Non-specialist private equity funds in Africa are winning most of the fundraising deals because investors are targeting a wide range of sectors to maximise their profits.

PE experts from the Africa Development Bank (AfDB) and Avanz Capital said in separate surveys that the interest in general-focused PEs was gaining ground because the funds can benefit more companies.

AfDB, itself one of the biggest investors in PEs in Africa, had allocated $208 million to non-specialist funds by June this year, the highest amount given in sectoral allocations. The bank has invested $1 for every $5 invested in the Africa PE market. 

Non-specialist funds invest in several companies across different sectors. Specialist funds tend to focus on one sector, like financial services or energy.

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“AfDB wants to support growth more broadly across the continent, and build a sustainable portfolio that has good country and sector diversification. The best way to achieve this is through generalist funds,” states a survey by the bank on its investments in PE from 2005 to 2012.

“About half of the portfolio is invested in these vehicles, which have a wider scope on where they can invest and what kind of businesses they can help finance,” the bank added.

AfDB cites PE funds like the Tuninvest-AfricInvest Group, Aureos, and Emerging Capital Partners (ECP) as some of the examples of non-specialist funds that have successfully invested in a wide number of small and medium-scale enterprises and mid-sized companies.

“Half of PEs we are tracking in Africa are generalists and the other half have a single focus on particular industry,” notes a brief from Avanz Capital titled Private Equity Climate in Africa; Embracing the Lion.

The brief states that the business services sector is the most popular target for PEs in Africa, attracting 38 per cent of the funds, followed by information technology at 34 per cent, telecoms, media and communication at 34 per cent, industrials at 32 per cent and consumer products manufacturing at 27 per cent.

The surveys suggest that general-focused funds will continue to attract more investors given that African economies are growing across most of the sectors.

Returns are also a driving factor, with many PEs reporting returns of an average of 250 per cent. The trend is said to be attracting other PEs to the continent.

It is estimated that there are 200 PEs operating in Africa, an increase of more than 100 per cent in the past five years.

Last year, PEs focused on Africa raised $3 billion, more than triple the $890 million raised in 2010. In 2010, sub-Saharan Africa accounted for 6 per cent of total emerging markets private equity investment, up from 3 per cent in 2007.