Sharper Focus

Facing criticism it has become too “financially focused”, government-owned CDC group will be undergoing yet another round of consultation over its investment policy.

CDC group’s renewed focus on less developed emerging markets began two years ago when the UK government revamped its investment strategy back in November of 2008.

Facing criticism it had become too commercially focused, CDC was given new guidelines to focus on the world’s poorest nations. Formerly the fund invested up to 70 percent in countries with a lower gross national income (GNI) per head than $1750. That figure has been revised to 75 percent in countries with per capita GNI of $905 or less.

The modified investment target meant CDC would reduce its exposure to Latin America and China, for example, and increase its stakes in struggling nations in Sub-Sahara Africa and South Asia, including India, Bangladesh, Nigeria and Kenya for example.

Currently the group is facing another review encompassing investment strategy, executive pay and other organisational changes. CDC is still too “financially focused”, and must balance its ability to generate stable returns while still providing development to emerging markets most in need of capital, argued the Secretary of State for International Development, Andrew Mitchell, in October. 

As a result, Mitchell is proposing the group reduce commitments to third party funds and begin increasing direct and co-investments into markets typically ignored by private sector counterparts. In one of his more significant proposals, as a way of recycling capital more quickly to new investments, Mitchell said the group should also be allowed to borrow capital. A public review is ongoing until the end of January 2011.