British International Investment, the U.K.'s development finance institution, made its first fund portfolio sale in a bid to mobilize more private equity capital into emerging markets.
Swiss impact investor Blue Earth Capital said Feb. 12 that it acquired through investment vehicles partial interest in three BII funds in Africa and Asia.
In a joint release, BII and Earth Capital said the transaction will help reduce the risk of emerging markets "by providing investors with visibility to a fund portfolio and the ability to make informed judgments on likely performance prior to investing."
The release said that the pilot secondary transaction gives BlueEarth stakes in three of BII's strongest funds for commercial and impact performance: Aavishkaar Goodwell India Microfinance Development Company II, an Aavishkaar Capital impact equity fund in India; Novastar Ventures Africa Fund II, which provides venture capital in Africa; and Adenia Capital Fund IV, which takes controlling stakes in companies active in renewable energy, agriculture, manufacturing and business services in Africa.
Blue Earth Capital operates dedicated private equity, private credit and fund solutions and is owned by the Blue Earth Foundation.
British International Investment invests to support the U.K. Government's Clean Green Initiative. In the next five years, at least 30% of total new commitments will be in climate finance.
John Owers, director and head of fund solutions at BII, said in the release that the transaction "gives us the opportunity to test a new approach to encourage investors already active in emerging economies to commit more capital and in time encourage new investors into these markets. This will help our fund managers build a diverse investor base and reduce their dependency on DFIs (development finance institutions)."
BII will retain a stake in each fund and serve on each limited partner advisory committee.
Emerging market equities have "appealing valuations," but there are still risks, cautioned Vladimir Oleinikov, senior quantitative analyst at Generali Investments, in a separate email. While emerging market equities are trading at a discount, "We remain cautious due to both falling macro surprises and weaker (earnings per share) revisions," he said.