Capital Markets

Pension schemes invest Sh730m in Acorn Reits

CMA-REIT

Capital Markets Authority CEO Wycliffe Shamiah during the launch of Acorn ‘s development REIT in February 24, 2021. PHOTO | DIANA NGILA | NMG

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Summary

  • Latest data from the Retirement Benefits Authority (RBA) show that the investment—equivalent to 34.8 percent of the Sh2.1 billion raised by Acorn in April.
  • The investment came on the back of RBA allowing schemes to invest in unlisted Reits and helped Acorn to surpass the minimum of Sh754.4 million.

Pension funds invested Sh730 million in Acorn Holdings’ recent real estate investment trust (Reit) issuance, accounting for a third of the money that was raised by the student hostels developer.

Latest data from the Retirement Benefits Authority (RBA) show that the investment—equivalent to 34.8 percent of the Sh2.1 billion raised by Acorn in April— was made in the period ended June 2021.

The investment came on the back of RBA allowing schemes to invest in unlisted Reits and helped Acorn to surpass the minimum of Sh754.4 million that was required for the offer to be declared a success.

“The period under review saw the emergence of investment under the “any other assets” category following the approval for some schemes to invest in the unlisted income and development Reit by Acorn Holdings Limited,” said RBA.

The Acorn Reit was offered at the Nairobi Securities Exchange under the unquoted securities platform (USP).

RBA data, however shows the emergence of investment in unlisted Reits came in the period schemes cut their investment in the listed ILAM Fahari Reit by half from Sh290 million in June last year to Sh140 million at the close of June 2021.

Pension schemes’ subscription into Acorn Reit helped the students’ hostels developer that was targeting Sh7.5 billion to hit a success rate.

This represented a subscription rate of 28.4 per cent, which the company said met its minimum success threshold of Sh754.4 million.

Acorn offered investors an opportunity to invest in two Reits –one focusing on developing student hostels and the other offering investors a share of the income from completed units.

The I-Reit raised Sh1.4 billion while the D-Reit raised Sh641.5 million. Each of the vehicles received subscriptions from the same 22 accredited investors comprising institutions and high-net-worth individuals.

The offer was priced at Sh20 per unit. The minimum investment was set at Sh20 million which was to be spread into the D-Reit (30 percent) and I-Reit (70 percent), meaning that one had to buy into both investment vehicles.

Both Reits allow investors to trade their holdings on the Nairobi bourse’s over-the-counter (OTC) market.

Investing in unlisted Reits is part of pension schemes’ push to diversify their portfolios away from traditional asset classes such as bonds and stocks in bid to spread risks and also maximise returns for retirees.

They are also allowed to invest in private equity as part of the alternative asset classes, where total investments doubled to hit Sh2.5 billion in June from Sh1.17 billion in June 2020.

The funds started investing in private equity in 2016 following a change in the Retirement Benefits Act 2016 that allowed them to put in up to 10 percent of their assets in this class.

Overall, the industry assets under management stood at Sh1.478 trillion at the end of June 2021, having grown by 11.8 percent from June 2020’s Sh1.323 trillion.

Government securities, however still account for most of the assets— Sh652.11 billion or 44.12 percent of the portfolio— followed by listed shares at Sh249.79 billion or 16.9 percent.

Property investments account for 16.7 percent of assets, equivalent to Sh247.4 billion, while guarantee funds also account for a similar amount at Sh247.5 billion.