LP Attitudes towards African Private Equity – November 2015

by James Higuita

  • 23 Nov 2015
  • PE

Despite having a population of over one billion and an abundance of natural resources, Africa remains the poorest and least developed continent in the world. However, much of Africa is developing quickly and the continent is now capturing the attention of global investors.

Preqin’s Investor Intelligence database details 360 investors currently actively investing, or considering investing in Africa-focused private equity funds. Public pension funds account for 12% of these investors, closely followed by private sector pension funds (10%) and foundations (9%). With the African private equity market being relatively new, it comes as no surprise that 78% of these LPs have a preference for venture capital funds, followed by the larger fund types of growth (69%) and buyout vehicles (66%).

North America-based LPs account for 35% of all investors targeting Africa-focused funds. Europe-based LPs also play a significant role (27%), while Africa-based LPs account for just under a quarter (24%), three-quarters of which are based in Sub-Saharan Africa and only a quarter in North Africa. Breaking this down further, we see that within Africa there is a clear divide in LP preferences regarding which areas represent the best investment opportunities. Twenty-eight percent of LPs invest solely in North Africa, compared with 34% focusing on Sub-Saharan Africa, particularly the more advanced economies such as South Africa. The remaining 38% of investors have a general interest in the African continent as a whole.

Eighteen percent of the LPs surveyed for the Preqin Investor Outlook: Alternative Assets, H2 2015 report stated that Africa is currently presenting the best investment opportunities in emerging markets. This view is highlighted by looking at investors such as US-based International Finance Corporation, which has committed to over 60 Africa-focused funds. Of the top 10 investors in Africa in terms of number of funds invested in, the sole Africa-based LP is the African Development Bank; this demonstrates the extent to which Africa still relies on foreign investment in order to facilitate growth.

Preqin’s Funds in Market online service shows that over $5bn has been raised by Africa-focused funds in 2015 YTD, compared with $1.8bn in 2014. This upward trend has been significantly aided by the closure of Africa-focused growth fund Helios Investors III, which closed on $1.1bn. Many will be hoping that this upward trend in private equity fundraising will continue and fuel further growth and development in Africa. 

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