PE funds lift African SWF to 1st profit

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Jose Filomeno dos Santos FSDEA 200x200

An Africa-based sovereign wealth fund (SWF) has reported a profit for the first time since it was set up, lifted by gains from private equity fund investments, with strong performance in agriculture and infrastructure-focused vehicles.

Angola’s SWF Fundo Soberano de Angola (FSDEA) brought in a net income of $43.9 million in the year ending December 2016, up 132.6% year-on-year from the -$134.8 million loss recorded in 2015.

The SWF was set up in 2012, and has been operational for three years.

FSDEA has $2.7 billion allocated to private equity, which is a 54% of its total $4.99 billion portfolio.

About $1.1 billion, which is 22% of the overall portfolio, is in fixed income – while the rest, 14%, is spread across a number of investment strategies such as derivatives and listed equity.

The fund also has an option to allocate up to 7.5% of its assets to social impact strategies.

Profits in the year were driven by gains in the infrastructure and agriculture private equity funds, which are two of the seven funds the SWF is invested in.

FSDEA is invested in QG African Infrastructure 1, a $1.1 billion specialist open-ended fund set up in 2014, and managed by Quantum Global. The vehicle generated $180 million income in the year.

Underlying assets in the Quantum infrastructure fund include an allocation to Angola-based industrial manufacturing company Grupo Sun Ocean. The deal was sealed in early 2017.

About the same time, Quantum also signed a deal to invest $180 million in Caioporto, a maritime infrastructure development company in Angola.

Also in the portfolio is Kenya-based industrial manufacturer Seruji, backed in 2015.

The Angola’s agriculture gains came from QG Africa Agriculture, an open-ended fund set up in 2014 with a $250 million commitment from FSDEA. This is also managed by Quantum Global, and generated an income $110 million in the year ending December 2016.

The vehicle has backed seven undisclosed farms in Angola, as of 2017.

“We are proud of the appreciation of private equity investments in the infrastructure and agriculture sectors, where important assets are predominantly in Angola,” said José Filomeno dos Santos, chairman at FSDEA. “The capital gains of the FSDEA assets confirm unquestionable progress in the implementation of its investment policy drawn up by the Angolan Government.”

The gains of these two funds offset the capital depreciation of $3 million generated by the remaining five vehicles. These are QG Africa Timber, a timber-focused fund sized at $250 million, the $500 million QG Africa Hotel, and the $200 million QG Africa Mezzanine. QG Africa Mining, sized at $250 million, and QG Africa Healthcare, with $400 million, are also part of FSDEA’s portfolio of commitments.

All funds are open-ended and are managed by Quantum Global.

“Over the coming years, we will achieve a continuous asset appreciation within the private equity funds in infrastructure and agriculture sectors and expect the remaining five funds to break even,” said dos Santos.

FSDEA’s assets under management (AUM) grew 5% in the year to $4.99 billion, from the $4.75 billion in 2015.

The SWF is 58% allocated to Sub-Saharan Africa, 12% to Europe – while 10% is in North America. The remaining 20% is spread across the rest of the world.

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