Sagicor anchors US$100m SME fund - Puts up US$20m as private equity financing alongside SEAF partners
Published:Friday | October 25, 2019 | 12:00 AM
A US$100 million fund aimed at boosting small to medium enterprises is up and running, and looking for target companies in Jamaica and the Caribbean region in which to invest.
Sagicor Group Jamaica, through subsidiary Sagicor Investments Jamaica Limited, has contributed US$20 million towards the SEAF Caribbean SME Growth Fund as its anchor investor in Jamaica, the company announced at a briefing on Wednesday.
Another US$27 million has been seeded by three others – SEAF, Sandals Resorts/ATL, and the Development Bank of Jamaica – in the first round of financing.
There is as yet no word on how the other US$53 million is to be seeded, but the deadline to hit the targeted US$100 million has been set for the first quarter of 2020.
The 10-year fund is operated by Small Enterprise Assistance Funds, SEAF, a Washington DC-based international investment management group that provides growth capital and business assistance to small and medium enterprises, SMEs, in emerging and transition markets underserved by traditional sources of capital, according to founder Bert van der Vaart.
He says SEAF is moving into the Caribbean, using Jamaica as headquarters for a regional push.
The investment in the SEAF SME fund is being made through Sigma Venture Fund, said Sagicor Group Jamaica President & CEO Christopher Zacca.
By joining forces with SEAF and other investors, Sagicor is helping to create a new asset class that will add a new dimension to investment and development, he said.
“We’re very excited to be leading the way, in concert with our partners, to develop this new asset class in Jamaica and the Caribbean, which can generate the type of returns suitable for pension funds and other long-term investors by providing the diversification to promote growth,” Zacca said at the launch on Wednesday.
The fund will pump between US$3 million and US$$7 million into individual companies targeted for investment. The investment horizon is five years.
Sagicor Investments CEO Kevin Donaldson said it took about 12 months of discussions with SEAF’s point man, Gerard ‘Gerry’ Johnson, to bring the fund to Jamaica.
Johnson will serve as senior adviser to SEAF Caribbean; Leo Williams is managing director; and Kurt M.A., Kisto is senior managing director for the LAC region. SEAF Caribbean’s fund management team will be supported by SEAF’s seven-member global investment committee, which is headed by van der Vaart.
Johnson, who is a former IDB director, says Trinidadian Ainsley Gill first brought up the idea of SEAF investing in the region in 2007, but the idea was shelved due to the advent of the global financial crisis the following year.
Since that time, SEAF has entered various markets, including Morocco, Tanzania, Vietnam, Bangladesh and Colombia, he said.
And the fund now sees conditions in the region as an opportune time to launch.
“Now around the region, you see where they are taking investments seriously while not crowding out the private sector. They are facilitating efforts and therefore, the potential is back in the Caribbean for firms to explode in growth,” Johnson said.
With the establishment of the fund Johnson will serve as senior adviser to SEAF.
Donaldson, meanwhile, is projecting that Sagicor expects more than 20 per cent returns on its investments, and expects the fund to do well despite other competing private equity funds.
“What makes us different is that we have the local knowledge, the necessary connections in addition to the partnerships with MSMEs; and what we’re bringing is the international exposure with SEAF,” he said.
“One company that we’re looking at needs to get into Africa and SEAF is in that continent with lots of relationships, so it’s not just about an international partners, but the connections and understanding that they have,” he said.
Johnson says the fund is looking for firms that need an additional boost, and those poised for take-off. He says that can take the form of companies where the founding entrepreneur is slowing down, but whose children are not interested in continuing the business, or family businesses that need strengthening.
“Firms like those can grow 400 per cent in the space of six years, in certain cases, with the right technology, better appreciation of the market, freshening up the structures and introducing efficiencies,” Johnson said.
SEAF’s motivation, he said, is not to grab other people’s assets, but to participate in their growth.
“Asset stripping is not a part of our business model,” he stressed, while adding that it is better for entrepreneurs to retain control of their business.
“Basically, we get on the escalator with them; they’re in the lead. We will take a minority position, but just enough to make a difference, and then we step off. We’re not interested in them being our employees or to control them,” Johnson said.