The Intervening Effect of Investment Policies on the Relationship between Corporate Governance and Performance of Pension Fund Managers in Kenya

Abstract

The pension fund is a common asset pool meant to generate stable growth over the long term, and provide pensions for employees when they reach the end of their working years and commence retirement. These targeted investments often require union built construction or are aimed at job creation and retention as in the case of private equity investments. Pension fund performance has received increased attention across the world with public pension fund performing dismally when compared to private pension fund.. This study sought to determine the intervening effect of investment policies on the relationship between corporate governance and performance of pension fund managers in Kenya. The study employed a cross sectional survey design whereby access to the widest possible amount of data from the targeted Fund Managers in Kenya was sought. The population of interest of the study was 31 Fund Managers in Kenya licensed by RBA and CMA. The study used purely primary data sources. Primary data was obtained from the selected respondents. Primary data was collected through questionnaire. Regression analysis was used to establish the relative significance of each of the variables on the influence of corporate governance on the performance of pension fund managers in Kenya. The study findings indicated that there exists a partial mediation effect on the mediating role of investment policies on the relationship between corporate governance and performance of pension fund managers. The study thus, rejected the null hypothesis and adopted the alternative hypothesis that there is a partial intervening effect of investment policies in the relationship between corporate governance and performance of pension fund managers in Kenya. The study recommends that the governing body of the pension fund should set forth in a written statement and actively observe an overall investment policy. The investment policy should establish clear investment objectives for the pension fund that are consistent with the retirement income objective of the pension fund and, therefore, with the characteristics of the liabilities of the pension fund and with the acceptable degree of risk for the pension fund, the plan sponsor and the plan members and beneficiaries. The approach for achieving those objectives should satisfy the prudent person standard taking into account the need for proper diversification and risk management, the maturity of the obligations and the liquidity needs of the pension fund, and any specific legal limitations on portfolio allocation. Keywords: Investment Policies, Corporate Governance, Performance & Pension Fund Managers.