UK government-backed development finance institution (DFI) CDC Group is making a transformation to its investment strategy in a bid to become a “more flexible, transparent and distinctive development finance institution”.
According to a statement, the firm will now exclusively make direct investments, debt investments and guarantees in low and lower-middle income countries in South Asia and sub-Saharan Africa, where investment capital is scarce.
A spokesman from the firm told PE Asia that direct investing offered several distinct advantages over CDC’s original fund of funds model.
“Direct investment can allow greater control of our allocation of capital and gives us an opportunity to more accurately target certain sectors and some of the frontier economies we’re keen to reach. To begin with, direct investments will be made in conjunction with CDC partner organisations such as fund managers, other DFIs and possibly alongside companies. CDC will build up its own direct investment expertise over time,” the spokesman said.
The spokesman noted that the firm will aim for direct investment to represent up to 20 percent of the organisation’s total portfolio by 2015, but that “at the moment we’re starting from a very low level with around 2.5 percent of our portfolio given over to co-investment”.
In addition, the firm also intends to improve environmental, social and governance standards in its portfolio companies.
In February, the firm lost its CEO of 11 years, Richard Laing, following a government review on the group’s efficacy. The government review had set out to determine whether CDC should switch to provide more direct investments and more debt-related products to the world’s poorest nations, in addition to also addressing executive pay and other organisational changes.