Kenya could attract major US pension and asset funds with assets of over Sh100 trillion with yesterday’s commitment by the federal government.
The US government has pledged to support the Kenya Pension Fund Investment Consortium (KEPFIC) in unlocking resources for multi-billion-infrastructure development in the country.
It supports the consortium through USAID’s Kenya Investment Mechanism, Power Africa, the World Bank Group, and MiDA Advisors (in partnership with USAID INVEST).
It provides an opportunity for beneficial collaboration between Kenyan and American pension funds and other institutional investors, US Ambassador to Kenya Kyle McCarter said yesterday.
“The US government is pleased to support a Kenyan institution that presents an innovative approach to infrastructure investment in Kenya,” he said.
This, he said, follows recent changes to the Retirement Benefits Authority guidelines allowing pension funds in Kenya to invest up to 10 per cent of their assets in infrastructure, potentially unlocking over Sh100 billion ($917 million).
Launching KEPFIC is a huge milestone, not just for pension schemes, but also for the country, said Sundeep Raichura, KEPFIC board Chairperson.
“With national and county governments facing a growing budget deficit and competing needs, pension funds through KEPFIC will be well positioned to help bridge the infrastructure funding gap,” Raichura said.
In April last year, 30 representatives of major US pension and asset management funds were in the country on a mission to evaluate the investment potential and opportunities in the country’s infrastructure.
The funds manage assets worth $1 trillion (Sh108.8 trillion).
“By moving from traditional investments in stocks and bonds to new opportunities in Kenyan roads, power plants and enterprises, Kenyan and U.S. pension funds will strengthen commercial ties between our countries,” McCarter had said.
The latest development now puts Kenya at a greater position to bridge the infrastructure financing gap which stands at more than $1.8 billion (about Sh200 billion) annually, with key sectors being energy, transportation, and urban development.
Treasury has continued to borrow commercially to fund the development, pushing the country deeper into debt.
Pension funds remain an ideal avenue for infrastructure projects due to their longer return on investment horizons and significant role in financing infrastructure projects in many countries, including the US.
However, individual pension funds in Kenya frequently lack the capacity to venture into big-ticket infrastructure projects alone.
Formed in 2018 by pension schemes, KEPFIC with a membership of 14 pension funds and a total asset base of over Sh200 billion, is expected to offer a solution by pooling resources from individual funds.
The consortium intends to mobilise more than Sh25 billion ($229 million) over the next five years for infrastructure investment.
Its membership includes the KRA Staff Pension Scheme, Safaricom Staff Pension Scheme, KenGen Staff Retirement Benefits Scheme, and Kenya Pipeline Company Retirement Benefits Scheme.
