Paul Fletcher has been appointed the new chief executive of CDC Group succeeding Alan Gillespie who will leave the group at the end of this month. Fletcher will be charged with restructuring the group into two divisions, separating the investment company from the specialist funds it plans to set up as the group looks to place more of an emphasis on private funding – see evcj October page 11.
The new structure emulates the approach of other successful fund management companies whose roots are derived from a partnership of public and private capital, such as Cinven and Hermes.
The group will now comprise an investment company which will own the existing assets of CDC and a management company which will be responsible for the management of assets through a series of specialist geographic-focused funds for which third party investors will be sought on a case-by-case basis. Fletcher is assuming the role of CEO of the management company. The CEO of the investment company will be announced in due course.
CDC’s first four specialised funds will concentrate on Africa, South Asia, power and small to medium enterprises. Each will be designed to nurture sustainable private businesses in developing countries through socially-responsible investment combining public money with third party private finance.
The funds will invest in industry sectors such as healthcare, financial institutions, consumer goods such as food and beverages, agribusiness, property, minerals, oil and gas. The firm has already launched CDC Globeleq to manage its $300 million power portfolio. Power is being targeted because of its critical role in economic development. According to the World Bank, 2.5 billion underprivileged people have no adequate electricity supply.
Is investing in emerging markets viable and will it attract the funding? Clare Short, secretary of state for the Department of International development (DFID) is positive: “I am very pleased with the way CDC has restructured itself to enhance its capacity to attract private sector investment into developing countries. I am confident the new structure, separating the investment company from the specialist funds, will add focus and effectiveness to CDC efforts.”
CDC manages funds of approximately GBP1 billion, three quarters of which came from the government. Its remit is to maximise the long-term growth of private sector businesses in developing countries and mobilise third party capital flow by achieving attractive rates of return. It started raising private sector money in the mid-1990s through a joint venture with Norfund, the Norwegian Investment Fund for Developing Countries. In July CDC’s Aureos Central America Fund held a first closing of $33 million, raised from the International Finance Corporation, the Swiss State Secretariat for Economic Affairs, Norfund and CDC.