Wednesday, February 18, 2009

Raising A Fund Of Funds, In Africa

By Daniel Hausmann [Wall Street Journal]

Henshaw Capital Partners co-founder Barbara James is trying to raise $300 million for her firm’s first Africa-focused fund of funds. That may prove difficult in the current risk-adverse climate, but the former head of the African Venture Capital Association thinks she can do it. We asked her about the firm’s strategy.

Q: With a lot of traditional investors maxed out or nearly so, what sorts of limited partners are you targeting?

The international and African institutions because they are not investing in the asset class as much as they should. These investors only have 5% allocated to the class. Historically it was the development finance institutions who invested in Africa. We think it’s time to transition from that.

Q: How do you sell risk-adverse institutions on investing in Africa?

I don’t. Our intention will be people who have already overcome the various barriers within their organization. The people who will commit to us have come to the realization that they need to invest in Africa. One (prospective) limited partner we’re talking to is a banking corporation in South Africa that doesn’t have exposure to the rest of Africa. They recognize, in terms of growth, that there is little headroom in South Africa. The future growth will come from the rest of Africa. Other institutions want to re-allocate and rebalance their portfolio to get an allocation to Africa. This period of financial crisis really will make LPs look at their allocation for increased diversification. And Africa will benefit.

Q: You’ve said there are 47 funds looking to raise $14 billion this year in Africa. As a fund of funds, you’ll have to pick and choose among them. How do you identify the winners?

The key differentiator is the team, the background and the vision of the team - what they have done in the past and their exposure to Africa. We are keen on getting a good composition of regional funds and country funds. We look at their historic funds and successes. We look closely at team retention.