Abraaj Group’s $1.4bn Funds Shows Strength in African Private Equity


August 25, 2015


Abraaj Group announced big news at the start of the week, as it closed its latest private equity fund. The North Africa focused fund managed to raise $375 million in investments. Together with its previous sub-Saharan focused fund, closed in April, Abraaj Group is set to invest nearly $1.4 billion more in the continent.


The Newest Fund


The Dubai-based buyout firm announced the closing of the fund in an e-mailed statement on Monday. The North Africa focused fund managed to raise $375 million and it is set to invest in mid-market businesses in the region. The focus will be on countries such as Algeria and Tunisia, with the industry focus ranging from healthcare and education to consumer goods and logistics.


Arif Naqvi, the founder and chief executive officer of the firm, said in the statement, “The successful closing of our second generation North Africa fund demonstrates the continued optimism and belief of our investors in the economic growth and development of this dynamic region”.


Investors from Europe and North America provided around 63% of the equity. Investors included global institutional investors, pension funds as well as sovereign wealth funds.


The fund has already started investing, making six investments in North Africa so far. One of these includes a much-reported investment in a hospital group, which will be rolled out in the region later on.


Strong Interest


The firm closed its previous fund earlier in April. The fund, which managed to raise $990 million, will also focus on the continent, but will invest in businesses in the sub-Saharan countries.


Together the two funds mean the private equity firm managed to raise nearly $1.4 billion with Africa-focused funds, a record-breaking amount for a single year. Abraaj Group’s rival, Helios Investment Partners, completes the story with its over $1 billion fund closed earlier this year.


The continent’s growing middle classes are providing new investment opportunities, as consumer growth has seen strong gains. African markets are currently offering higher return opportunities to what is an offer in the saturated buyout markets of the US and Europe.


Risk Factors Remain


But the region’s investment opportunities naturally don’t come without risks. Many analysts are currently concerned about the collapsing commodity prices and what effect this will have for African currencies and therefore private equity investors.


The Financial Times reported Abraaj Group’s partner, Mustafa Abdel-Wadood, pointing out that volatility in currencies is something the firm is including in their discussion. Abdel-Wadood went on to add, “This is not the first time these markets have faced currency issues. Over the lifetime of an investment, this can be absorbed by the underlying growth of the business.”


EY report in July on private equity industry outlook for Africa in 2015 also noted how viable exit strategies remain a key issue to overcome for investors. The good news is that the report saw an increase of 38% in disclosed exits in sub-Saharan Africa in 2014, which was at an eight-year high.


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