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Pension funds to boost private equity investment in Africa, survey shows

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Pension funds in developed countries expect to triple their allocations to African private equity over the next two years as they look for strong returns to boost funding levels, according to a survey.

An international poll carried out by investment firm RisCura, the African Private Equity and Venture Capital Association (AVCA), and the South African Venture Capital and Private Equity Association (SAVCA) showed pension funds expected their portfolio allocation to African private equity to rise to 3% in two years’ time from an average of 1% now.

Rory Ord, head of private equity valuation at RisCura, said: “Pension funds, in particular, are under great pressure to achieve strong return figures to help funding levels, and the results of the survey clearly show there is a strong belief Africa could be the location for these returns.”

The survey, which took in data collected from 48 limited partners from different parts of the world with collective assets of more than $150bn (€109bn) in global private equity assets under management, asked about the attractiveness of Africa as an investment destination compared with other emerging markets, he said.

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Some 70% of respondents rated the continent as more or much more attractive, Ord said.

For pension funds, the survey found that the most attractive sectors within Africa over the next three years were energy and power/utilities, he said.

Michelle Kathryn Essomé, chief executive of the AVCA, said this was expected, as established funds of private equity funds had the necessary know-how, track record and local networks for pension funds to tap into.

Erika van der Merwe, chief executive of the SAVCA, said: “Alongside the openness to first-time fund managers, the survey indicated a clear preference amongst investors for fund managers to be based locally in Africa.”

Sixty percent of respondents said African fund managers should be based in their most significant target market, she said.

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