KENYA Power and Lighting Company pension fund has become the first since the 1990s to invest in private equity, putting in Sh350 million into new PE player, Ascent Capital.
Ascent Capital, headed by former Centum executive David Owino, has raised a debut fund of Sh4.38 billion ($50 million) at its first close, of which 70 per cent has been committed by commercial investors.
The Ascent Rift Valley Fund will invest between $1m-$10 million in 12 fast-growing enterprises in Kenya, Ethiopia and Uganda, and will shortly close a deal with a health company in Ethiopia.
The move by Kenya Power is strategy shift for pension funds, as they move away from traditional asset classes such as shares in listed companies, government securities like treasury bills and bonds and real estate.
"We're already getting a lot of inquiries on how they can go about investing in private equity", a spokesperson for Retirements Benefits Authority, the industry regulator, told the Star. "Previously there was no provision for it in their strategy, but now there's a lot of interest".
Traditional investments have given Kenya Power's pension pot, which has 6,000 workers and $300m under management, average annual returns of 13-14 per cent over two decades.
The investment has been made possible by a change in regulation by the Retirement Benefits Authority, who have stipulated that pension funds can invest up to 10 per cent of their capital in private equity, however each investment must seek approval for each investment.
Chairman of Kenya Power Pension Fund chairman Lawrence Yego said he would like to see the ten per cent RBA cap on private equity investment raised.
"We want to take a little bit of risk and increase our returns, and we are willing to go beyond it [the cap]", he said in a phone interview.
Owino said that in raising further funds, he hopes to maintain 10 per cent local investment.
"This is the first time in the region that local pension funds have committed to invest in a private equity fund."
He added: "In addition to the local institutional investors, the fund has also attracted significant capital from international investors. Coming on the back of the successful Eurobond milestone, this is another sign that the country's financial sector has come of age."