There is a disconnect between the management team of the pension funds and their boards in West Africa, when it comes to private equity investments, Africa Global Funds has learned.

Ehimeme Ohioma, Head of Investment Supervision at the Nigerian National Pension Commission (PenCom), said that many PE proposals are “turned down in Nigeria and it’s a major challenge”.

“The board of trustees of the pension funds don’t understand what private equity is, because private equity is such a small amount of what they do,” he said at the SuperReturn conference in Accra, Ghana.

Ohioma said that the asset allocation to private equity, infrastructure and real estate in Nigeria is expected to increase from the current 5% to 10%.

He added that PenCom is “putting in place a strategic capacity building programs for directors and trustees of the pension funds in Nigeria”.

Hany Assaad, Co-Founder of Avanz Capital, said that this issue of boards and trustees not understanding private equity is not only in West Africa, but all over the world.

“Pension funds’ boards don’t know private equity that well. And they don’t focus on it if it’s 5-10% of their entire portfolio at best, they are not experts at private equity,” he said.

He added that the regulators in Nigeria are taking "quite an initiative" in educating the boards of those pension funds by providing an annual education for all the board members to make them aware of what’s happening in private equity and why it’s important for them.

“By closing the knowledge gap, they are able to fast forward the investment of these local institutional investors into private equity in Africa,” he said.

Assaad added that there is a great deal of interest in Africa, but there is a disconnect between perception and reality and the biggest disconnect is about risk and returns.

“The perception of risk is very high. The distinction in many institutional investors especially the pension funds is between the fund managers and their board of trustees that don’t understand Africa. They get swiped by the news in the press and they don’t always trust their internal investment team,” he said.

“The reality is that we see Africa as one of the few remaining growth markets. There are many companies that are growing pretty fast and they do well. It’s a combination of macro factors and reforms that are happening, the political stability that is happening more and more,” he added.