The ALCB Fund has played a crucial role in helping bring multiple issuers to market
Pricing: The Fund prices to market, meaning it co-invests along-side local investors and does not bilaterally negotiate pricing. That said, the Fund will only invest where pricing is aligned with its target return and risk appetite.
Products: Local currency bonds in the form of listed or private Medium Term Note programs, private placements and local currency club deals in countries where bonds are not possible.
Instrument: Investments will target senior debt. However, subordinated debt may be considered where the appropriate risk/ return framework supports a strong fit with the Fund’s development goals.
Co-investors: The Fund will always be a minority investor in a bond program, insisting on a minimum amount of local participation among domestic pension funds, insurance companies, asset managers and financial institutions. The Fund does not lend bilaterally or at concessional terms.
Participation: The Fund will generally not invest in more than 30% of an issue without a credible sell down strategy or unless the bond is part of a larger issue program (such as an MTN program).
Ticket: The Fund will typically invest the equivalent of USD 2-4 million with scope to consider smaller or larger amounts depending on the transaction.
Currency: The Fund will invest in the principal currency of any African country. This includes currencies used in regional monetary union areas.
Hedging: The Fund has adopted an FX Risk Charter which guides its approach to open currency exposure. The Fund will usually swap its local currency exposure into US Dollars, but does on occasion enter un-hedged transactions .
Process: The Fund has a flexible investment process. It can engage with issuers from an early-stage, assisting with deal structuring and marketing; but can also participate in a time-sensitive offering. The Fund, however, targets issuers that make use of market intermediaries to assist in a capital markets transaction. As a bond investor, the Fund itself does therefore not assume a primary role in creating the transaction concept and carrying out the early structuring work.
Geography: The Fund’s target region covers all African countries. In order to qualify for investment, countries must have a minimum legal and regulatory framework for local currency bonds and local co-investors.
Issuers: The Fund will only invest in non-sovereign corporate or financial institution issuers that are either first time issuers or are introducing market innovation (e.g. listing, rating, longer tenors, structured transactions) that meet the Fund’s market development objectives.
Sectors: Proceeds of bond issuance must be used in highly developmental sectors. These include financial services with a focus on financial inclusion (SME lending, mortgage finance and microfinance), housing, education, green/ renewable energy, and agriculture/ agro-processing.
Beneficiaries: Ultimate beneficiaries are micro, small and medium enterprises (MSMEs) and lower income households. The Fund will also work with local issuers, investors and intermediaries to bring deals to market.