Institutional investor pours $30 million into ALCB's private funding round
The African Local Currency Bond (ALCB) Fund, a pioneering investment vehicle, has recently secured $30 million from an unnamed UK-based insurance company. This transaction, according to Robert Anson, vice president, debt syndicate at HSBC, showcases the potential of international bond markets to mobilize the private investment community for good in African markets.
Since its inception in 2012, the ALCB Fund, managed by Cygnum Capital, an emerging markets-focused investment bank and asset management firm, has deployed over $420 million, backing 67 companies across various sectors in Africa. The investment was made through the issuance of a 10-year bond under the ALCB Fund's Euro Medium Term Note (EMTN) programme.
The bond, issued by the ALCB Fund, was rated Baa1 by Moody's Investors Service, making it the second-highest rated Africa-focused investor, after the Africa Finance Corporation. Brock Hoback, fund lead at the ALCB Fund, stated that the local currency mandate of the fund materially reduces credit risk. He also mentioned that the Baa1 rating by Moody's played a crucial role in attracting institutional investors.
The ALCB Fund's strategy of mobilizing international private capital directly through the fund itself is aimed at building forward momentum in its private capital mobilization strategy. This strategy has proven effective, as the ALCB Fund has achieved a 9.1x private capital mobilisation ratio, meaning for every dollar it invested, an additional $9.10 was mobilised from local investors.
The sectors in which the ALCB Fund invests include financial inclusion, renewable energy, affordable housing, and other critical sectors. By focusing on local currency bonds, the fund aims to manage credit risk effectively, as evidenced by their low write-off ratios, which are less than 2% since inception.
The notes from the bond are listed on The International Stock Exchange. This transaction is expected to serve as a springboard for other investors to participate, further bolstering the African markets. The ALCB Fund's approach of attracting institutional investors and leveraging local currency mandates could pave the way for sustainable development in Africa, aligning with the United Nations' Sustainable Development Goals (SDGs).
- The ALCB Fund's success in mobilizing $30 million from a UK-based insurance company showcases the potential for development finance through international bond markets, particularly in sectors like financial inclusion, renewable energy, and affordable housing.
- The strategic investment by the ALCB Fund, which has a low write-off ratio of less than 2% since inception, demonstrates the effectiveness of blended finance, where local currency bonds are used to attract institutional investors and boost sustainable development in Africa.
- The ALCB Fund's investment strategy, centered around private capital mobilization and alignment with the United Nations' Sustainable Development Goals (SDGs), indicates a commitment to investing in businesses that have a positive impact on Africa's development, such as affordable housing and financial inclusion.
