In America and especially in Europe, pension funds were conservative. They didn't move into VC until the ecosystem was established with plenty of exits and a number of experienced GP's with rock solid track records.
PF's are rarely the first movers.
PF's are rarely the first movers.
https://twitter.com/africatechie/status/1431637106552709127
In Africa:
1. The VC asset class is still new
2. Still few exits
3. Undeveloped stock exchanges/ M&A markets which reduce the frequency of liquidity events
4. Low number of experienced GP's with stellar track records
5. Far more attractive fixed income returns than America/EU
1. The VC asset class is still new
2. Still few exits
3. Undeveloped stock exchanges/ M&A markets which reduce the frequency of liquidity events
4. Low number of experienced GP's with stellar track records
5. Far more attractive fixed income returns than America/EU
6. Macroeconomics problems like inflation and devaluation
7. Regulations that only allow them to invest in certain types of assets
I believe pension funds will come along soon, but it's their job to be conservative.
7. Regulations that only allow them to invest in certain types of assets
I believe pension funds will come along soon, but it's their job to be conservative.
You can't be telling someone that spent 20 years fighting Boko Haram for Nigeria inside Sambisa forest that you lost their pension money because you invested in a start up.
In America even the largest pension funds expect a 7% return on the dollar.
That's huge in America. In Africa, its normal. You can lend to a sovereign at that rate. Sovereign Eurbonds are 10%
That's huge in America. In Africa, its normal. You can lend to a sovereign at that rate. Sovereign Eurbonds are 10%
Also investing in VC is expensive. That 2% management fee; whether the GP is successful or not, adds additional element of risk to an already risk averse PF manager.
It basically means that if a VC or PE raises enough money, then they can use your money to live the soft life and if "carry/exit happens, it happens, but that is in the hands of God 🤗"
Most American/EU pension funds have majority of their funds in fixed income anyway. Its a small proportion that goes to PE/VC with most of it going to PE and a smaller proportion going to VC.
However, when they start seeing GP's able to deliver returns at a 6% dollar hurdle, the route to exit/liquidity is clearer and the regulations evolve I believe we will see a lot more participation from them.
And these changes are just round the corner.
If you are interested in PE/VC and want more depth, watch me & the Godfather of Nigerian PE, Dr Okey talk about it here:
Fun fact: both me and the Godfather started our careers as medical doctors.
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