Private Equity Investing for Pension Funds in East Africa

The report identifies a significant gap between the regulatory allowance for private equity investments (up to 20% in some countries) and the actual muted allocation by East African pension funds. Key barriers include a lack of technical knowledge among trustees, a strong bias toward high-yielding government bonds, and a perceived risk associated with the asset class. The study recommends tailored capacity building for trustees and regulators, the development of specialist investment policy statements, and the use of multi-manager models to mitigate risk and governance burdens.

• While regulatory guidelines in East Africa explicitly allow pension funds to invest in private equity, actual allocation remains very low. In Kenya, for example, the Retirement Benefits Authority allows up to 10% of assets under management to be invested in private equity, but the actual investment to date is only 0.07%.
• Development finance institutions (DFIs) are the dominant source of capital for private equity firms in East Africa, accounting for nearly 70% of the funds held by these firms.
• Pension fund trustees in East Africa exhibit a strong preference for government bonds over growth assets like private equity. This is driven by high effective real yields, regulatory guidance allowing over 50% allocation to fixed income, and the implicit capital guarantees and tax-exempt status of government securities.
• There is a significant knowledge gap among pension fund trustees regarding the technical, commercial, and governance aspects of private equity. Survey results show low understanding of key terms such as 'Limited Partner', 'General Partner', and 'Carried Interest', as well as a lack of familiarity with the International Private Equity Venture Capital Valuation Guidelines.
• Private equity offers pension funds a way to gain exposure to the 'real economy' and sectors under-represented on African stock exchanges, such as healthcare, sustainable energy, and education. Data shows that private equity investee company revenue growth (2017-2018) significantly outperformed real GDP growth in the region.
• Local currency pension funds are uniquely positioned to provide 'patient capital' for unlisted companies, avoiding the currency volatility and US dollar repayment expectations that constrain international investors. For instance, the Ethiopian Birr lost 69% of its value against the US Dollar over a ten-year period, while the Kenyan Shilling depreciated by 31%.
• General Partners (GPs) in East Africa primarily utilize a 'growth equity' or 'expansionary capital' model, focusing on operational improvements as the main driver of value creation rather than financial leverage.
• Most East African private equity firms have strongly integrated Environmental, Social, and Governance (ESG) policies, likely due to the influence of early DFI investors. However, adoption of Global Investment Performance Standards (GIPS) remains low.

APA

FSD Africa (2019). Private Equity Investing for Pension Funds in East Africa. https://fsdafrica.org/wp-content/uploads/2025/05/Market-Study-Report1.pdf

Chicago

FSD Africa. Private Equity Investing for Pension Funds in East Africa. 2019. https://fsdafrica.org/wp-content/uploads/2025/05/Market-Study-Report1.pdf.

Wikipedia

{{cite report |author=FSD Africa |title=Private Equity Investing for Pension Funds in East Africa |date=October 2019 |url=https://fsdafrica.org/wp-content/uploads/2025/05/Market-Study-Report1.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{fsdafrica2019private, author = {{FSD Africa}}, title = {{Private Equity Investing for Pension Funds in East Africa}}, institution = {FSD Africa}, year = {2019}, month = oct, url = {https://fsdafrica.org/wp-content/uploads/2025/05/Market-Study-Report1.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }