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OPIC calls for $400m for emerging market funds

The US development finance institution wants to engage private equity firms with expertise in debt to help fill a gap in lending for deal activity in developing economies.

The Overseas Private Investment Corporation, a US government development finance institution, has issued a $400 million call for proposals from private equity funds specialising in equity, debt, mezzanine, fund of funds and hybrid fund strategies in emerging markets.

OPIC’s wide ranging request, announced last week, is targeting funds seeking to invest in Africa, Asia, Latin America, the Middle East as well as Central and Eastern Europe. Private equity advisor Altius Associates will assist OPIC in evaluating the proposals.

OPIC will consider providing financing of between $35 million and $150 million for each fund selected, according to the agency’s website. OPIC typically commits one-third of a fund’s capital target in debt financing. Fund managers are responsible for finding the remaining two-thirds from other limited partners.

Selected funds are expected to be approved by OPIC’s board in June 2012.

While the agency is expected to engage a broad selection of strategies and geographies, this marks only the second time that OPIC has actively called for funds of funds or debt funds, according to head of investment funds Jay Koh.

“We’ve supported the development of private equity across a number of geographies in the past,” Koh said. “[But] in many cases, you don’t have the range of debt financing or bank lending in many of these markets.”

As of 30 September, OPIC had committed to only a handful of funds with a specified mezzanine or debt strategy, according to its contact list of fund managers. While equity remains the primary source of capital for businesses in emerging markets, limited access to debt financing has stifled growth and presents a new opportunity for fund managers, Koh said.

Last month, OPIC provided financing of up to $285 million to six impact investment funds geared toward projects that will “improve lives, create employment, enhance health care, protect forests and address climate change”, the agency said in a statement.

OPIC was established by the US government in 1971. The agency has supported around $200 billion of investments, according to a statement.