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Pension schemes raise PE, Reits investment by 25pc

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Total assets in the industry stood at Sh1.17 trillion by the end of June. FILE PHOTO | NMG

Pension funds raised their investments in private equity and real estate investment trusts (Reits) by 26 per cent in the year to June, highlighting the growing appetite for the recently introduced investment classes.

Latest data from the Retirement Benefits Authority (RBA) shows that investments in Reits rose to Sh1.01 billion from Sh888 million in June 2017, while private equity investments nearly doubled, rising from Sh250 million to Sh420 million.

“Investment in alternative assets by schemes has gained traction with an inclusion of Private Equity & Venture Capital and Reits as separate assets classes constituting around 0.04 percent and 0.09 percent of the total assets under management respectively,” said the RBA in its industry report for June 2018.

While the two investment classes are still dwarfed by the traditional types such as government securities, equities, property and guaranteed funds, they are expected to keep growing as funds seek the higher returns they offer — especially from private equity.

Total assets in the industry stood at Sh1.17 trillion by the end of June. RBA regulations allow pension funds to invest up to 30 percent of assets in Reits, while PE investments are capped at 10 per cent.

This means that funds still have plenty of headroom to invest in the two classes.

There has been a perception that PE firms tend to invest in risky ventures that are out of line with the usual conservative approach adopted by many pension funds.