CDC commits $40m to two SME-focused funds

The UK-government backed fund of funds has backed funds focused on Southeast and Central Asia. It expects the two funds to raise a total of $225m.

CDC Group, a UK government-backed emerging markets fund of funds, has committed $30 million to Kendall Court Mezzanine (Asia) Bristol Fund, and $10 million to Centras Private Equity Fund.

The Kendall Court Mezzanine (Asia) Bristol Fund, which is targeting $150 million, will focus on mezzanine, growth capital and buyouts in small to medium enterprises in Southeast Asia.

“Mezzanine financing fits the profile of the predominately family-run businesses in Asia,” said Brian Lim, CDC’s pan-Asia portfolio director.

The Centras Private Equity Fund plans to raise $75 million to invest in SMEs in Central Asia, mainly in the Republic of Kazakhstan.

“There are a very small number of equity players in Central Asia. So Centras is positioned to take advantage of privatisation programmes, prudent monetary and fiscal policies and legal and regulatory reforms benefitting many Central Asian countries,” said Innes Meek, CDC’s portfolio director.

Kendall Court was established in 2004 with a $90 million maiden fund. Founded in 2004, Centras Capital is an investment company in the Republic of Kazakhstan.

CDC’s outlook on investing in South Asia remains cautious as political and economic factors impact on confidence in the regions, specifically India, Pakistan and Bangladesh, according to Anubha Shrivastava, CDC’s Asia managing director.

In mid-2008, CDC restated its goal of helping the world’s poorest nation out of poverty by noting that in future it would focus on sub-Saharan Africa and South Asia, including India, Pakistan and Bangladesh.
At the time, it said it invested about 60 percent of its capital in African private equity funds, and 24 percent in Asia.

At the same time, it also committed $185 million to six India-focused private equity funds: Baring India Private Equity Fund III; New Silk Route Private Equity Asia Fund; India Value Fund III; and BTS India Private Equity Fund. These funds are expected to raise a total of more than $2.47 billion.

The government-owned fund of funds has net assets of £2.7 billion ($3.8 billion) and invests out of its own balance sheet in private equity funds focused on sub-Saharan Africa and the emerging markets of South Asia.