* Also looks to invest in Kenyan government debt
* Fund's assets grew 29 percent last year
By Elias Biryabarema
KAMPALA, March 20 (Reuters) - Uganda's sole state pension fund said on Wednesday it would start investing in Kenyan debt and equities and establish a private equity fund to expand its Ugandan investments into unlisted companies.
The National Social Security Fund (NSSF) is one of the biggest investors in the country with assets of 2.74 trillion shillings ($1.04 billion) last year, and has about 130 billion shillings to invest every month from contributions.
Kenya offers a more varied array of established companies to invest in compared to Uganda, said the NSSF's managing director, Richard Byarugaba.
The NSSF already has large holdings of stocks on the Uganda Securities Exchange.
"The main problem NSSF faces is that Uganda doesn't have a deep equity market so our investment options are limited, yet we have a lot of cash - about 130 billion shillings in fresh cash to invest every month," he told reporters.
"So we're working on an idea of setting up a private equity fund that will be looking at investing in small and medium enterprises and we're also planning to increase our investments on the Nairobi Stock Exchange."
The pension fund expanded its assets by 29 percent last year after improving contributions from its members.
All Ugandan employers with more than five workers are required to remit 15 percent of each employee's monthly salary to the Fund as social security savings to be redeemed upon retirement, set at 55 years.
Some struggling employers, however, often fail to remit the worker contributions and the fund has traditionally struggled to enforce compliance.
Byarugaba said he had changed the pension fund's investment model, putting more money into high yielding, longer-term government paper instead of short-term. The NSSF cut back its deposits in commercial banks, he said.
"Also, we're planning to start buying Kenyan treasury paper," he said.
Last year, President Yoweri Museveni revealed his government was looking to borrow about $400 million to finance construction of roads and Byarugaba said the loan was likely to be budgeted for in the financial year to June 2014. ($1 = 2627.0000 Ugandan shillings) (Editing by James Macharia and Tom Pfeiffer)