PGGM, which manages the assets of the €75 billion ($106 billion) Pensioenfonds Zorg en Welzijn, Zeist, Netherlands, – will invest $60 million in a microfinance private equity fund managed by Grassroots Capital, according to Alex van der Velden, PGGM's head of responsible equity strategies.
Grassroots Capital's Global Microfinance Equity Fund will invest primarily in India, Latin America and Africa. Returns are expected to be in the double digits annually and tend to mirror the performance of the typical private equity portfolio. The investment also comes at a time when many microfinance organizations globally are in dire need of cash.
“In the same way that (major financial institutions globally) have been capital-constrained, the microfinance community is also seeking to bolster its balance sheet,” Mr. van der Velden said.
Funding came from a 2008 commitment of about €200 million to the PGGM's microfinance strategy. About €30 million already has been invested in a credit strategy run by BlueOrchard Finance.
“We expect microfinance private equity to achieve competitive returns and also generate a social dividend — that makes it attractive as an asset class,” Mr. van der Velden added.