REMARKS BY MR. NZOMO MUTUKU, MBS, CHIEF EXECUTIVE OFFICER, RETIREMENT BENEFITS AUTHORITY, DURING THE EAVCA LAUNCH OF PE INVESTING GUIDE ON TUESDAY 15, OCTOBER 2019, NAIROBI
Ladies and Gentlemen
It is a great pleasure and honour to officiate the launch of the EAVCA PE Investing guide which is a vital informational tool particularly for pension sector. I am aware that this Private Equity investing guide is a product of collaborative capacity building workshop learnings that EAVCA together with development partners IFC and FSD-Africa have been holding for the past 12 months for pension scheme trustees, administrators and fund managers. It is important to underscore that this PE investing guide will be very critical in bridging the existing knowledge gap on private equity investment whose uptake has been low as an asset in pension funds investment portfolio.
Ladies and gentlemen, the Authority remains positive to new innovative ideas aimed at broadening pensions assets growth. In this regard, we will continue to review the legal framework to keep pace with emerging trends in the industry and expand the investment horizon for pensions funds.
Over the years, the authority has increased the investment options available to schemes by accommodating alternative investment asset classes such as property, private equity and venture capital, REITs among others. Consequently, we have continuously encouraged pension schemes to explore the available investment options through diversification of their investment portfolios with an aim to generate higher returns for members while at the same time limiting exposure to risks.
Ladies and gentlemen, despite putting in a lot of efforts to bring alternative assets to compete the traditional investments, they have generally been characterised with low uptake by pension funds. For instance, the total investment in private equity and venture capital as at June, 2019 stood at 0.08% of the total assets despite the asset class having a limit of 10% in the investment guidelines. As you are aware, the main reason that has often been cited for the low uptake of PE has been inadequate knowledge among pension funds investors.
I am happy that EAVCA picked on this feedback and mobilised other partners including IFC and FSD-Africa to come up with a capacity building programme targeting trustees, pension scheme administrators, trust secretaries and fund managers. I believe this PE investment guide will be helpful in further narrowing the existing knowledge gap by providing users with a checklist of material information to look out for prior to investing in PE assets, as well as providing guidelines for post investment monitoring.
Ladies and gentlemen, the Authority in collaboration with stakeholders continue to institute dynamic strategies as well as progressive legal and regulatory regime for the industry. To this end, the authority has a new five-year strategic plan (2019-2024) which was developed based on three themes namely: Operational Excellence, Policy and Regulatory and Developing the Informal Sector.
- The operational excellence focuses on the delivery of efficient and effective services to the Authority’s stakeholders. This will be achieved by improving the organizational capacity, enhancing automation and knowledge management within the Authority, instituting a strong M&E framework and improving access to and reach of its services.
- The aim under Policy and Regulatory theme, is to strive to enhance order in the management of retirement benefits schemes to increase confidence in the retirement benefits sector. This will be accomplished by enhancing the capacity for policy formulation, improving the legal framework that guides the Authority’s operations, and strengthening surveillance of the sector in order to improve sector governance.
- The theme on development of the informal sector will strive to enhance access to pension services and enhanced financial inclusivity among Kenyan workers especially from the informal sector. This will be realized by enhancing outreach programmes based on needs-based research and promoting the development of pension products that specifically target the informal sector.
Ladies and gentlemen, allow me to conclude my remarks by appreciating the deliberate efforts that you have put in place towards supporting the government’s Big 4 Agenda that is aimed at transforming the economy and accelerating growth. I am aware that some pension schemes are fostering partnership to fund infrastructure projects in the country. I would urge Private Equity investors to also take a cue and support the government agenda through participation in available initiatives such infrastructure investment particularly affordable housing and private equity investment in manufacturing firms.
The Retirement Benefits Authority has written to stakeholders requesting for policy proposals touching on taxation, investments, interim administration of schemes, and administration of pension schemes among others that you would like to be considered for inclusion in the 2020/2021 budget memorandum by 9th November 2019. Its is through such policy proposals we get legislative feedback for policy change. I hope this time we shall get may proposals from you.