Impact funds set up by private equity powerhouses KKR, TPG and Bain Capital will be a boon for smaller emerging markets managers, according to the US government’s development finance institution.
“For all of us, the biggest problem we have as emerging markets managers is exit strategies,” Frank Dunlevy, vice-president, investment funds department at Overseas Private Investment Corporation said at the EMPEA Summit in London on Tuesday.
“Having the next layer of private equity from these larger funds with greater liquidity and the ability to purchase these companies that have been incubated by successful funds, that’s really the golden outcome for us.”
OPIC made a $125 million commitment this week to London-based Greater Pacific Capital’s $700 million fund that will finance small and medium-sized enterprises in India operating in the healthcare, energy, technology, agricultural and services sectors.
Runa Alam, co-founding partner and chief executive of pan-African private equity firm Development Partners International, also noted at the summit that larger funds coming into the impact investing market is positive.
“Whether it’s larger funds or Middle Eastern sovereign wealth funds, having another pool of money is never bad,” she said.
“In terms of competitive landscape there’s less private equity money in our world than there should be. Larger funds coming in will make it more competitive, but that’s what the private sector is about.”
For smaller impact managers, their advantage is local knowledge, while the larger shops have more capital and easier fundraising, which makes all players equally matched, Alam added.
DPI has raised two pan-African private equity funds to date: the $400 million 2008-vintage African Development Partners I and the $725 million 2013-vintage ADP II.
KKR registered its debut impact fund, KKR Global Impact Fund, in Luxembourg in February. The private equity giant is reportedly seeking $1 billion for the vehicle. TPG raised its $2 billion Rise Fund which it closed in October last year. Bain Capital raised $390 million for its Double Impact Fund last year while Goldman Sachs Asset Management has its Impact Private Equity Managers.
According to the 2018 Global Impact Investing Network Annual Survey, “suitable exit options” ranked third among significant challenges for impact investors. Respondents ranked “appropriate capital across the risk/return spectrum” as the biggest challenge, followed by a common understanding of definition and segmentation of the impact investing market.
PEI is holding its Global Impact Investing Network Investor Forum 2018 on 30-31 October at the Marriott Rive Gauche Hotel in Paris.