Side Letter: Why are GPs in Africa feeling optimistic?

Why are GPs in Africa so optimistic about the fight against covid-19? Plus: Apollo spin-out gathers commitments, GPs get better at recycling and BC Partners' ADIA hire. Here’s today's brief, for our valued subscribers only.

He said it

“Certainly, content is essential, but more than anything, the opportunity to spend time with an entire organisation even for just a few hours or days, is mission critical to our ability to make decisions on who to invest with or not.”

Matt Curtolo, director of private equity at Metlife Investments, makes the case in a blog post for a return to “business as usual” to mean a return to in-person annual meetings.

Just happened

Africa’s optimism

GPs in Africa are relatively optimistic about the impact of covid-19 on their investments, according to a survey by the African Private Equity and Venture Capital Association. Carmela Mendoza found out why:

– Businesses tend to be defensive-minded. “For instance, it sometimes takes longer to import things into African countries, which means all our companies keep much more stock, not just-in-time. Most of our companies have three months or more of inventory,” says Runa Alam, co-founder and chief executive of pan-African firm Development Partners International.

– DFIs dominate the investor base. Development finance institutions – often government-owned entities are safe and steady investors. They can also get hands on when needed. Ann Wyman, a director at AfricInvest, tells PEI her firm is working with several DFIs on creating a relief facility to assist companies in the face of the crisis and their role is proving “exceptionally important”.

– Sector choices are covid-19 resilient. According to Alam, many of DPI’s companies have been put in the “essential or emergency services” designation, meaning these companies are continuing their operation during the lockdown periods, including those in pharmaceuticals, food production and education.

Cometh the hour…

Fundraising rumbles on for some strategies despite (or perhaps because of) the global pandemic. One of those is distressed and special sits, as evidenced by London-headquartered Intriva Capital’s sophomore fund. Founded by two ex-Apollo Global Management execs in 2016, the firm has held a first close on about one-third of the €300 million target for its latest fund, which will invest in small and mid-market companies experiencing distress. Details here.

ADIAos

BC Partners has tapped the former head of healthcare at Abu Dhabi Investment Authority as a partner. Pascal Heberling will lead the buyout firm’s healthcare investments in Europe, particularly in Germany and France, the firm said today. Heberling has almost two decades’ industry experience and counts the $10.2 billion acquisition of Nestlé Skin Health (now Galderma) as one of his largest deals. Prior to ADIA he was a partner at Cinven and worked on deals including hospital operator Spire Healthcare and academic publisher Springer Science.

Essentials

You recycle? More GPs are doing so as a way of getting capital for existing portfolio companies, according to reporting by sister title Buyouts‘ Chris Witkowsky. If you can alter the fund docs to allow it, it is the simplest way of freeing up some capital, but comes with an obvious downside for LPs: “The negative comes back to cashflow. You want to recycle, but I wanted that to be my [money] to keep,” one family office LP says.

Teachers’ battle plan. What’s going through the mind of a public pension CIO at the moment? Buyouts‘ Justin Mitchell gives us a peek with a report from Teacher Retirement System of Texas April meeting. Some highlights:

– At this stage CIO Jase Auby was (understandably) unable to be specific about how the private markets portfolio would reflect the public markets volatilty. “The time horizon at which they are reflected can be a number of quarters, sometimes as long as a year to reflect and so … it is possible that some of those assets might not in fact mark down due to the crisis, but others will.”

– The pension is following its “battle plan” as outlined in December: reducing equities and identifying strategies that can be “upsized to take advantage of dislocations”.

– The pension has done $7 billion of “rebalance trades” as it actively tries to remain within proper benchmarks. Most of those trades were in public equities and bond markets.

Dig deeper

Fund name: Asia Food Brands Private Equity Joint Venture
Amount raised: $275 million
Target size: $500 million
Stage of fundraising: First close
First close date: April 2020

Investcorp has held a first close on Asia Food Brands Private Equity Joint Venture on $275 million. The vehicle is a joint venture with food distributor China Resources and Fung Strategic Holdings, part of Fung Investments. It will target the branded condiments, packaged foods and healthy snacks sectors in Asia.

For more information on Investcorp, as well as more than 5,900 other institutions, check out the PEI database.


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Today’s letter was prepared by Toby MitchenallIsobel MarkhamAdam LeCarmela Mendoza and Alex Lynn.


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