The European Bank for Reconstruction and Development is set to hit €10 billion in private market investments this year.
The London-headquartered development finance institution is on course to hit the milestone in public sector and private markets projects this year, Anne Fossemalle, director for equity funds at EBRD told Private Equity International. The DFI invested €9.5 billion across 375 public and private markets projects last year.
Fossemalle declined to comment on how much of the €10 billion will be invested in private equity.
“We want to do as much as possible in the traditional circumspect, reasonable and careful way how we always invest. But how much we will eventually be able to do, only time will tell,” she said.
The EBRD is preparing its next business planning cycle from 2021 to 2025 and may decide as early as next year whether it should expand investments into several sub-Saharan African countries from 2021, Fossemalle said.
According to industry body EMPEA’s The Road Ahead for African Private Equity report, GPs investing across Africa are “adopting new approaches to value creation in order to adapt to tenuous economic conditions, volatile currencies and increasingly competitive deal origination”.
Sub-Saharan Africa ranked fifth among the most attractive emerging markets for GP investments in EMPEA’s 2018 Global Limited Partner Survey. Managers include The Carlyle Group, which launched a fund in 2011 dedicated to the region; Leapfrog Investments and pan-African manager Development Partners International.
Despite its name, Fossemalle highlighted that EBRD is not a European entity and has overseas shareholders in the US, Japan, China, India, Australia and Mexico, among others. The DFI is investing in Europe, Africa and Asia, covering almost 40 economies.
EBRD’s most recent private equity commitments include $50 million to Almaz Capital Fund III, €10 million to Invera Private Equity Fund and €30 million in Evolving Europe Principal Investments I, according to PEI data. It also backed the third fund of Ukraine-focused manager Horizon Capital.
The EBRD was established in 1991 to promote the development of Central and Eastern Europe, Russia, the ex-Soviet Union and Central Asia. Over time it has expanded to Mongolia, Turkey, Egypt, Jordan, Morocco, Tunisia, Greece, Cyprus, Lebanon, the West Bank and Gaza. It started investing in private equity funds in 1992, committing between €150 million and €250 million in private equity funds each year, according to PEI data.
Fossemalle noted that nearly half of EBRD’s fund commitments are managed by first-time fund managers.
“A commercial investor might not be able to look at a first-time fund in south-eastern Europe but we can and have that risk appetite. We try to find players who work in accordance with best market practices, with a developed team that understands the terms of the fund and that has a strategy that makes sense in terms of the region or sector in which it operates.”
The EBRD is the largest private equity investor in Central and Eastern Europe, and seeding fund managers in difficult geographies such as CEE is work that takes a lot of time, Fossemalle said.
“These hard-to-access markets do offer amazing opportunities,” she said. “In the last few years, there has been a broadening and deepening of private equity in the region. In addition, it’s starting to be more specialised with the emergence of sector-specific investment strategies,” Fossemalle said.
“It’s a labour of love,” she added.