African Insights: minimising risk when investing in African-focused PE funds

Investing in African private equity funds is not a new phenomenon: development finance institutions (DFIs), such as UK based CDC Group, have been doing it for decades. However, institutional investors are finally recognising the opportunities that the continent affords.

As a result, some managers (for example, Helios Investment Partners and The Abraaj Group) are now raising significant African-focused funds in the region of $1bn.

In this article we consider a few issues likely to concern managers and investors when making an investment in an African-focused private equity fund:

  • environment, social and governance (ESG) considerations and business integrity;
  • political risk;
  • investment policy;
  • DFIs versus institutional investors;
  • establishing a new manager relationship;
  • deal flow;
  • currency risk; and
  • exit routes.