital inflows into global equity trackers.”

The allocations show pension managers are increasingly using foreign markets not only to chase returns but also to reduce dependence on Kenya’s economy, currency and domestic asset prices.

Offshore holdings nevertheless remain a small portion of the retirement industry’s Sh3.17 trillion assets, accounting for just about 3.3 percent of total assets as of June.

The RBA permits pension schemes to invest up to 15 percent of their assets offshore, meaning the current allocation remains well below the regulatory ceiling.

Government securities remained the dominant investment class at Sh1.5 trillion, equivalent to 46.35 percent of total pension assets, although their share declined as interest rates eased.

Quoted equities, meanwhile, rose sharply during the period to Sh439.32 billion, or 14.37 percent of pension assets, supported by a strong rally on the Nairobi Securities Exchange (NSE).

The RBA said the NSE 20-Share Index and NASI each gained about 20 percent in the first half of 2026, while equity turnover jumped 511 percent to Sh263.87 billion.

The enhanced diversification to offshore management comes against a backdrop of rising inflation during the first half of this year, which averaged 5.29 percent compared with 4.46 percent in the second half of 2025.

Inflation climbed to 6.68 percent in May before easing to 6.41 percent in June, increasing the pressure on pension managers to preserve the purchasing power of members’ savings.

At the same time, the Central Bank of Kenya (CBK) reduced its policy rate from nine percent in January to 8.75 percent in February, where it remained through June.

Lower interest rates can reduce the returns available from newly issued fixed-income investments, increasing the incentive for managers to consider equities and other assets offering different sources of return.

The pension industry is already moving beyond its traditional concentration in government debt, with private equity, REITs, commercial paper and other alternatives recording strong growth.

Private equity rose 44 percent to Sh43.1 billion, driven partly by a Sh10.84 billion increase in existing holdings in Africa Finance Corporation, while REITs reached Sh19.61 billion.

Commercial paper and non-listed bonds expanded even faster, rising 141.39 percent to Sh12.06 billion, according to the regulator’s June industry brief.

The diversification is being supported by rapid growth in the amount of money flowing into retirement schemes, giving managers greater room to alter portfolios without sharply reducing their exposure to established investments.

RBA investment rules require pension schemes to diversify their portfolios, with the authority saying the limits are designed to promote safety, investment returns and risk reduction while ensuring schemes can meet benefit obligations.

Pension contributions reached Sh165.29 billion in the six months to June, up 28.83 percent from Sh128.30 billion a year earlier, according to the RBA.

The increase was linked to the implementation of the NSSF Act, higher contribution limits, improved employer compliance and growth in active scheme membership.

Under the NSSF Act, 2013, tier II contributions are set at six percent of pensionable earnings between the lower limit of Sh9,000 and the upper limit of Sh108,000, translating to a maximum monthly contribution of Sh6,480 each from the employer and employee in 2026.

Under the revised structure, monthly contributions have risen from Sh200 per month under the old regime.

The higher contributions have boosted collections for NSSF, with the amount rising by 35 percent to Sh83.97 billion in the year to June 2025.

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