Bamboo Capital Partners, which is managing the United Nations entities-backed investment platform SDG500, has raised $100 million for the vehicle that seeks to invest in emerging and frontier markets, a top executive told DealStreetAsia.
The platform, launched in February 2020 to help achieve the UN sustainable development goals (SDGs), will have exposure to six different funds.
SDG500 investment platform is expected to reach its final target of $500 million by the end of 2021, Bamboo Capital managing partner Florian Kemmerich said.
Of the total corpus, Bamboo Capital is looking at an allocation of around $200 million for Asian countries.
Asset manager Bamboo Capital has raised more than $400 million and invested in over 30 countries. Aside from SDG500, the other funds managed by the firm include the $200-million Financial Inclusion Fund I, the $40-million Financial Inclusion Fund II, the $50-million Oasis Fund, the $25-million BEAM Fund, the $40-million OMDF Fund and the $20-million OGEF Fund.
Some of Bamboo Capital’s investments in the region include Indonesian P2P lending platform Amartha Mikro Fintek, India’s Vaatsalya Hospital and primary healthcare chain the family doctor, energy solutions startup Greenlight Planet, MFI Annapurna, among others.
Bamboo Capital is looking to step up focus on Vietnam, the Philippines, Cambodia, Bangladesh and Myanmar given the opportunities for impact investing in these countries.
“These are countries where we see a huge opportunity. We see the possibility of focusing on the missing-middle – the population segment that is beyond microfinance, but below mainstream bank lending,” Kemmerich added.
SDG500 investment thesis
SDG500 will invest through six funds, namely, CARE She Trades Fund, a gender lens fund investing debt and equity; ABC Fund, a vehicle targeting smallholder farmers and small and medium agribusinesses; BUILD, a fixed-income for early-stage enterprises in the least developed countries; BLOC SmartAfrica and BLOC Latin America, venture capital funds targeting technology enterprises in Africa, Latin America, and the Caribbean; and HEAL, a VC fund investing in health tech businesses in emerging and frontier markets.
The platform will target agriculture, finance, energy, education, and healthcare sectors in Africa, Asia, Latin America and the Caribbean and Pacific regions. The funds will use either debt or equity to bridge the financing gap between the seed and growth stage for businesses in emerging and frontier markets.
SDG500 was launched by a coalition of partners including the United Nations Capital Development Fund (CDF), International Trade Centre (ITC), International Fund for Agricultural Development (IFAD), Stop TB Partnership, Smart Africa, and CARE USA.
In each of its investments, Bamboo Capital Partners generally holds minority stakes with a board seat. It provides capital to companies to support them at the scale-up stage. The investment through SDG500 will be around $1-3 million, but the firm can go as low as $250,000 per deal both through equity or debt financing, he said.
The SDG500 platform will also set aside $140 million to provide catalytic first-loss capital, that is not typically placed for fast returns but to attract additional private investments on top, Kemmerich said.
First-loss capital typically comes from governments and international NGOs, per the SDG500 prospectus.
According to a report by The Global Impact Investing Network, the provider of the first-loss capital will bear the first losses typically set and agreed upon upfront. It can be incorporated into the capital structure through a range of instruments including grants, equity, subordinated debt and guarantees.
“We’ll start investing the first loss [capital] right now… from here to the end of the year,” Kemmerich said, even though the platform is yet to reach its target fundraising.
Bamboo Capital Partners has set a target for internal rate of return (IRR) at 10 per cent for debt investments while for equity investments, the rate is in single digits. The company also typically looks at an investment tenure of 10+2 years.
The current COVID-19 pandemic situation has impacted overall fundraising activities, led to moderation in valuations as well as adjustments to returns and rewards expectations.
“Promising over 20% IRR on a true, risky impact fund, is not realistic where we invest so we have to adjust it. That’s why our new funds have [the] first loss [component]. The risk-reward return is adjusted, which makes it a safe investment for private and institutional investors in the senior tranches,” Kemmerich said.
Bamboo Capital typically looks at promoter buyback, trade sale or secondary transactions as exit routes. The only option that is not preferable is a public offering as there are companies operating in countries where IPOs are unusual, Kemmerich added.