International Finance Corporation (IFC) and soverign wealth funds from Azerbaijan, the Netherlands, Saudi Arabia, and South Korea have joined to make equity investments in companies in Africa, Latin America, and the Caribbean, providing a new way to finance growth and jobs in the developing world.
IFC has committed up to $200m as a limited partner in the IFC African, Latin American, and Caribbean Fund. Other anchor investors in the fund, with total commitments of up to $600m are Dutch pension fund manager PGGM, Korea Investment Corporation, State Oil Fund of the Republic of Azerbaijan and a fund investor from Saudi Arabia.
The fund is part of IFC’s broader strategy to increase its commitment to Africa, Latin America, and the Caribbean and to mobilize third-party capital where it is needed most.
The fund will be managed by IFC Asset Management Company (AMC), a wholly owned subsidiary of IFC. This is AMC’s second fund under management, joining the $3bn IFC Capitalization Fund, which invests in systemically important banks in emerging markets.
Robert Zoellick, president at World Bank, said: “Pension and sovereign funds represent a significant savings pool that is seeking commercial returns and portfolio diversification. With this fund, we will demonstrate that developing countries have high-quality investment opportunities to attract commercial investors. The private sector will be crucial to a sustained recovery from the global economic crisis and for future growth.”
Lars Thunell, CEO and executive vice president at IFC, said “This fund is part of IFC’s strategy to address the increasing number of investment opportunities in frontier markets. With the launch of this fund we are providing equity co-investment opportunities to sovereign and pension fund investors for the first time. We are proud to work with these institutions, which share our vision of sustainable investment opportunities in these markets.”
Fons Lute, MD of alternative strategies at PGGM, said: “We are very pleased about this new partnership with IFC, which will give us greater access to frontier markets where we see a lot of potential for growth over the long term.”
The establishment of the IFC African, Latin American, and Caribbean Fund comes as net private capital flows to emerging markets have declined significantly since their peak in 2007. From the perspective of investors, investments in emerging markets, especially frontier markets, represent an asset class that can bring diversification and long-term capital-growth opportunities.