Futuregrowth Asset Management, which oversees about R193bn, is launching a high-growth development equity fund, which will target investments in early-stage businesses that are expected to have a strong developmental impact.
The Futuregrowth High Growth Development Equity Fund (HGDEF) will form part of the firm’s suite of developmental investment funds, which span a range of impact areas such as infrastructure, social services, clean power, agriculture and regional development. The fund will target venture capital to early-stage private equity investments and will sit alongside the Futuregrowth Development Equity Fund (DEF), which has a 16-year track record of investing in developmental unlisted equity.
Futuregrowth, which is majority owned by Old Mutual, plans to raise R500m-R600m in capital for its new HGDEF and its indicated fee will be 2% on committed capital plus a 20% incentive fee. It has started the capital raising process for the new fund and is aiming for a first close by end-2022.
“We have been considering an early-stage equity fund for several years, watching the evolution of the SA market, considering SA’s strategic position for disruptive enterprises, and investing in several high-growth equity transactions,” said Andrew Canter, chief investment officer of Futuregrowth, SA’s eighth-largest asset manager. “We believe the time is right for a risk-seeking offering.”
The Futuregrowth HGDEF will invest in early-stage businesses with high scalability that offer new services, products or disruptive technologies in niche and growth markets. The investment firm says it has a strong pipeline of deals for the new fund, many of which stem from its deal sourcing activities related to the Futuregrowth DEF, which has more than R3.4bn in assets, though there will be no asset transfers from the DEF.
“The new Futuregrowth High Growth Development Equity Fund aims to support SA entrepreneurs who push the boundaries with innovative technologies that change how we live,” said Amrish Narrandes, head of private equity and venture capital at Futuregrowth. “We believe that by backing SA start-ups, we can play our part in job creation and in growing our economy.”
Of the R3.4bn in assets held in the Futuregrowth DEF, roughly R500m relates to developmental early-stage investments, including disruptive fintech companies such as Yoco, Retail Capital, Lifecheq and, more recently, Ozow. The DEF has also invested in companies engaged in other subsectors, including health technology (hearX), agriculture technology (Inseco) and marketing technology (Mobiz).
“We source innovative start-up businesses by backing SA entrepreneurs who are brave enough to take risks and disrupt industries,” said Narrandes. “It is these entrepreneurial leaders who will be instrumental in unlocking SA’s economic growth potential, while delivering strong commercial returns and meaningful social and environmental change.”
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