With the discussion in Uganda’s pension sector about alternative investments beyond government securities, regional experiences, particularly from Kenya and South Africa, offer useful insights on how to structure, regulate, and scale private equity and other long-term investment vehicles.
While Uganda’s retirement benefits industry has made significant progress in strengthening governance and delivering strong returns through fixed-income instruments, the development of alternative investments remains at its infancy. In contrast, some African markets have spent years building frameworks that support institutional participation in private equity, real estate, and infrastructure funds. Understanding these experiences provides practical insights into what works, the challenges to anticipate, and the institutional reforms that may be necessary.
Daisy Lynda Nabakooza, Head of Supervision at URBRA, notes that one of the most notable differences between Uganda and more developed markets such as South Africa is the depth and diversity of available investment vehicles. In South Africa, pension funds operate within a developed financial ecosystem that includes private equity funds, listed property funds, infrastructure investment vehicles, and structured products designed for institutional investors. This enables Retirement Benefits Schemes to spread risk across multiple asset classes while maintaining exposure to long-term growth opportunities.
Kenya has also made significant progress in developing real estate investment structures and collective investment vehicles that allow institutional investors to pool resources into large-scale projects. These structures have expanded access to investment opportunities that would otherwise be out of reach for individual schemes.
A key feature of these markets is the use of structured investment funds that act as intermediaries between retirement benefits capital and underlying investments. Rather than investing directly in individual companies or projects, pension schemes invest through professionally managed funds specialising in private equity, infrastructure, or real estate. These funds source investments, conduct due diligence, manage portfolios, and execute exit strategies, reducing operational complexity while ensuring investment decisions are made by professionals.
In Uganda, discussions between the Ministry of Finance, URBRA, CMA and service providers are ongoing around the development of similar pooled investment structures, which could enable broader participation in alternative assets.
One of the most widely adopted alternative investment structures in Kenya and South Africa is the Real Estate Investment Trust (REIT) model. REITs allow investors to gain exposure to income-generating real estate without directly owning property by purchasing units in a trust that owns and manages a diversified portfolio of real estate assets. This structure provides liquidity, diversification, and professional management, making it attractive to institutional investors such as pension funds.
Kenya has been a regional leader in developing REIT frameworks, while South Africa has a more mature listed property sector. In Kenya, REITs must distribute at least 80% of their distributable earnings annually to maintain tax-exempt status and invest at least 75% of their total assets in real estate, leaving up to 25% for cash and liquid instruments.
Another key lesson from these markets is the importance of strong governance and regulatory oversight. In both Kenya and South Africa, alternative investment markets have developed alongside clear regulatory frameworks defining investment limits, disclosure requirements, valuation standards, and fiduciary responsibilities. This regulatory certainty has helped build investor confidence. In contrast, emerging markets often struggle with inconsistent valuation practices, limited transparency, and underdeveloped reporting standards. Uganda’s ongoing efforts to develop guidance for alternative investments reflect recognition of this gap and the need to strengthen institutional safeguards.
Investment expertise within pension fund governance structures has also been critical. Trustees and investment committees in South Africa and Kenya often have access to specialised training, advisory services, and professional fund managers who support decision-making in complex asset classes. In Uganda, capacity building is increasingly recognised as necessary for expanding into private equity and infrastructure investments. This has led to initiatives such as trustee training under the Insurance Training College, recognising that without adequate training and technical support, trustees may remain reluctant to move beyond familiar fixed-income instruments.
Alternative investments involve greater complexity and lower liquidity than government securities. More advanced markets have addressed this by developing clear exit strategies, secondary markets, and structured fund lifecycles that define how investments are realised. The absence of clear exit pathways has remained one of the key barriers to private equity participation in less developed markets, reinforcing the need for well-structured investment frameworks.
In both Kenya and South Africa, collaboration between regulators, fund managers, and institutional investors has played an important role in developing alternative investment markets and supporting innovation in investment products tailored for Retirement Benefits Schemes.
Ms. Nabakooza adds that discussions underway in Uganda between regulators, fund managers, and the Ministry of Finance reflect a similar direction. Pension funds are recognised not only as financial institutions but also as contributors to national development through investment in infrastructure, housing, and productive enterprises.
Uganda is at an early but important stage in the evolution of its pension investment landscape. The strong performance of government securities, with yields currently ranging from 14.75% to over 18% for long-term securities, has created a stable foundation while highlighting the risks of concentration. As discussions on alternative investments continue, regional experience demonstrates that diversification is achievable when supported by the right regulatory environment, institutional capacity, and investment structures, allowing Uganda’s pension sector to become a more diversified source of long-term capital for national development.