The volatility of the stock and money markets is shepherding public pension managers into real estate where they hope to get better and more stable returns for their shareholders.

But the question most managers face is how to exit the equity market and government securities without booking huge losses.

Data contained in their latest financial filings show the state-run schemes from Uganda, Kenya and Tanzania plan to pump millions of dollars into real estate or infrastructure projects in coming months.

READ: EA fund managers in big investment deals to stem pension crisis

Uganda’s National Social Security Fund, said besides real estate it plans to shift some of its investments from stocks to government securities. But analysts said there are no takers to buy off its huge share holding of equities.

Kenya’s NSSF reported last week it holds quoted securities worth Ksh39 billion ($469 million) or 35 per cent of its entire Ksh111 billion ($1.33 billion) assets. The pension scheme holds 36 per cent of its assets in real estate, and plans to increase this, with the rest held in government securities.

Tanzania’s NSSF is betting on increased investment in infrastructure projects especially in the roads and energy sectors.

Uganda’s NSSF is seeking to go big on real estate too, while also increasing lending to the government through the money market, as it seeks to move away from the equity market, where it holds 80 per cent of all floated shares at the Ugandan Securities Exchange.

“Our portfolio at the USE has matured and we believe investing more money is not the solution to increasing our market returns. But we are willing to exit some market positions and enter new ones in case there are good takers for our stock,” says Richard Byarugaba, NSSF’s managing director.

Last year, the Kenyan and Ugandan securities exchanges market lost an average of 25 per cent of their value. But since January this year, the two bourses have rebounded, posting about a 20 per cent return, pushing them to the top 10 best performing bourses in the world. Last year, the two were among the worst performing globally.

In the money market, a sudden surge in interest rates across the region saw financial institutions book huge losses in their available for sale and available for trading bond holding.

This is because interest rates and bond prices have an inverse relationship, meaning an increase in interest rates leads to a fall in bond prices.

With the Ugandan scheme currently having an investment mix of 75 per cent fixed income assets, 15 per cent real estate and 10 per cent equity, a volatile movement in either the bond or equity has a huge effect on the fund.

NSSF Tanzania, whose investment portfolio stood at $627 million in 2011, is targeting to invest $130 million in the construction of the Kigamboni commercial Bridge. The bridge will link Dar es Salaam to Kigamboni Island situated to the east of the city.

The 520,000 member pension scheme also plans to pump cash into the construction of a 300MW, gas powered power plant in Mkuranga, 21 miles to the south of Dar es Salaam.

READ: NSSF to invest in bridges, power projects

In Uganda, NSSF says it will kick-start the second phase of its Pension Towers, an Ush260 billion ($105 million) commercial complex that will also serve as its headquarters. It will also pump money into low cost housing projects in Temangalo and Lubowa, central Uganda.

The Fund is also eager to lend roughly Ush1 trillion ($403.9 million) to government to enable it finance large energy and roads projects.

In Kenya, the NSSF is looking at increasing its real estate holding through the development of its land holding which will enable it unlock value in the parcels it holds.

By Bernard Busuulwa, Adam Ihucha, Emmanuel Were and Peterson Thiong’o