Futuregrowth, South Africa’s eighth-largest asset management firm, is floating Futuregrowth High Growth Development Equity Fund (HGDEF) to make investments in early-stage businesses.
The Futuregrowth HGDEF will form part of its suite of developmental investment funds which cover a range of impact areas such as infrastructure, social services, clean power, agriculture, regional development and more.
It will sit alongside the Futuregrowth Development Equity Fund (DEF), which has accumulated a 16-year track record of investing in developmental unlisted equity.
“We have been considering an early-stage equity fund for several years, watching the evolution of the South African market, considering South Africa’s strategic position for disruptive enterprises, and investing in several high-growth equity transactions and we believe the time is right for a risk-seeking offering,” said Andrew Canter, Chief Investment Officer of Futuregrowth.
The Futuregrowth HGDEF will be a closed-ended, limited life fund with a four- to five-year draw period and a five- to six-year payback period. It is targeting ZAR500 million to ZAR600 million of committed capital.
There will be no asset transfers from the DEF. Futuregrowth has kicked off the fundraising process and is aiming for a first close by the end of 2022.
The DEF currently has over ZAR3.4 billion under management, of which ZAR500 million relates to developmental early-stage investments. This portion includes fintech companies such as Yoco, Retail Capital and Lifecheq, and, more recently, Ozow.
Additionally, the DEF has invested in companies engaged in various other subsectors, including healthtech (hearX), agritech (Inseco) and marketing technology (Mobiz).
The DEF recently sold one of its first early-stage investments, CashConnect, to Nasdaq-listed company Net1, generating a 33x multiple on invested capital (MOIC) and a 48% internal rate of return (IRR).
The Futuregrowth HGDEF will seek investment opportunities from venture capital to early-stage private equity, as well as other special opportunities.
“In most cases, Futuregrowth keeps declined deals warm in the event they turn the corner and become investment-ready opportunities at a later stage. We keep in touch with companies on our watchlist regularly, so when investment opportunities arise, we are top of mind,” said Amrish Narrandes, Head of Private Equity and Venture Capital at Futuregrowth.