Old Mutual Plc is setting up a new fund for investments in African infrastructure including toll roads and power plants as part of a joint venture with Macquarie Group Ltd.
The companies intend to “raise a new fund because the old fund is almost fully invested,” Paul Boynton, head of alternative investments at Old Mutual Investment Group, said in an interview in Johannesburg on Wednesday. “We are going to launch a fund next quarter.”
Through their African Infrastructure Investment Managers Pty Ltd., which had $1.2 billion under management at the end of 2014, the companies are tapping into growing economies of sub-Saharan Africa. Expansion is forecast at 4.5 percent in 2015 and 5.1 percent next year, according to the International Monetary Fund, as nations build roads, power plants and water systems to meet the demands of the world’s second-most populous continent.
Old Mutual, headquartered in London, and Sydney-based Macquarie have invested in renewable energy and transportation infrastructure in East and West Africa, Boynton said. The companies put funds into gas-fired power plants in Ghana and Nigeria, and are looking to invest in wind farms in East Africa, he said.
AIIM, which was established in 2000, has a fund that invested in South African toll roads and a joint venture with Johannesburg-based Kagiso Tiso Holdings Pty Ltd., according to its website.
Old Mutual said on Thursday funds under management increased 10 percent in the first quarter to 351.4 billion pounds ($554 billion), with sales gaining 18 percent.
The company has invested 7 billion rand ($589 million) in private equity and infrastructure funds in the last 15 years and 11 billion rand in direct deals in both asset groups, Boynton said. The investments earned 15 billion rand in profit in the period, he said. The money manager targets allocating 10 percent of funds to alternative assets including private equity and natural resources and is currently “just above” the goal, Boynton said in an e-mailed statement on Wednesday.
“Though private equity is considered an illiquid asset class because of the length of time it takes to realize returns, the significant return premium is more than sufficient compensation,” he said.