Healthcare an investment option for pension funds

As our labour force gets more formalised and aware about the need for pension schemes, the government and workers contributions are rising. Data from the Retirement Benefits Authority (RBA), by asset classes, places the total pension pot at around Sh1.3 trillion. This amount is managed by 1,258 pension schemes and overseen by 41 fund managers.

Kenya’s pension penetration currently stands at around 20 percent and the latest GDP figures at Sh198,000 per capita, intimating the future amounts managed by pensions will be high.

Real estate as an asset class, has been a darling of many pension schemes, but changing demographics and dynamics both at the workplace and in the family front means the future consumption of these products will be in a different manner.

Two of the emerging questions now are how a digital economy impacts consumption of office spaces and if increasing virtual business overtaking brick and mortar enterprises reduce office space demand.

It is not just office space numbers, but also the average size of the office that are declining. Gone are sole occupancy offices with shared workplaces hired on the hour taking over.

The new line of thought along minimalism, where frugality is espoused and less space is seen as better, places demand for smaller housing units as well.

As an early phase contributor to a pension scheme, one of the questions I ask myself is whether my money will be safe in 2043 when I am eligible to withdraw them. Is my pension scheme investing in housing or office blocks also.

It was noted in a local daily recently that the National Social Security Fund NSSF’s assets include real estate investments.

Given the dwindling fortunes in the sector, the article indicated a potential shrink in its fund occasioned from the real estate sector losses.

Trends in Nairobi’s office and housing sector offers an example. In some streets, occupancy levels for office space is decreasing, a few other business districts have also been mentioned as declining in tenancy occupancy. A similar scenario plays out in many housing investments.

As health sector players in a capital starved private health sector, we need to initiate dialogue with fund managers for consideration of the health sector as an alternative investment vehicle. Over the last five years, the number and average capital sought by health entrepreneurs has risen.

Revelations that the NHIF spent billions paying for medical services abroad suggests room for investments in health services. Equipment for advanced medical care and precision surgery or oncology cost hundreds of millions, often limiting investments.

Critics of such heavy investments will argue for organic growth, however as seen from the early days of investments in MRI and CT scans, where demand was thought to be non-existent, once solutions have been structured around the service, organic demand ensues.