The Kenya Pension Funds Investment Consortium (KEPFIC) has received infrastructure and alternative investment proposals collectively worth over Ksh700 billion ($5.5 billion) from project sponsors and fund managers looking to raise capital from the local retirement benefits schemes. The proposals come as local pension schemes expand their search for suitable investments to provide diversification and higher returns for pensioners.
The announcement was made during the opening of the two-day KEPFIC Annual Investment Conference in Nairobi, where the shortlisted investment opportunities were presented to the local pension fund investors and discussed with project sponsors, fund managers, and industry experts.
The projects under evaluation by the pensions investors span different sectors such as energy, property, affordable housing, healthcare, water and sanitation, transport and logistics, agriculture, telecoms, and ICT among others.
The mobilization of funds for different sectors by KEPFIC aligns with the Kenyan government’s plan to mobilize over Ksh100 billion in private sector capital through priority projects that deliver nationally significant infrastructure, drive growth and have the highest benefit to Kenyans as outlined in the 2023/24 National Budget Proposal.
“Kenyan pension schemes are in search of profitable, secure, and impactful investments for better returns for their members. Infrastructure and alternative assets are an attractive but untapped new asset class for pension schemes and offer attractive returns and much-needed portfolio diversification benefits, delivering better overall investment performance,” said Ngatia Kirungie, the Head of the KEPFIC Secretariat and CEO of Spearhead Africa.
According to the Retirement Benefits Authority, the pension industry assets under management stand at approximately Ksh1.5 trillion. Pension funds are allowed to put up 10% of their assets into infrastructure as per the RBA investment guidelines passed in 2020.
Traditionally, pension funds have invested in government securities, listed equities, and direct property investments but infrastructure investments remain hugely untapped yet profitable and sustainable in the long term.
KEPFIC, founded as an industry-wide initiative supported by the Joint Capital Markets Program (J-CAP), a World Bank Group program, and USAID, works together with pension fund trustees, fund managers and regulators to address the challenges that pension schemes face while investing in alternative assets. These challenges include limited visibility on investment opportunities, large capital requirements, and a lack of specialized investment expertise.
“As a consortium, we look for bankable projects with suitable returns that support sustainable economic development. They also have to be backed by strong environmental, social, and governance principles. By the end of 2022, we had mobilized over Ksh15 billion from local pension scheme investors into a number of alternative asset opportunities,” Mr Kirungie added.
Some of the investments by KEPFIC members include a bond issued by the Kenya Mortgage Refinance Company (KMRC) for affordable housing mortgage refinancing, and the development of student housing through a real estate investment trust (REIT) established by developer Acorn Holdings. Another upcoming investment is in the Lot 3 road project in North Eastern Kenya under the Kenya Roads Annuity public-private partnership (PPP) program developed with technical assistance from the World Bank.
Through support from USAID, KEPFIC has established partnerships with US-based pension funds to explore infrastructure co-investment opportunities in the region. With the support and co-investment partnerships is has cultivated, KEPFIC aims to mobilize and invest at least USD250 million (Approx Ksh.35 billion) in infrastructure assets in the near term and provide competitive returns and diversification opportunities to the member funds and co-investors.