Kenya’s Retirement Benefits Authority, which oversees the establishment and management of local pension schemes, is encouraging local pension funds to invest in private equity through training and educational initiatives.
Local institutions can now invest up to 10 percent of their portfolio’s value into private equity following a change to investment guidelines last year that recognised private equity as a separate asset class. Previously, private equity was classified under ‘other’ assets, which were collectively capped at 10 percent.
Despite the change, local funds still invest less than two percent in the asset class, RBA chief executive officer Edward Odundo told Private Equity International. “It’s very, very low. We need to do a lot of financial education. We have been taking them through training. If you don’t understand what private equity is, you can’t invest in it. The education part of it is so critical.”
One of the challenges is to persuade pension trustees to invest money into an asset class that describes itself as private and is managed by individuals, Odundo said. “For them to put their money in an individual’s palm, especially a principal sum, they have been a bit reluctant.”
Most local pension fund private equity investment to date has been direct investment into infrastructure, with funds interested in energy, infrastructure and communications companies they are familiar with, Odundo said.
GPs manage $862 million of funds in Kenya, including Pearl Capital Partners, Amethis Finance and Helios Investment Partners that has dedicated $61 million to Kenya, according to a Dutch Good Growth Fund report.
Kenya is the East African private equity hotspot. It has seen the region’s highest value of private equity investment in to date, with $500 million of invested capital, with the next biggest markets of Ethiopia and Tanzania at a fraction of that, according to an East African Private Equity and Venture Capital Association (EVCA) report published in March. The report surveyed 63 deals submitted by 13 EVCA members and three pan-regional funds. Kenya accounts for about two thirds of transactions by number.