Kenyan retirees may be missing out on better returns because of the over-emphasis local pension fund managers place on domestic fixed-income assets, according to money manager Allan Gray.

Retirement fund managers in East Africa’s largest economy invested less than 2% of their assets offshore, well short of the 15% allowed by the industry regulator as of the end of 2018, figures from the country’s Retirement Benefits Authority show. They cut allocations to equities to 17%, the lowest in at least two years, while stepping up exposure to government securities to 39%, the highest since December 2016.

“If you look at how Kenyan retirement funds are positioned today, we think they are overexposed to fixed-rate bonds in general,” Tapologo Motshubi, chief executive officer of Allan Gray’s Kenyan unit, said by phone. The combination of Kenya’s relatively high level of government debt to gross domestic product and a local currency that may have strengthened too much can reduce returns for such a strategy, he said.

Cape Town-based Allan Gray, which oversees about $39.1 billion for its clients, began investing in Kenya in 2012 and started full operations there in the middle of last year. It now manages about 5 billion shillings ($49 million) in the East African country, offering a strategy of performance-based fees.

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