Emerging Markets Pioneer Actis Rethinks Private Equity Model

(Bloomberg) -- Actis became one of the most prominent emerging-market investors with bets on everything from Egyptian snack makers to casual dining in Taiwan. Its future points down a more prosaic path.

The firm plans to switch its focus from the traditional private equity model -- buying into undervalued companies and building them up -- to investing in longer-term assets like energy, infrastructure and real estate, according to Senior Partner Torbjorn Caesar. London-based Actis has been meeting with investors in recent weeks to explain the shift, he said.

“The demands of our investors are constantly evolving, and they are telling us that they need more exposure to hard assets,” Caesar said in a phone interview. “These industries offer opportunities of scale for us and hence we are doubling down.”

Actis, which manages about $10 billion, is changing focus after some other big-name investors pulled back from private equity in the developing world. Carlyle Group Inc.’s sub-Saharan African team spun out into a separate firm, while Blackstone Group Inc. decided in 2019 to sell its African unit to management. Raising funds for Middle Eastern deals has also gotten harder since Abraaj Group collapsed amid allegations of theft.

Yield Hunt

Several Actis private equity dealmakers have been considering splitting off to start their own firm, people with knowledge of the matter said, asking not to be identified because the information is private. They have held discussions about taking over management of some legacy investments from Actis, though no final decisions have been made, according to the people.

There are no current plans to spin off Actis’s private equity assets, Caesar said. The firm employs around 300 people in 17 offices, including about 120 investment professionals, its website shows.

Actis was spun out of CDC Group, the U.K. government’s development-finance institution, in 2004. It has since raised $19 billion and been an investor in growth markets across Africa, Asia and Latin America. Its current private equity portfolio includes South African retailer Food Lover’s Market, shaving razor supplier Super-Max and Kenyan tire distributor AutoXpress.

Andrew Newington, an Actis partner who has served as chief investment officer, is set to depart in the coming months after spearheading a major expansion over the past five years, Bloomberg News has reported. He led the acquisition of Standard Chartered Plc’s Asian real estate business in 2018 and oversaw a deal last year for Actis to take over management of two funds from Abraaj as part of the firm’s liquidation.

Data Centers

The latest shift comes as pension funds and endowments increasingly hunt for yield in the low-interest-rate environment. Hard assets, which can also include data centers and logistics businesses, offer scope for consistent returns in emerging markets over an extended period of time, Caesar said.

Actis is currently seeking about $4 billion for a fund dedicated to renewable-energy deals, a person with knowledge of the matter said. Last year, it raised a $1.2 billion vehicle for investing in infrastructure assets and holding them for a longer period. A representative for Actis declined to comment on the fundraising.

It’s also been putting money into data centers, teaming up in September with South Korea’s GS Engineering & Construction Corp. to build a $315 million project in Seoul. Actis has also funded facilities in China and said in March it will put $250 million into a new platform to acquire and build data centers in Africa.

There are no immediate plans to raise a traditional private equity fund, Caesar said.

“Our focus is increasingly going to be on the sectors that we think offer better prospects,” he said.

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