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Carlyle's Africa fund blows past its asset targets

Africa rises for investors
Africa rises for investors

Here's further proof that serious international investors are warming to Africa: The Carlyle Group announced Wednesday that it had raised $698 million for its dedicated continental fund, nearly $200 million above its initial target.

The firm initially sought $500 million for the Carlyle Sub-Saharan Africa Fund when it launched in March 2012. The firm's Africa operations are based out of Johannesburg, South Africa and Lagos, Nigeria, and its investments focus on buyouts and minority investments in goods, logistics, financial services, agribusiness and energy.

"We are optimistic about prospects for investing in Sub-Saharan Africa," David Rubenstein, co-founder and co-CEO of Carlyle, said in a statement announcing closing the fund to new capital. "The region has been the fastest growing developing market in the world outside of China, and we have a strong, experienced, local team in the region. We are very pleased with investor interest in this strategy."

Construction of a new road past an advertisement for a new development of residential apartments in Nairobi, Kenya, March 1, 2013.
Trevor Snapp | Bloomberg | Getty Images

Carlyle is based in Washington, D.C., and manages $189 billion overall in global alternative assets.

The money raised comes from clients both inside and outside Africa; some of the latter group are investing in Africa for the first time, according to Carlyle.

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"The success of the fundraising reflects investors' appetite for the strong economic growth that the region has experienced over the last decade, as well as the prospects for future economic development across the continent," Marlon Chigwende, co-head of the Sub-Saharan Africa advisory team at Carlyle, said in a statement.

The fund has already made two investments: Export Trading Group, a supply chain manager headquartered in Tanzania; and J&J Africa, a trucking and logistics business based in Mozambique.

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Carlyle's fundraising success in Africa underscores a shift in emerging market private equity investing away from the "BRIC" countries of Brazil, Russia, India and China, and into other less-developed markets—especially Southeast Asia and Sub-Saharan Africa—in hopes of better returns.

Money invested in non-BRIC emerging markets increased 18 percent in 2013, reaching a five-year high of $11 billion and representing 44 percent of total capital invested in emerging markets, according to a recent study by the Emerging Markets Private Equity Association. At the same time, total capital invested in the BRICs declined 20 percent between 2012 and 2013 and was 38 percent lower than in 2011.

PE fund managers invested $1.6 billion in Sub-Saharan Africa over 2013, a 43 percent increase from 2012 and a five-year high, according to the EMPEA report.

The returns on private equity exits—when the PE firm sells or brings public one of its holding companies—were 20 percent higher on average in Africa versus North America between 2010 and 2012, according to a recent report by the African Private Equity and Venture Capital Association and Ernst & Young.

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Those relatively high returns helped Carlyle and others raise $3.3 billion in 2013. That's down from the peak of $4.7 billion in 2007, but up 136 percent from 2012 ($1.4 billion), according to a recent Ernst & Young report.