The Eskom Pension and Provident Fund plans to expand into venture capital to reduce its dependence on traditional investments, according to an official.

“We are about to invest in venture capital, which is a subset of private equity,” said Phathutshedzo Mabogo, deputy chief investment officer at the Johannesburg-based fund. “We’ll start with the offshore development markets like North America and Europe. We’ve committed US$100-million.”

The fund linked to struggling state-owned power utility Eskom has about R185-billion worth of assets under management, with roughly two-thirds allocated to South African stocks, inflation-linked debt, property and nominal bonds.

Exposure to private equity is about 5-6% of net asset value, Mabogo said. “We have scope to grow,” he said in an interview in Mauritius.

Private equity and venture capital represent “an area of growth that could deliver decent returns without introducing too much risk in the total portfolio”, Mabogo said.

Amendments to South Africa’s pensions legislation now allow funds to invest as much as 45% of assets offshore. For the Eskom fund, the share is about 30%. Any shift won’t happen any time soon, according to Mabogo.

“If we see a big opportunity like private equity offshore, we could move quicker,” he said. “The chances of us getting to 45% in the short term are very slim.” — Kamlesh Bhuckory, (c) 2023 Bloomberg LP