The Netherlands Development Finance Company (FMO), Privium Fund Management and Dutch state-owned bank ABN AMRO have joined hands to float an impact fund called FMO Previum Impact Fund for emerging markets at large, as per a statement.
The fund offers clients of ABN AMRO—starting with its private bank in the Netherlands, ABN AMRO MeesPierson—an opportunity to co-invest in loans to companies in emerging markets, together with FMO.
“By providing a loan to a local bank in Bangladesh, for example, this bank has the opportunity to offer credit to more local SMEs. This increases the chances of these entrepreneurs to be successful and to create jobs within their companies,†the statement said.
“The FMO Privium Impact Fund is a solution from which clients can expect both financial and social returns, with regular liquidity. It is an interesting opportunity for our clients to co-invest with a bank like FMO, which has a good track record in emerging market loans,’ said Solange Rouschop, Global Head of Investment Services & Sustainability.
The fund will be able to co-invest in both existing and new loans (to be) provided by FMO to its clients. The co-investments of the fund will be structured as participations in such loans provided by FMO. They will include senior and subordinated loans.
It will invest in four focus sectors of FMO - financial institutions, energy, agri-business and telecom infrastructure.
The targeted return net of fees of the fund is expected to be 2.5-4% per year, over a multi-year cycle and once the fund's portfolio has been built up.
With this collaboration, ABN AMRO, FMO and Privium, a fund manager with significant experience in sustainable investments, are expanding their impact investing universe.
Dutch development bank FMO has invested in about 80 countries worldwide. In India, it has given out more than €650 million ($716 million) in loans and equity, mostly to private equity firms.
“For us, India is by far the most important country in our portfolio. However, we have an above-average percentage of our non-performing assets in the country as well, with particularly our debt portfolio performing unsatisfactorily. Indeed, we haven’t been as successful in India as we would like to," FMO’s chief risk and finance officer Jurgen Rigterink told VCCircle recently.
“Of our non-performing assets, 11% are in India,†Rigterink told The Hindu on the sidelines of the VCCircle India Limited Partners Summit 2016. “You can see that we are not actually as successful here as we are in many other markets,†Rigterink said.
FMO’s portfolio in financial sectors including banks, leasing companies, micro-finance institutions and energy-related investments have been doing well, he said.
Impact funds - firms which provide money for projects seeking to meet the critical needs of people - that are active in India include Omidyar, Aavishkaar, Unitus Seed Fund, Mahindra Rise, Acumen Fund and Khosla Impact Fund.
These are not philanthropic institutions, but expect profitable exits with healthy returns just the way private equity (PE) and venture capital (VC) funds do.
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