Capitalworks, a South-African based asset manager, has held a R2.7bn hard-cap (€210m, $270m) final close on its Private Equity Fund II.
The firm, which came to market in the first quarter, needed just six months to complete its fundraising, according to a statement. The firm held an undisclosed first close last month.
The fund was oversubscribed. “All our key investors re-upped”, Chad Smart, co-founder and chairman of Capitalworks, told Private Equity International. He declined to give the specific number but said the re-up rate was “very significant”.
The majority of the investors came from overseas, from both the US and Europe, Smart said. “We have quite a broad range of investors, both local and international, [including]: fund of funds, pension funds, family offices, insurance companies and some charities. It’s a very broad base [of] high quality investors,” he said.
This is a shift from the firm’s previous fund, when the majority of LPs came from South Africa, he added. “The real growth in our investor base came from the international [LPs]. It wasn’t from the pension funds.”
We really haven’t seen an uptick from the local pension funds yet. Year by year, that appetite, sophistication and interest in private equity is growing but it’s not a single shift in a single period
Due to regulatory changes, local African pension funds have started to look at private equity. In South Africa for example, as a result of regulation 28 [a law that came into force in 2011], investors can commit up to 20 percent in private equity up from 2.5 percent. Nigerian pension funds are also slowly able to invest in the asset class.
However, this hasn’t materialised yet in more commitments, Smart said. “We really haven’t seen an uptick from the local pension funds yet. Year by year, that appetite, sophistication and interest in private equity is growing but it’s not a single shift in a single period. I think it will happen gradually over the next five years.”
The firm’s fund was placed by London-based Asante Capital Group. The performance of the prior fund is unclear.
Capitalworks, a generalist firm, will invest its Private Equity Fund II in the South African mid-market, targeting investments in healthcare, education, financial services and consumer goods. The firm’s existing portfolio comprises investments in the consumer food, building materials, affordable housing, recycling, healthcare and mining services. The firm will be invested in three to five years.
While the firm will spend the majority of its capital in South Africa, it can actually invest a minority of its fund in Sub Saharan Africa, but Smart stressed the firm “ideally would invest through a South African company”.
“The Sub Saharan growth opportunity is quite exciting. We do see a lot of future growth and future returns coming out of South African businesses expanding their foot print or developing business opportunities into Sub Saharan Africa,” he added.
Following the current fundraise, the alternative asset manager’s assets under management have reached over R5 billion.
Look out for PEI’s Africa Special in September, where we will take an in depth look at the latest developments on the continent.