The Capital Markets Authority (CMA), Kenya Pension Funds Investment Consortium (KEPFIC) and Nairobi Securities Exchange (NSE) have signed a Memorandum of Understanding (MOU) to support infrastructure projects financing and development through the capital markets. This is expected to lead to the growth and deepening of the country’s capital markets.
The pensions sector regulator, the Retirement Benefits Authority, recently introduced infrastructure as a distinct investment category under the pension fund investment regulations. This allows pension funds to directly invest up to 10 per cent of their portfolio in the asset class, potentially unlocking approximately Ksh.140 billion for infrastructure investments.
Infrastructure investments are capital-intensive, meaning the pooling of long-term capital is necessary. The MoU between CMA, KEPFIC and NSE will not only leverage economies of scale but also help in financing big-ticket infrastructural projects. The MoU will also provide an avenue for enhancing the liquidity of KEPFIC investments through the capital markets.
The CMA Chief Executive, Mr Wyckliffe Shamiah observed that; “Through the partnership, NSE, CMA and KEPFIC will seek avenues to deploy pension funds’ investments into infrastructure projects using available capital markets products such as Green bonds, Asset-Backed Securities (ABS) and Real Estate Investment Trusts (REITs). The partnership will therefore cement the capital markets contributed to the Sustainable Development Goal Nine, by leveraging capital markets to build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation, while providing pension funds with a significant return on their investments.”
The NSE Chief Executive, Mr Geoffrey Odundo said; ‘’this collaboration between NSE, CMA, and KEPFIC outlines the direction NSE is taking in enhancing pension fund activity through forming strategic partnerships as well as reaffirming our commitment to increasing liquidity in our market.’’
The KEPFIC Chairperson, Mr Sundeep Raichura added, “There is considerable need to utilize the appropriate capital market structures to finance the development of infrastructure in Kenya, whilst ensuring optimal returns and diversification to investors. We are excited to formalize this partnership which will enhance the transparency and liquidity of our members’ investments as well as pave the way for collaborative stakeholder engagements and capacity building initiatives pertaining to alternative assets in the capital markets”.