African Pension Funds: A New Capital Source For Private Equity

LAGOS (Capital Markets in Africa) – African pension funds are primed to play a valuable role in the future of the African private equity industry. They are likely to become an increasingly significant capital source for medium and long – term investment and are primed to play a critical role in catalysing African development. With many pension funds accumulating substantial AUM, there is pressure on these pension funds to diversify from traditional investments such as government bonds and listed equities – with private equity providing an attractive proposition.

Expanding source of capital
Africa’s pension fund industry is burgeoning – with an expanding young population, the amount of capital that needs to be invested is extensive. An industry which shows an average 10-12 per cent return over the last 10 years can’t be ignored – private equity has outperformed public markets and pension funds risk losing out on diversification and significant growth if they don’t engage with private equity. It is estimated that there is USD29billion available for investment by African pension funds in African private equity2 – a staggering number that has exponential ramifications for sectors such as infrastructure that has a huge demand for capital in Africa. This opportunity has, however, not necessarily translated into commitments, due to barriers to entry which include lack of industry knowledge and understanding, and concerns around mismatches in illiquidity. to continue to work for as long as they are physically able, due to the absence of adequate savings.

An extract from the INTO AFRICA September Edition: Gauging 2018 Africa’s Outlook. To read full article, please download by clicking: INTO AFRICA PUBLICATION: September  2018 EDITION.

Contributors’ Profiles
Cindy Valentine is a Partner at Simmons & Simmons, London. She deals with private equity investment fund structuring, fund raising, co-investment arrangements, management buyouts, start-ups and alternative structures including specialized focus on permanent capital vehicles. Her experience covers a wide range of funds, including large buyout and mid-market funds, renewable energy, infrastructure, venture funds, fund of funds and emerging market funds. Cindy advises both private equity houses and investors.

Charles Vermeylen is a Managing Associate at Simmons & Simmons, London. He advises on fund formation, financial promotion, investor participation and ongoing corporate actions affecting alternative investment managers. He has experience with every typical investment vehicle and managed account arrangement extending across private equity, real estate, hedge and other strategies.