The Kenya Pension Fund Investment Consortium (KEPFIC) has identified infrastructure and alternative investments worth approximately KES 16 billion to venture in this year as the drive for diversification of local pension portfolios and the need for greater private infrastructure funding gains momentum.
The Consortium has 24 pension schemes with a portfolio of approx. KES 500 billion in aggregate seeking to invest in infrastructure, energy, and other alternative assets. Among the projects shortlisted by the consortium is a 143 kilometres road project in Northern Kenya under the Kenya Road Annuity Program and KEPFIC members are seeking to invest KES 2 billion into the project via an upcoming bond issuance.
Recent provisions in the Retirement Benefits Authority investment guidelines allows pension funds to invest up to 10% of their assets into infrastructure, effectively unlocking over KES 140 billion into the asset class, and KEPFIC announced it is also looking at evaluating public private partnerships opportunities in the transport, energy and affordable housing sectors. Since its inception in October 2020 the consortium has reviewed over 30 investment opportunities, with the most suitable ones presented to KEPFIC members and their fund managers.
KEPFIC has been working to increase awareness of infrastructure and alternative investments opportunities and the Head of the KEPFIC Secretariat, Ngatia Kirungie, noted during an industry conference themed “Opportunities & Experiences in Infrastructure & Alternative Investments for the Pensions Industry’ held in Nairobi: “Our member funds are seeking profitable and diversified investment opportunities for optimal returns for their members and retirees, and while pension funds have traditionally invested in government securities and listed equities, infrastructure investments remain an untapped, yet lucrative and impactful opportunity. We are working to make this a reality and are encouraged by the pension fund response towards infrastructure and alternative investments.”
KEPFIC is supported by the U.S. Government through USAID’s Kenya Investment Mechanism, Power Africa, the World Bank Group, and MiDA Advisors (in partnership with USAID INVEST) and the consortium provides an opportunity for beneficial collaboration between Kenyan and American pension funds and other institutional investors.
Historically during election years, the market value of most traditional investment assets have been negatively affected with investors adopting a wait and see approach. Of keen interest to the industry will be to assess the performance of schemes that have diversified their portfolios into more politically resilient alternative investments.
Kenya’s annual infrastructure funding gap currently stands at more than KES 200 billion presenting private investors with numerous opportunities in sectors such as power, transportation, and urban development. Pension funds are the ideal investment partners for infrastructure projects due to their longer investment horizons but the large investment sizes needed underlines the need for individual schemes to work together as part of a consortium.