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Local fund managers are seeking to tap Sh779.4 billion from the country’s Sh1.6 trillion pension industry to finance 57 infrastructure and alternative assets that generate competitive returns.

Ngatia Kirungie, Kenya Pension Funds Investment Consortium (Kepfic) Head of Secretariat said this is part of a strategy by local pension schemes to push for suitable investments that will provide diversification and higher returns for pensioners.

He said local pension funds represent a significant but largely untapped source of finance in Kenya. In December last year, the consortium invited project sponsors and fund managers to present investment proposals that offer suitable returns, support economic development and adhere to strong environmental, social and governance principles.

“Kepfic received 57 opportunities across various sectors such as energy, property, telecommunications and ICT, transport and logistics, water and sanitation, agriculture and healthcare, seeking a total of over Sh770 billion in capital,” said Kirungie.

Kirungie, who was speaking at the opening session of a two-day Kepfic investment conference yesterday said infrastructure and alternative assets are an attractive, but untapped new asset class for pension schemes that offer attractive returns and portfolio diversification benefits in addition to delivering better overall investment performance.

Traditionally, pension funds have invested in government securities, listed equities and direct property investments, though infrastructure investments remain hugely untapped yet profitable and sustainable in the long term.

“As a consortium, we look for bankable projects with suitable returns that support sustainable economic development. They also have to be backed by strong environmental, social, and governance principles,” he said Kirungie.

He said the Kepfic strategy also aligns with the government’s plan to mobilize over Sh100 billion in private sector capital through priority projects that deliver nationally significant infrastructure, drive growth and have the highest benefit to Kenyans as outlined in the 2023/24 National Budget Proposal.

The Retirement Benefits Authority Act allows Pension funds to invest up to 10 per cent of their assets into infrastructure projects. Kirungie said Kepfic aims to mobilize and invest at least $250 million (Approx Sh35 billion) in infrastructure assets in the next three years. Kenya has an estimated Sh566.8 billion infrastructure funding gap. Historically, the government has been the leading source of funding for infrastructure investments, but now faces the twin challenges of growing budget deficits and competing priorities such as healthcare, food security, and education, creating an opportunity for private sector investments into profitable infrastructure investments.

Among leading infrastructure companies that have put in proposals for funding either through debt or equity include Two Rivers Water and Sanitation, Two Rivers Power Company and Akiira Geothermal Limited with a combined value of Sh6.9 billion.
Two Rivers Water and Sanitation company is seeking Sh175 million to support the company’s growth and capital requirements, while the Akiira Geothermal Ltd is in the market for Sh5.6 billion to develop a geothermal power plant in Olkaria, Naivasha that will be an integral part of Kenya’s base load power generation capacity with an initial 70 MW.
Also in the mix is Two Rivers Power Company that requires Sh1.2 billion to install additional solar and the implementation of a smart microgrid that utilises smart metering systems to enhance billiing effeciencies.