Highly attractive infrastructure and private equity investment opportunities abound in Africa, but foreign pension funds willingness to invest in the region will depend on a more stable political and regulatory environment, and the availability of local peers to collaborate and co-invest in projects.
This was one of the key take-outs from the US-Africa Pension Funds Trustees Roundtables conference that took place in Johannesburg, South Africa hosted by the National Association of Securities Professionals (NASP) and USAID as part of their Mobilizing Institutional Investors to Develop Africa’s Infrastructure (MiDA) program.
The day focussed on exploring investment outlooks and opportunities in African infrastructure and private equity, as well as views and experiences related to diversity and financial inclusion.
Martin Kuscus, Mineworkers Provident Fund Board Chairman, stated that the day represented a welcome opportunity to exchange views with representatives from the United States as both the world’s biggest economy and a country with highly developed capital markets.
“South Africa is one of the leading economies on the African continent, so from our perspective it is encouraging to hear that the world would like Africa to succeed. It has also been useful for calibrating our thinking with global best practice, and to gain a sense of context from foreign investors in understanding where they may be risk averse to investing on the continent,” he said.
The US delegates seemed to agree that while Africa holds a wealth of long-term investment opportunities, many asset allocators prefer to invest in regions they are familiar with and need some sense of comfort of the security of investments.
Participants present indicated that while Africa offered a favourable risk/return investment profile, political instability, the ability to perform a comprehensive due diligence and potential illiquidity remained some of the key risks.
Charles Burbridge, Chicago Teachers Pension Fund Executive Director, explained that while African infrastructure investments represented similar levels of risk to infrastructure investments in the United States, US pension trustees and executives would prefer to partner with another pension fund or investment agency with in-depth regional experience and political understanding to help de-risk investments.
“Considering the potential for returns in consumer driven economies, and in terms of the age of its citizenry, we see huge long-term investment opportunities in Africa,” he said.
“But as investors you tend to manage to what you know and fear the unknown, and while today has shifted more of the world into the known, we would also look at what partners are available with boots on the ground that can do the necessary due diligence.”
Delegates also shared common experiences in implementing diversity and inclusion initiatives.
While many agreed that the dearth of experienced black asset managers continued to represent a challenge, diversity and financial inclusion policies and initiatives offered the advantage of enabling funds to support the incubation of new firms and strategies and the diversification of manager types for the next generation of asset managers.
“This gathering was an excellent experience for our members seeking to engage with industry peers in Africa to further our understanding of the opportunities in the region. We look forward to more exchanges with investors on the ground with similar investment philosophies, and that will ultimately lead to US investors doing more business in Africa and opportunities for co-investments,” stated Donna Sims Wilson, National Association of Securities Personnel (NASP) Chair.
“The day has really been about leveraging the collective wisdom and expertise of like-minded local and global pension funds, participating complementary organisations and industry service providers. It marked the first step in building sustainable and strategic relationships. Institutional investors are the main suppliers of capital within the alternative investment space. Emerging market economies have much to offer and we welcome the opportunity to explore areas of future collaboration,” adds CEO of Ba, Anne-Marie D’Alton, BATSETA Chief Executive Officer.