Highlights Opportunities For Responsible Investing And Diversification Strategies In Challenging Times

The Pension Funds and Alternative Investments Africa conference (PIAFRICA)  took place on March 15-16, 2023 in Mauritius, bringing together over 150 in-person delegates and more than 30 virtual attendees from 15 countries to explore opportunities and solutions in the unprecedented era of risks facing the world. The event featured over 40 expert speakers and was sponsored by the Africa Finance Corporation (AFC), and The Trade and Development Bank (TDB), AfrAsia Bank and LS Advisors supported by the government of Mauritius and our support partners.

The Minister of Financial Services and Good Governance, Honorable Mahen Kumar Seeruttun, lauded the conference theme of responsible investing and diversification strategies in a low-growth environment. He highlighted Africa’s immense potential and announced new ESG initiatives to give confidence to the international investing community.

Keynote speakers discussed how debt has fuelled inflation and how local currency debt may be a better option than forex-denominated debt. They also highlighted the importance of robust governance for macro-economic performance and called for new models to navigate the current context with alternatives at the heart of the diversification debate.

Key Takeaways from PIAFRICA 2023: Driving Sustainable Growth through Innovative Investing

• Redefining the Role of Fund Trustees: Achieving Better Alignment between Fees and Performance – Panellists discussed the evolving role of fund trustees in shaping the economic landscape and emphasized the need for better alignment between fees paid and performance achieved.

• Balancing Long-Term Liquidity and Infrastructure Investment: Leveraging Development Finance Institutions for Sustainable Growth – Focused on the need for long-term liquidity in institutional funds and the importance of early-stage financial support from development finance institutions (DFIs) for unbankable infrastructure projects. Legislating mandatory investments in specific asset classes was seen as counterproductive, with a focus on risk-reward dynamics instead.

• Maximizing Returns with Alternative Assets – Panellists highlighted the benefits of alternative assets for investors seeking to outperform their peers who focused purely on public markets. The discussion also emphasized the importance of mixing traditional and alternative assets to reduce systemic risks.

• Robust Benchmarking for Effective Investment Mandates – Focused on the importance of robust benchmarking for well-crafted investment mandates and performance follow-through. Stakeholders explored efforts underway to address significant benchmarking gaps and drive effective investment strategies.

• Early-Stage Support for Attractive Infrastructure Investments – Panellists discussed the need for early-stage support to make infrastructure investment transactions more attractive to private investors. AFC announced its financial close on a major renewable energy investment transaction, making the institution one of the largest renewable energy players on the continent.

• Innovating to Meet Pension Funds’ Specific Needs – Explored how the market needs to innovate to meet pension funds’ specific needs and attract investment into infrastructure and real estate. The discussion focused on the importance of liquidity demand through regular cash flows and enduring infrastructure priorities like low-cost housing and renewable energy.

• Private Equity Upside Opportunity for Investors – Addressed the underperformance of the African private equity market compared to other emerging markets. The discussion presented an upside opportunity for investors seeking to invest in African private equity.

• Mauritius IFC – Key to African Financial Success – Panellists discussed the enduring success of the Mauritius International Financial Centre as a global financial centre and its potential to attract foreign investment and consolidate African pension funds.

• Integrating ESG for Long-Term Sustainability – Speakers agreed on the long-term benefits of integrating ESG (Environmental, Social, and Governance) in investing, despite limited researched evidence on ESG in Africa. The panellists noted the gradual convergence of ESG benchmarking and reporting, emphasizing the need for all stakeholders to work together towards this convergence.

Overall, the PIAFRICA 2023 conference was a success, providing valuable insights on innovative investment strategies for driving sustainable growth. The conference sessions highlighted the importance of better alignment between fees and performance, robust benchmarking, and early-stage support for attractive infrastructure investments. Additionally, the discussions emphasized the benefits of alternative assets, the need for innovation to meet pension funds’ specific needs, and the upside opportunity for private equity investors in Africa. As a whole, the conference provided a platform to showcase the pivotal role of pension funds and alternative investments in diversifying portfolios and channelling Africa’s savings into capital, with a focus on responsible investing and long-term sustainability as key drivers of success in this context.