Investor Appetite for African Private Equity – April 2014

by Lauren Mason

  • 02 Apr 2014
  • PE

Investor attitudes towards Africa-focused funds have changed significantly over the past year. Preqin Investor Outlook Report: Alternative Assets H1 2014 shows that 18% of respondents highlighted Africa as a region within emerging markets presenting the best investment opportunities in December 2012, but this dropped to 11% in December 2013. This gives the impression that investors are not as positive towards the continent as they previously were, and does not support an encouraging outlook for 2014. This decreased appetite runs parallel to an increased confidence in the traditional markets of Europe and North America, as more investors are turning back to these larger and more developed geographies for investment opportunities. The December 2013 survey highlighted 59% viewing Europe as having the best opportunities and 54% for North America, compared to only 11% of investors for Rest of World regions. 

However, the recent improvements of macroeconomic conditions within Africa lay the foundations for the emergence of potentially promising private equity opportunities.  This has not been ignored by the industry by any means, and our Investor Intelligence online service currently tracks 572 LPs which currently have a preference for, or have previously invested in, Africa-focused private equity funds, equivalent to 11% of total investors tracked by Preqin. Specifically, of all the investors looking to actively make new commitments to private equity vehicles in 2014, 12% are interested in investing in Africa-focused funds, which is encouraging for the 105 fund managers that are currently on the road with 122 vehicles that include Africa in its investment focus. 

Pension funds are the most prevalent investor type among LPs targeting Africa-focused funds (30%), with public pension funds making up 17% and private sector pension funds making up 13% each. Foundations follow closely, comprising 13% of the investor corpus interested in the region. Insurance companies and endowments each account for 8% of the investors with a preference for, or that have previously committed to funds with exposure to, Africa, and government agencies represent 4%. One example of a government agency investing in Africa-focused funds is CDC Group, which recently committed $33.4mn to Atlantic Coast Regional Fund, a growth vehicle which will target West and Central Africa. 

In terms of location, over half (51%) of LPs interested in Africa-focused funds are based in North America, with a further quarter (25%) of LPs based in Europe. As the two most prominent and mature regions in the global private equity space, it is unsurprising that they are the most dominant forces in Africa-focused funds. These statistics also give clear indication of the international interest in Africa funds, with several institutional investors possessing an appetite to capitalize on the rising opportunities in the region.

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