RBA CEO Charles Machira on  Pension Funds Investment

RBA CEO Charles Machira on Pension Funds Investment

Retirement Benefits Authority CEO, Mr. Charles Machira has called on pension funds to invest in alternative asset classes for better returns.

Speaking during the recent Kenya Pension Funds Investment Consortium (KEPFIC) 2023 Annual Investment Conference at a Nairobi hotel, Mr. Machira said the regulatory framework has granted pension funds leeway to invest in non-traditional asset classes and called on fund managers, trustees, actuaries and other sector stakeholders to work closely to exploit the opportunities.

Pension Funds growth on an upward trajectory

“Pension assets have grown significantly from the year 2000 to date and currently stand at KES 1.6 trillion. As the regulator we recognize and support the role that KEPFIC plays in seeking alternative asset investments for pension fund portfolios,” said Mr. Machira.

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As at December 2022, pension schemes continued to invest heavily in the traditional government securities with the asset class accounting for 45.81 percent of the total assets under management. This was followed by guaranteed funds which accounted for 18.91 percent; investments in immovable property and quoted equities accounting for 15.76 percent and 13.66 percent of the total assets under management, respectively.

Investment in alternative assets such as private equity & venture capital increased slightly by 4.78 percent during the period. Investment in REITS increased marginally from Kshs. 268 million in June 2022 to Kshs. 283 million in December 2022. Investment under the “any other assets” category also increased from Kshs. 2 billion in June 2022 to Kshs. 2.67 billion in December 2022 accounting for a paltry  0.17 percent of the total assets under management. The investment under any other assets was mainly investment in the Acorn Student Accommodation Development REIT.

Kenya Pension Investment Guidelines

According to the investment guidelines popularly referred to as Table G, pension funds are allowed to invest up to  30 per cent of scheme funds in all listed Real Estate Investments Trusts (REITS) incorporated in Kenya and approved by the Capital Markets Authority, 10 per cent in Private Equity & Venture Capital, 10 per cent in debt instruments for the financing of 10 per cent infrastructure or affordable housing projects approved under the Public Private Partnerships Act, 2013 or as may be prescribed by the Cabinet Secretary responsible for matters relating to housing.

The pension funds can also invest up to 5 per cent of scheme funds/assests in all exchange traded derivatives contracts approved by the Capital Markets Authority  and up to 10 per cent of scheme funds in any other assets.

Speaking at the conference Mr. Wyckliffe Shamiah, CEO, Capital Markets Authority said , the Collective Investments Scheme Act of 2001 has been amended to now include alternative assets as an investment class for pension funds.”

“The reasons for the growth in the pension fund industry can be attributed to factors such as policies in place, proactive industry players, technological rise and the positive environment for pension funds to operate in,”said Mr Shamiah.

Mr. Shamiah urged all industry stakeholders to participate in the review process of the CMA Act to facilitate greater investment into alternative assets by pension funds.

Mr. Irungu Waggema, Chief Officer, ICT, Strategy, Risk & Compliance, Nairobi Securities Exchange said private-public partnerships can foster investment opportunities with pension funds playing a vital role towards the mobilization of capital into various sectors of the economy.

Kenya Pension Funds investment opportunities

The main objective of the KEPFIC conference was to present the recently reviewed and shortlisted infrastructure and alternative asset investment opportunities that KEPFIC had received following a Call for Investment Proposals that closed in January 2023.  

“We are pleased to announce that from the Call for Proposals we received 57 investment opportunities valued at over KES 777 billion with infrastructure leading with a total opportunity value of KES 105 billion, followed by healthcare at KES 75 billion, MSME financing at KES 71 billion, agriculture at KES 37 billion, energy at KES 34 billion and property at KES22.5 billion,” said Mr. Calvin Nyachoti, KEPFIC Board Chairman.

Ms. Patricia Aruwa, Director, State Department for Investments Promotion said the Kenyan Government sees the importance of private-public partnerships between the government and the private sector as the way to close the funding gap for infrastructure in Kenya which now stands at USD 4 billion.

“The shortlisted opportunities to be discussed at this conference are well aligned with the Government’s goals of promoting investment,” said Ms. Aruwa.

The shortlisted opportunities were presented for the consideration of the pension schemes and their fund managers who are actively seeking viable investment opportunities that offer attractive returns and much needed portfolio diversification benefits.

The opportunities were presented through the KEPFIC 2023 Investment Dealbook which summarized the key elements of each proposal and categorized the same into various thematic areas, with the key drivers of each sector highlighted, providing the context for wider discussions.

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