Abraaj closes Turkey fund above target

Despite an onslaught of challenges, the emerging markets specialist has raised $526 million for its debut Turkey-dedicated vehicle.

The Abraaj Group has raised $526 million to invest in Turkey, according to a statement from the firm.

Abraaj closed its debut Turkey-dedicated fund on $486 million, with a further $40 million raised for co-investment. The vehicle, which came to market in 2014, had a target of $500 million.

In the statement, the firm said the Abraaj Turkey Fund I received support from “a diverse range of new and existing investors”. Of the committed capital, 70 percent came from European and North American investors, and institutional investors and sovereign wealth funds accounted for 78 percent of the capital.

Investors in Abraaj Turkey Fund I (ATF I) include the European Bank for Reconstruction and Development (EBRD), which committed €75 million, and the European Investment Fund, according to PEI Research & Analytics. The International Finance Corporation (IFC), part of the World Bank, has committed up to $50 million to the vehicle.

The fund is targeting medium-sized businesses, focusing on sectors set to benefit from growing domestic consumption, such as consumer goods and services, healthcare, financial services, logistics and retail.

ATF I has already made two investments. In February 2015 the firm acquired a minority stake in Turkish e-commerce business Hepsiburada. Financial details of the transaction were not disclosed, but a market source indicated that the group acquired a 25 percent stake in the business for around $100 million, as reported by PEI.

Last month Abraaj acquired a 9.95 percent stake in Turkish bank Fibabanka, which focuses on commercial, corporate and SME customer segments. EBRD and IFC are already shareholders in the bank.

Other investments for the firm in Turkey include Yu-Ce Medical, a medical gauze and sponge producer, in which it invested in August 2015, and Turkish dairy producer Yörsan Group, in which it acquired a majority stake alongside the EBRD and the founding Yörük family in January 2014.

Abraaj’s successful fundraising comes despite an onslaught of macro challenges that the Turkish market has faced in recent months, including concerns over domestic terrorism, the conflict in neighbouring Syria, and issues relating to governance and freedom of speech.

Turkey is struggling to meet the conditions for its citizens to be granted visa-free travel to the EU, and has also been grappling with a drop in the Turkish lira, which slid 20 percent against the dollar last year, the most since 2008 according to Bloomberg.

Abraaj is the first firm to successfully raise capital for Turkey since 2014, when just one fund – UNLU & Co II – raised $110 million. In 2013 three funds raised a combined $1.26 billion, of which $1.04 billion was for Turkey-headquartered Actera Partners II, according to data from PEI Research & Analytics

Abraaj founder and chief executive Arif Naqvi said the fund reflects the firm’s “strong conviction on the Turkish economy and the attractive investment opportunities available”.

“Turkey is on track to become one of the 15 largest economies in the world by 2030, driven by a young population, a growing and aspirational middle class, and a vibrant entrepreneurial culture,” he said in the statement. “We have long recognized the Turkish consumer as a reliable source of investment returns, having generated over US$ 800 million in exit proceeds to date.”

Selçuk Yorgancioglu, partner and regional head of Turkey and Central Asia, added that the Turkish market “remains underserved by private equity” and therefore offers “clear opportunities to provide smart capital to drive expansion among well-managed companies with the capability to become market leaders”.