Regulation 29 spawns another SPV

Mark van Wyk, head of impact investing at Mergence

Investment opportunities for long-term investors abound as governments around the world look to private funding to contribute to economic and social infrastructure, as well as other developmental investments.

In Namibia, there are infrastructure projects requiring funding of more than N$200 billion as per the NDP4 in the fields of Energy, Transport, Water and Telecommunication.
Speaking at the recent conference in Windhoek of the Retirement Funds Institute of Namibia (RFIN), Mark van Wyk, head of impact investing at Mergence, said that pension funds are ideally positioned to provide funding to development projects.
“The Namibian government has created an enabling legislative framework through Regulation 29 of the Pensions Fund Act which allows pension funds to allocate a minimum of 1,75% and a maximum of 3,5% of the market value of their investments locally in unlisted entities.
“In addition, there is growing interest by investors in asset classes that can generate stable performance whilst still producing desirable yields given the continuing volatile macro-economic backdrop and record low real yields for safe assets,” said van Wyk.
Mergence Unlisted Investment Managers (Namibia) recently launched the Mergence Namibia Infrastructure Fund Trust, a Namfisa approved SPV, which will invest via unlisted investments into carefully selected impact and infrastructure projects.
According to van Wyk, the benefits of adding infrastructure to an investment portfolio include: Diversification – risk premiums and inflation protection characteristics provide low correlation to other major asset classes. Attractive long-term returns – median net internal rates of return for most unlisted funds range from mid-teens to low 20’s. Stable cash flows – infrastructure assets provide essential services. Inflation protection – asset incomes are regulated or predetermined at the investment stage. Risk/return benefit – adding infrastructure to an institutional portfolio improves the return per unit of risk Low sensitivity to GDP – compared to other asset classes, infrastructure has a low sensitivity to changes in GDP due to inelastic demand and price insensitivity.