UK government-backed fund of funds CDC Group has recorded a £207m (€234 million; $318 million) profit for the year 2009. The profit has led to a rise in net assets to £2.5 billion from from £2.33 billion in 2008.
The increase in net assets over 2009 follows the group’s first ever annual decline in net asset value for seven years in 2008, when CDC saw a 13 percent drop in the value of its portfolio.
CDC generated £162 million in cash from its portfolio in 2009 and this sum will be used for future re-investment in developing countries.
“These are positive results which show that despite the tough conditions caused by the global downturn, the companies in which CDC has a stake are performing well,” Richard Laing, chief executive of CDC said in a statement.
Through the course of 2009, CDC invested a total of £359 million in businesses in developing countries. Sixty one percent of this amount was invested in Africa and 34 percent in Asia. This included a commitment of £207 million to 11 new funds.
Last year, like many other LPs we were working through our capital constraints. This year, things are looking positive for the market as a whole.
In 2009, CDC invested a total of £219 million in African businesses, making it the largest private equity investor in sub-Saharan Africa. Of this sum, the firm committed £142 million to five new Africa-focused funds, including the first ever private equity fund in Sierra Leone. CDC’s investments over 2009 have increased the value of its portfolio of African businesses to £731 million.
On the other hand, CDC invested a total of £122 million across Asia, thus increasing the value of its Asian portfolio to £607 million. Its investments in Asia included a commitment of £55 million to four new private equity funds.
“We will see an increase in our commitments to Asian private equity funds this year. Last year, like many other LPs we were working through our capital constraints. This year, things are looking positive for the market as a whole,” said Anubha Shrivastava, a managing director and head of the Asian portfolio at CDC Group.
“Furthermore, this year, we are seeing many good funds in the market, so we are looking at a larger commitment,” she said.
CDC, which believes in backing first time funds in order to develop a sound investment infrastructure in emerging markets, is seeing an impressive breed of new first time managers in 2010. First time fund managers in the region have “clear cut, well thought out strategies for their funds” and “they are coming to us with credible propositions and term sheets that are in keeping with global best practices,” Shrivastava added.
CDC is now invested in 134 funds with 65 fund managers and has more than £1.5 billion of commitments still available to be drawn down by these funds, Laing said, adding that the profits will be recycled into these new investments.
During the last five years CDC has invested more than £1.5 billion and its capital now backs nearly 800 sustainable private sector businesses which support the lives of more than 3 million people and pay at least $3 billion of taxes each year to their own governments.
“This powerfully demonstrates the strong developmental effect of the private sector improving people’s lives in the poorest countries of the world,” Laing said.
The year 2009 marked the beginning of CDC’s five-year investment policy according to which it will make more than 75 percent of its investments in low income countries with per capital gross national income of less than $905, and more than 50 percent of new investments in sub-Saharan Africa.