CDC books first loss in 7 years

The UK government’s vehicle for promoting economic growth in the developing world recorded a 13% decline in the value of its portfolio in 2008, but it outperformed its nearest benchmark – the MSCI Emerging Markets Index – by 22%.

CDC Group, a London-based developing markets fund of funds, has recorded its first annual decline in net asset value for seven years. The UK government-owned investor saw a 13 percent drop in the value of its portfolio, which at its latest valuation is worth £2.33 billion (€2.64 billion; $3.45 billion).

The group released its 2008 results this morning. Despite the decline in net asset value, the group’s portfolio outperformed its most important benchmark, the MSCI Emerging Markets Index by 22 percent, said chief executive Richard Laing.

“The upheaval in emerging economies’ stock exchanges and falling company valuations has had an impact on the value of the portfolio,” said Laing. “However, CDC is a long-term investor and most of the funds that we invest in have a 10-year life. We are therefore able to look beyond short term fluctuations in value.”

Last year the group invested a record £436 million in developing markets. In 2008, its mandate was revised so that it makes 75 percent of its investments in low income countries, particularly in Sub-Saharan Africa and South Asia, as part of its mission to alleviate poverty by stimulating economic growth and encouraging third party capital investment.

CDC, which has historically made most of its commitments to private equity funds in developing markets, is in “early stage” talks with the fund management arms of two Sub-Saharan African banks to create debt funds that would plug the financing gap for small- and medium-sized businesses in the region, as PEO reported yesterday.