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Investor Appetite for Africa-Focused Private Equity – April 2015

by Karun Ahluwalia

  • 01 Apr 2015
  • PE

The global investor ecosystem has seen vast changes in the past 12 months; with subdued growth within the Eurozone and some developed Asian economies, LPs are looking towards opportunities within the maturing African market. Fourteen percent of LPs Preqin interviewed in a recent study stated that Africa presented the best investment opportunities in the current market, an increase from 11% in December 2013.

Preqin’s Investor Intelligence online service shows that there are 281 LPs that have a preference for, or are considering investing in, Africa. Public pension funds account for 16% of these LPs, followed by private sector pension funds (11%) and foundations (10%). With regards to strategy preferences, three-quarters of investors have shown a preference for venture capital vehicles and 70% of LPs target buyout and growth funds.

There is an emerging appetite for North Africa, with 68% of LPs displaying a preference for this region. This indicates growing investor activity outside South Africa, the historically strong haven for African private equity. This may be explained by the growth of emerging economies in North West Africa, including Ghana, Ivory Coast and Nigeria. Thirty-four percent of LPs have a specific preference for investing in sub-Saharan Africa. Netherlands Development Finance Company (FMO) is an investor that has committed to an Africa-focused fund, Metier Capital Growth Fund II, a socially responsible vehicle investing in mid cap businesses in sub-Saharan Africa.

Political disharmony in Libya and Nigeria along with the outbreak of the Ebola crisis in West Africa have to some extent hindered investment activity in the last year. Preqin’s Funds in Market online service shows that only $1.8bn in capital focused on Africa was raised in 2014. So far this year, $3.4bn in commitments has been accumulated by fund managers targeting the continent, the highest figure since 2007, indicating an upturn in investment activity and confidence in the region. To this end, Africa is well placed to position itself as an alternative investment destination for LPs looking to emerging markets.

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