There is a well-worn phrase in investment circles: illiquidity premium. We use it often, sometimes loosely, as though it were simply the reward for tolerating a locked up position. But I have come to think of it differently. The real premium is not just financial. It is the premium that comes from having the patience, the structure and the conviction to do something that most institutional investors still find difficult – committing capital to the real economy for the long term.
Infrastructure is where that conviction is tested most directly, given the long-term nature of infrastructure projects.
When we brought an infrastructure fund of funds to market, the response confirmed what we had been hearing from trustees for some time – there is genuine appetite for infrastructure exposure, but there’s also a real gap between that appetite and the ability to access it well. Bridging that gap is not merely a product design question. It is a governance question, a portfolio construction question and ultimately a question about what retirement funds exist to do.
South Africa’s infrastructure deficit is well documented. Energy, transport, water and health facilities’ shortfall runs across every sector that underpins economic participation. National Treasury’s amendment permitting retirement funds to invest up to 45% in infrastructure was a deliberate signal, the public sector alone cannot rebuild what decades of underinvestment have eroded and institutional capital has a role to play. The state requires the assistance and involvement of the private sector. But regulatory permission is not the same as readiness. Many trustees have found themselves in the uncomfortable position of being allowed to invest in something they do not yet fully understand, and in South Africa, prudence has often meant waiting.
That caution is understandable. Despite the regulatory green light, concerns over illiquidity, pricing uncertainty and the credibility of impact claims have kept many retirement funds on the sidelines. These are legitimate concerns, not excuses. But they point to a need for better frameworks around the infrastructure investments themselves – transparent deal structures, credible impact measurement and manager selection that goes beyond track record to include governance quality and operational competence.
This is where a fund of funds structure offers something that direct investment or single-manager exposure cannot easily replicate. A multi-manager, multi-strategy approach offers diversification across sectors from renewable energy projects to roads, railways and public health facilities while allowing investment teams to apply disciplined manager selection across a range of specialisations. For trustees who are accountable to members for both risk and return, that layer of oversight is not a luxury. It is a fiduciary necessity.
The investor appetite is becoming clearer. According to the South African Venture Capital Association (SAVCA) 2025 survey, infrastructure and energy-related funds accounted for 71% of assets raised in South Africa’s private markets landscape, up from 56% in 2023. For those already invested in unlisted assets, the case is not difficult to make. The asset class offers predictable return outcomes and a low correlation to listed markets, which is precisely the kind of diversification that long-term retirement portfolios need.
What sometimes gets lost in these conversations is the member at the end of the chain. Infrastructure investments in South Africa are not abstract. They power households, create employment and channel capital into businesses that would otherwise struggle to access funding. When private markets infrastructure is constructed and governed well, the social return is not a secondary consideration. It is evidence that the investment thesis is working. The industries and communities that benefit from well-funded infrastructure become part of the economic base that sustains long-term returns. The two are not in tension.
The honest conversation that the industry needs to have is this – if retirement funds continue to underweight infrastructure because access is difficult, the liquidity profile is uncomfortable or governance frameworks feel immature, the cost is borne by members. The cost is reflected both in foregone returns and in the continued deterioration of the economic environment those members will retire into.
We are not asking trustees to take on risks they do not understand. We are asking them to build that understanding. The opportunity has been there for some time. The tools to access it responsibly are now available. What remains is the willingness to act on long-term conviction, which is, after all, what managing retirement capital has always required.
