African Insights: minimising risk when investing in African-focused private equity 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;
  structure;
• deal flow;
• currency risk; and
• exit routes.

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