Fusion Capital to establish new Fund

East Africa

By COSMAS BUTUNYI

Posted  Saturday, June 30  2012 at  16:1 

 

East Africa-focused private equity firm Fusion Capital intends to set up a new fund dedicated to raising capital from institutional investors. This will be the firm’s second private equity fund, having launched its maiden - Fusion African Access, a $150 million fund earlier in the year.

“We are in the process of putting together an institutional fund at the moment following interest expressed by various development finance institutions and some pension funds,” Diana Gichaga, the firm’s head of investor relations told The EastAfrican.

She however declined to divulge the target size and other details of the new fund, saying they are still being worked out.

Fusion Capital’s interest in setting up a vehicle for institutional investors comes as the private equity industry in Africa works ways of unlocking local sources of capital to reduce overdependence on international development finance institutions.

Regulatory hurdles have been blamed for the inability of pension funds and insurance companies.

Ms Gichaga explained that the investors in its current fund are ultra and high networth individuals from Europe. However, it caters for both institutional and individual investors.

The fund with its headquarters in Nairobi has offices in Rwanda, Uganda and Tanzania, has already invested $5.7 million in nine firms in the region. The investments were made over the last five months in the firms-four in Kenya, three in Uganda and two in Rwanda-are scattered around the agro-processing, real estate, construction, retail and other sectors.

According to Ms Gichaga, more investments are lined up, and could see the fund make a debut deal in Burundi.

“The deal pipeline is quite strong, and we are seeing quite a number of deals coming through especially from Burundi, Rwanda and Uganda,” she said.

The firm’s chief executive, Luke Kinoti, attributes the growth in its portfolio in the first quarter of the year, to its presence in the East African Community member countries.

“This regional flavour is as a result of our regional branches which have started gaining traction in their respective markets, with the Rwanda office currently serving the Burundi market too,” says Mr. Kinoti.

Fusion Capital’s Fusion African Access fund is regulated by the Guernsey Financial Services Commission, though it is not involved in its decision making process.

“Decisions are guided by the investment policy and made by the investment committee which sits here in Kenya,” he explains.

Buoyed by the last quarter’s growth in portfolio, Fusion Capital is bullish about prospects in the East African region.

Besides the projected strong economic growth in the medium term, Mr Kinoti says that the resource finds are also a boon to the region’s fortunes.