Declining stock market performance pushes pension funds to venture into real estate

Declining stock market performance pushes pension funds to venture into real estate

 

  • Africa’s Equity markets are losing value prompting pension funds to venture into real estate sector
  • Kenyan pension funds have nearly tripled their real estate investments in the last 8 years
  • Pension funds in Nairobi Stoke Exchange had reduced their assets by 40% at the beginning of 2015

Kenyan pension funds are shifting their assets from the country’s stock markets into real estate investments, where returns are running at more than 20% a year, at a time when Africa’s equity markets are losing value.

Data to be presented at the East Africa Property Investment Summit in Nairobi on April 5 and April 6, 2017, shows that Kenyan pension funds have nearly tripled their real estate investments in the last eight years, moving into property development on a grand scale.

For pension funds fully invested in the Nairobi Stock Exchange at the beginning of 2015, the market’s decline had reduced their assets by almost 40% by the end of 2016, fueling an urgent focus on diversification.

“Pension schemes need to invest in real estate as part of a diversification strategy and with a view to reducing portfolio risk and complementing the overall returns to members,” said Wangeci Kanjama, Trustee of the Safaricom Pension Scheme and Chair of the Real Estate Project Committee.

READ ALSO: Cytonn Investments buys 25% stake in Superior Homes, announces Real Estate Development Partnership

The Safaricom Staff Pension Scheme (SSPS), which was an early mover into real estate project finance, is now developing the new Crystal River Mall and Gated Community and the luxury Mandharini holiday homes in Kilifi County.

Stanlib Asset Management, in its Africa’s Direct Property Investment Fund report, states that, currently, Africa’s real estate market has an estimated Internal Rate of Return of 25 per cent compared with an equity market which declined by 11.2 per cent in 2016.

The relative strength of real estate investments had already seen Kenya’s pension funds increase their real estate holdings to Sh150.8 billion by 2015.

 

 

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