Invest AD is to form a financial management company with the Japanese conglomerate SBI Holdings to invest in Africa, beginning with a US$100 million (Dh367.3m) fund. The fund will focus on Nigeria, Ghana, Kenya, Egypt, Tunisia and Morocco, with investments in areas including banking, mining, consumer products, manufacturing, listed equities, initial public offerings (IPOs), and pre-IPO and unlisted equity.
Invest AD and SBI Holdings will contribute equally to the fund. Three more funds of at least $100m are expected to be launched over the next five years or so, involving a bigger proportion of third-party investment. "We're delighted to be the strategic partner and the eyes and ears for SBI Holdings in Africa, a continent of great opportunity," said Nazem Fawwaz al Kudsi, the Invest AD chief executive.
"Fundamentals in the region are strong. There is improved stability, and we see immense future wealth potential - not only as a supplier of raw materials, but also in the growth of consumerism and in manufacturing bases." Foreign investors are increasingly examining opportunities in Africa as fast-growing populations, ambitious infrastructure projects and improved financial regulations offer higher investment returns than in developed markets.
David Sanders, the chief investment officer of Invest AD's asset management business, has helped the company build extensive links in Asia. In May, Invest AD, which is owned by the Abu Dhabi Government, entered a partnership with the Hong Kong-listed financial company Quam to offer Asian investors access to Middle East stocks. Under its previous name, Abu Dhabi Investment Company, the firm signed deals with the Korea Development Bank and the Korea Trade-Investment Promotion Agency to increase investment flows between South Korea and the MENA region.
The venture with SBI Holdings is not Invest AD's first involvement in Africa. In April last year, it launched an emerging Africa-listed equities fund, primarily focused on companies across 10 countries including Tunisia, Zambia, Egypt and South Africa. The $378m fund provides average annualised returns of 10.5 per cent. In the year to date, its rate of return has been 9 per cent. But Invest AD's latest venture will also invest in non-listed companies.
"Africa is a market we believe in, and this company is a logistical extension of our existing fund," Mr Sanders said. "The fund will be a hybrid structure to take advantage of firms that are not listed and may be willing to sell some of their equity but want a long-term partner." For its part, the Tokyo-listed SBI has formed partnerships to invest in frontier and emerging markets, including with Singapore's Temasek Holdings, the Brunei ministry of finance, Russia's IFC Metropol and Brazil's Jardim Botanico Investimentos.
"We're looking to expand SBI Group's asset management activities across the world through collaboration with strong partners," said Yoshitaka Kitao, the representative director and chief executive of SBI Holdings. "Invest AD's focus, expertise and track record will undoubtedly place us in a strong position as we seek to make the most of African opportunities." Invest AD has several hundred million dollars' of assets under management through its third-party asset management business. It also acts as a proprietary investor for the Abu Dhabi Government.