Helios Investment Partners announced on Monday that its third Africa-focused investment fund has raised $1 billion, marking the first time the region has attracted funds at that scale. The Helios Investors III broke the previous its previous record of fundraising in the region, showing once again that private equity is attracted to the region.
The Fund’s Aim
The firm released a statement on Monday saying the fund’s main objective is to “acquire and build market-leading, diversified platform companies, operating in the core economic sectors of the key African countries, with an emphasis on portfolio operations as a creator of value”, building up on the fund’s first investment in ARM Pension Managers PFA last year.
The firm’s investment in the Nigerian pension fund management company is not known, although Pension & Investments said the amount is likely to stand near $50 million.
According to CP Africa, the $1 billion is mainly raised from existing investors, with 60% coming from previous stakeholders. The investors include, among others, corporate and public pension funds, sovereign wealth fund, as well as development finance institution across Europe, Asia, Africa and the US.
The Region’s Biggest Funds
Monday’s announcement meant that an Africa-focused fund has now been able to pass the $1 billion barrier for the first time. Helios Investment Partners, founded by Nigerian expats in the UK in 2004, has been successful with its previous funds as well, raising a record-breaking $908 million with its previous fund.
Furthermore, the big private equity firms have also been active in fundraising money for the region’s investments. Carlyle fundraised $700 million in 2014 and KKR and Blackstone have shown plenty of interest in the region. On top of this, Sir Bob Geldof’s 2012 fund, 8 Miles, raised $200 million.
Attractive Possibilities for Growth
Helios Investment Partners said in the statement how, “Africa-specific factors, including economic liberalization, increasing technology-driven productivity, demographic dynamics and urbanization are driving growth and creating attractive investment opportunities”.
The region’s financial institutions have also been maturing, especially in South Africa, Nigeria and Morocco, and the growth prospects are luring in private equity. Helios Investment Partners’ co-founder, Tope Lawani, was quoted in Venture Burn saying, “The size of the capital raising and the participation of pension funds and sovereign wealth funds is a sign that private equity in Africa is maturing”.
Gross domestic product per capita in the region has also been increasing, rising nearly 40% since 2002.
Some Experts Remain Concerned
But not everyone is as optimistic about the region’s prospects for private equity. The financial institutions remain largely immature, causing concern for suitable exit strategies for firms.
This is combined with the current drop in commodity prices and according to the Financial Times, “countries brace for the impact on capital flows of an anticipated increase in US interest rate”.
Yet, for Helios Investment Partners the region offers more opportunities and the firm believes the declining asset prices can provide lucrative opportunities for investors. Furthermore, it is more than likely that other private equity firms keep an eye on the region in 2015.