A consortium of Kenyan pension funds plan to spend Sh16 billion in the next five years, to fund infrastructure projects under the public private partnership (PPP) model.

Kenya Pension Fund Investment Consortium (Kepfic) head of secretariat Ngatia Kirungie announced this yesterday, saying the fund comes from it’s 24 pension schemes which boost of a financial portfolio in excess of Sh500 billion.

According to the consortium, it is currently in the market for ways to diversify its earnings by investing in the roads, energy and housing sub-sectors.

The Organisation for Economic Co-operation and Development (OECD) estimates that a whooping $47 trillion (Sh5,342 trillion) is invested by the world’s pension funds globally which is approximately half of all the money invested in the global financial system.

Pension funds therefore have a huge impact on the global economy, and choices made on where they are invested have a significant impact on livelihoods.

Diversification

“Our member funds are seeking profitable and diversified investment opportunities for optimal returns for their members and retirees, and while pension funds have traditionally invested in government securities and listed equities, infrastructure investments remain an untapped, yet lucrative and impactful opportunity.

We are working to make this a reality and are encouraged by the pension fund response towards infrastructure and alternative investments,”said Kirungie.

Speaking in Nairobi yesterday during a one day workshop to discuss opportunities and experiences in infrastructure and alternative investments for the pension industry, Kirungie said the industry will keenly assess the performance of schemes that have diversified their portfolios into more politically resilient alternative investments, especially during the General Election periods.

A stand-out project shortlisted by the consortium is a 143 kilometres road project in Northern Kenya under the Kenya Road Annuity Program (KRAP) where Kepfic members are seeking to invest Sh2 billion through a bond issuance.

The consortium is taking advantage of recent provisions in the Retirement Benefits Authority (RBA) investment guidelines that allow pension funds to invest up to 10 per cent of their assets into infrastructure, a move Kirunge said had unlocked over Sh140 billion into the asset class.

Investment gap

Representing the Public Private Partnerships (PPP) Directorate headed by Christopher Kirigua, a legal counsel within the directorate Gideon Magara said Kenya has an annual infrastructure funding shortfall of Sh400 billion, a gap private investors can fill by funding investments in sectors such as power, transportation and urban development.

Magara noted that pension funds are ideal investment partners for infrastructure projects due to their longer investment horizons, adding that the large investment sizes underlined the need for individual schemes to work together as part of a consortium.

The government has prioritized 10 infrastructure projects worth $5 billion (Sh570 billion) this year, as part of the vision 2030 enablers, out of which four were at the tender stage and concept notes done for another four while two  have been closed.