Sydney: LeapFrog Investments, a private equity firm backed by George Soros and JP Morgan , said it has raised $400 million for socially responsible investments in Asia and Africa - the largest ever for a fund specialising in low-income emerging market financial services.
The fund, LeapFrog`s second such fund, was three times the size of first raised and was oversubscribed, underscoring the increasing popularity of so-called "impact investing".
Investors include Australian superannuation funds, American International Group , Europe`s second-biggest insurer AXA and Swiss Re .
"Here you have these institutions seeing that there is an enormous opportunity in the emerging consumer - people who have yet to enter the middle class, and that`s a big deal," said Andrew Kuper, LeapFrog`s Sydney-based chief executive.
LeapFrog, with over $500 million of assets under management, has small-ticket investments in companies providing insurance, savings, pensions and payments services - usually for customers earning under $10 a day.
LeapFrog estimates that worldwide, the annual collective spending power of such customers will rise to $5 trillion by 2022 from around $2 trillion in 2012.
It also invests in markets most players refrain from. For example, it has a stake in South Africa`s All Life, which provides insurance cover to HIV patients.
Investment bank JPMorgan and think tank Global Impact Investing Network estimate there is $46 billion in impact investments under management. While experts say this figure is growing, it is only a fraction of the $210 trillion invested in financial markets around the world.
While Kuper did not disclose the rate of return or any other performance metric for the fund, he said the firm`s portfolio of companies showed an average 40.6 percent increase in operating revenue and a 39 percent rise in profitability last year.
The new fund will typically make equity investments of $10 million to $50 million in LeapFrog’s priority markets of Ghana, Kenya, Nigeria, South Africa, India, Indonesia, the Philippines and Sri Lanka, Kuper said.
LeapFrog has invested in India`s Mahindra & Mahindra Ltd`sinsurance brokerage business which serves low-income consumers in the country.
This year, it sold its majority stake in Ghana life insurer Express Life to Prudential PLC , marking the entry of one of the world`s biggest insurers into direct insurance in Africa.