Laing to step down from CDC

In a ‘blow’ to African private equity, Richard Laing will quit the development-focused fund of funds in early 2012 after the completion of a government review of its activities.

Richard Laing, the long-standing chief executive officer of CDC Group, will step down from the role early next year after the government has completed its review of the group’s activities.

CDC is a development-focused fund of funds group owned by the UK government’s Department for International Development. It promotes economic growth in the world’s poorest nations by investing in private equity funds in these markets. As such, Laing has for 11 years helmed one of the most important LPs in emerging markets private equity; currently the group has $5 billion committed to private equity funds, predominantly in Africa and Southeast Asia.

Richard Laing

“Following the outcome of the current DFID consultation into CDC and the implications for the organisation in the future, we will embark on a process to appoint a new chief executive,” said Richard Gillingwater, CDC’s chairman, in a statement. Gillingwater went on to praise Laing’s 11-year contribution to making CDC an entirely self-funding development institution.

The government review that will ultimately lead to Laing’s retirement was initiated because CDC – along with an associated private equity GP Actis – has frequently been mired in doubts about how effective it is at using taxpayer’s money to alleviate poverty. Criticism of the organisation has been launched on the basis that – among other things – its activities enrich a relatively small number of individuals and, because it uses private equity fund structures, are tax efficient.

The ongoing government review will determine whether CDC should switch to provide more direct investments and more debt-related products to the world’s poorest nations. It will also cover executive pay and other organisational changes.

CDC has done a good job in African private equity and Richard has personally been very supportive

Stephen Dawson

Also under review is the ownership structure of Actis, the highly successful emerging markets GP that spun out from CDC in 2004. The emerging markets specialist is still 40 percent owned by the UK government’s Department for International Development, which had agreed to receive 80 percent of any future profits. Controversy has centred on the fact that, as a private equity firm, profits are minimal. Returns from successful investments flow back to the LPs and GPs – which include DfID-owned CDC – via distributions, while fee income is absorbed by the firm’s running costs.

“I am proud to have contributed, as part of a team, to CDC’s successes,” said Laing in a statement. “We have balanced commercial acumen with development needs, investing in pioneering products which benefit those countries and the people living there. It has been a fascinating time and an honour to have been chief executive of CDC for the last seven years.”

Stephen Dawson, private equity veteran and co-founder of African private equity initiative Jacana Venture Partnership, said Laing’s retirement would be a sad development for the growing private equity market in Africa.

“CDC has done a good job in African private equity and Richard has personally been very supportive, so it is a bit of a blow to the industry in the region,” said Dawson. Dawson’s Jacana partners with small African private equity shops to develop and grow their activities.

Laing added that his future plans are to fill a number of non-executive positions.