Africa rising as a private equity haven for investors

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“I think when we look at the opportunities in sub-Sahara at the moment we think that for 2013 that number should be 15 to 20 per cent higher than last year.  So we have a lot of momentum in the region, there’s a lot of good skill sets on the ground operating and we think that momentum and that trajectory is going to continue,” Steven Costabile, head of private funds group PineBridge Investments global told CNBC Africa on Wednesday.

Institutional investors around the globe have a desire to find growth for their portfolios and those that operate in emerging markets have seen growth rates of between one and three per cent. This has prompted the allocation of a significant percentage of investment in sub-Saharan portfolios.

PineBridge Investments, which has been operating in Africa since 1998 through an office in Kenya, is one such company that has put the continent at the forefront of investment and encourages its clients to diversify their global portfolios by adding a sub-Saharan one.

“It’s a natural extension of our relationship to bring our global clients and potentially local investors into the opportunity set. It’s the desire to find growth,” Costabile explained.

He added that investors could ideally allocate between 10 and 15 per cent of their overall provision to sub-Saharan Africa if their global portfolios are well-diversified.

PineBridge Investments is particularly looking to the East African region as a haven of investment because of local cooperation between countries in terms of lower trade tariffs across that region and favourable regulatory regimes for business development.  These show significantly bigger investment opportunity than in other countries.

“What we learned about our exposure to emerging markets is that you can have a point today and think you’ll allocate a certain way, but the amount of capital we apply will be determined based on the opportunity set given at the time that we’re allocating capital,” said Costabile.

“When you look at the vibrancy of what’s happening in these regions, in East Africa specifically, and look at the penetration of private equity relative to the size of their economies, there’s a lot of potential here and we’re quite excited about it.”