African attractions

Africa has witnessed a spate of fund closes that suggest faith in the region’s private equity opportunity – far from being diminished by the global finance crisis – is as strong as ever. Several firms have already capitalised on this positive investor sentiment, while others, such as Sub Saharan stalwarts Brait and Ethos, are now looking to do the same.

South African investment firm Brait is currently understood to be considering a target of around $700 million for Fund V – a little less than the $880 million Fund IV which closed in 2005. Brait declined to comment on its fundraising situation, but market sources say the firm has already commenced fundraising from its local South African institutions and has held a first close on approximately $100 million. Typically Brait raises one fund locally to demonstrate the confidence of South African investors, and subsequently raises another international vehicle. These two vehicles then invest pro-rata alongside each other. Previous Brait funds have attracted capital from international limited partners such as the New York State Common Retirement Fund in the US and the Pennsylvania Public School Employees’ Retirement System.

Ethos, a compatriot of Brait’s, is currently braving the fundraising trail for its sixth fund, as exclusively revealed by PrivateEquityOnline.com in December. A spokeswoman for the firm confirmed at the time that it would seek to raise a similar amount to its $750 million 2006 vehicle, but declined to name a specific fund target. Ethos had originally plotted to commence fundraising for a larger vehicle in 2008, but had to revise its plans amid the global financial crisis.

The return of these two “big beasts” of Sub Saharan private equity to the fundraising market signals renewed confidence among those wishing to raise capital to invest across the continent. This confidence has certainly been enhanced by a series of strong fund closes by managers which focus on African private equity.

The most recent firm to close a fund was Kingdom Zephyr Africa Management in February. The firm only narrowly missed the $500 million target for its second pan-African fund, raising $492 million. The fund dwarfed its $122.5 million 2003 predecessor.

Aureos Capital closed close to its original target for the Aureos Africa Fund, which will make investments across the continent in small- and medium-sized businesses. The firm corralled $381.1 million, just below its $400 million target. A slow first nine months of 2009 meant the process was extended by six months, says Brigit van Dijk- Van de Reijt, a partner at the firm, but the final quarter brought a pick-up in investor confidence and a “definite renewed interest”.

Helios Investments is currently in the process of raising its second fund, with a target of $650 million. The firm has garnered around $300 million thus far and hopes to close on up to $650 million by the end of the first quarter. Tope Lawani, managing partner at the firm, is confident that those investors which were “willing but not able” during 2009 are now returning to the market: “In many cases institutions have either solved the problems they had, or reconciled themselves to them, and decided that in the current environment, which appears to be the best investment environment we have seen for many years, now is certainly the time to make space for new investments rather than be preoccupied with old wounds.”