Fund-of-funds seeks to back African PE firms; announces first close

Posted on: 8 July, 2020 at 9:50 AM

The SDG Frontier Fund reached its first close at €25.3 million thanks to the participation of nine Belgian private investors together with BIO, the Belgian Investment Company for Developing Countries. The SDG Frontier Fund (referring to the Sustainable Development Goals of the United Nations), targets to reach €50 million in subsequent closings. Its goal is to generate an attractive financial return combined with a high development impact.

The SDG Frontier Fund is a self-managed co-investment vehicle which seeks to invest together with BIO in private equity funds active in Africa and Asia. The fund will capitalise on BIO’s extensive expertise in the field since 2001, while benefiting from its services at middle and back office level.

The SDG Frontier Fund looks to participate in 5 to 12 funds, which in turn will invest in 10 to 15 local small and medium-sized enterprises (SMEs). This means that 50 to 180 SMEs in Africa and Asia will benefit from the fund’s support. The ambition is to combine a high development impact with an attractive financial return, at the same time as carefully managing the risk, as demonstrated by BIO’s historical performance. This first-of-its-kind investment fund in Belgium offers a uniquely counter cyclical opportunity to diversify an investor’s portfolio.

The SDG Frontier Fund already approved its first two investments:

African Rivers Fund III

The African Rivers Fund III is a mezzanine fund that aims at providing growth capital to approximately 35 SMEs in the Democratic Republic of Congo, Uganda and Angola, where the availability of SME finance is limited. It wishes thereby to achieve sustainable economic development by encouraging entrepreneurship in these fast-growing markets, and by creating a local manufacturing, services and agricultural base to provide Central African economies with locally produced goods and services.

Excelsior Capital Vietnam Private Equity Fund

The Excelsior Capital Vietnam Private Equity Fund will support established Vietnamese SMEs active in different sectors in their growth, thereby taking advantage of the ongoing regional economic integration and meeting the needs of Vietnam’s growing middle class.

Currently, advanced discussions are taking place to invest in a third private equity fund in India with a specific focus on clean energy and energy efficiency.

In its first closing, the SDG Frontier Fund has partnered with nine institutional and private investors, including AG Insurance, Belfius Insurance, King Baudouin Foundation, Volksvermogen, vdk bank, several family offices, and BIO.

The SDG Frontier Fund looks forward to welcoming new private investors in its subsequent closings.

SDG Frontier Fund and Covid-19

Businesses in Africa and Asia have been severely hit by the Covid-19 crisis. The lockdowns and the cessation of economic activities are having a significant impact on SMEs. Emerging markets will likely be further affected by an expected decline of foreign direct investments. In this respect, many SMEs in Africa and Asia will be in need for capital to survive the crisis, which will unlock opportunities to make long-term investments with appealing long-term returns and unprecedented development impact.

It should be highlighted that after the recent completion of its first closing, the SDG Frontier Fund will exclusively invest in selected funds that are in their startup phase. These funds will have the means to invest in quality companies in need of funding, and as such will accomplish both a positive economical and developmental impact in these current turbulent times.

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