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Creation Investments Social Ventures Fund II, LP Announces An Oversubscribed Final Fund Closing of $75 Million

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FOR IMMEDIATE RELEASE

CHICAGO, IL – June 14, 2013 – Creation Investments Social Ventures Fund II, a global private equity fund focused on financial services and microfinance, completed its final closing on May 31, 2013 with total committed capital of $75 million USD.  The Fund was oversubscribed on its target of $60 million USD less than one year from launching, and hit its hard cap of $75 million USD with substantial investor support.

 

Creation Investments Capital Management, LLC, headquartered in Chicago, Illinois, is a leading impact investment fund manager with an overall investor base composed of over 100 US and European institutional and family office investors along with several high net worth individuals.  Over 90% of Fund I investors committed to Fund II, alongside a General Partner commitment of over $7.5 million.

 

To date, the Fund has deployed 35% of its committed capital, making equity investments in three Microfinance Institutions (MFIs) and Small-and-Medium Enterprise Lenders in Latin America and Asia.  Specifically, portfolio holdings include: Grupo Finclusion S.A.P.I. de C.V. SOFOM E.N.R. (Mexico), Sonata Finance Private Limited (India), and Grameen Financial Services Private Limited (India).

 

Each of the Fund’s portfolio companies is committed to providing financial services to under-banked individuals and businesses, helping to facilitate access to capital and economic development. Beyond small business lending, several of the Fund’s portfolio companies offer micro-insurance, micro-savings, money transfer, micro-pension products and other financial services. As of March 31, 2013, the total aggregate loan portfolio is $145 million USD with over 573,000 active borrowers.

 

Creation Investment Social Ventures Fund II seeks to make significant growth equity investments in earlier stage, high potential financial services providers in emerging markets, as well as buyout transactions in more mature MFIs transitioning out of NGO ownership. The Fund Manager seeks to add value and achieve greater scale through active management, in-market consolidation, and expansion of the financial product offering.  The Fund aims to allocate capital in three major geographic regions – Latin America, Asia, and Eastern Europe – resulting in a diverse, global portfolio in core emerging markets.

 

The Creation Investments team, led by Patrick Fisher and Ken Vander Weele, has proven its ability to originate unique impact investment transactions, recruit seasoned management for portfolio companies, access debt capital to fund growth, deliver technical assistance and technology to enhance systems, maintain a focus on responsible investment and client protection principles as a UN PRI signatory and Smart Campaign member, and add value through active involvement in all levels of the business.

 

“We are excited to have attracted a sophisticated set of private sector investors to the global financial inclusion space, providing them with the opportunity to maximize their financial and social returns through impact investments,” said Patrick Fisher, Managing Partner and Founder of Creation Investments.

 

Mayer Brown LLP served as legal advisor and KPMG LLP as tax advisor and auditor.  Silicon Valley Bank supports the Fund and the Fund Manager through its banking, credit and foreign exchange services. The General Partner is comprised of the Creation Investments team and affiliates of Promus Holdings, LLC, a Chicago based multi-family office and alternative assets manager in which Mr. Fisher is also a Partner.

 

About Creation Investments Capital Management, LLC:

Creation Investments is a leading alternative investment management company with a focus on private equity investments in Microfinance, Small-and-Medium Enterprise lenders, Emerging Market Banks, and other Financial Services Providers. Creation Investments sponsors and manages impact investment funds and one-off investments in social ventures, seeking to maximize financial and social returns on investment. For more information, go to: http://creationinvestments.com/

Microfinance Growing in Attraction to Private-Equity – WSJ.com

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Microfinance Growing in Attraction to Private-Equity

By Isabella Steger, November 18, 2012, 9:38 PM

Bloomberg News
A Hindusthan Microfinance Pvt. Ltd. employee checks loan application forms at the company’s office in Mumbai, India, on Saturday, June 12, 2010.

Amid all the negative news surrounding the private-equity industry, one sector that caters to the poor is drawing interest from these firms: the microfinance industry.

The returns in investing in these companies—which make small loans to entrepreneurs in developing economies—are good, too.

That’s the view of Xavier Pierluca, chief investment officer of Luxembourg-based Bamboo Finance, which manages $250 million in assets and specializes in socially responsible investments globally. The fund just acquired a non-profit, Boston-based Accion Investment Fund, for $105 million in a transaction which the firm says shows the attractiveness of the sector to private capital.

In Asia, Bamboo Finance is currently invested in Xac Bank in Mongolia, which provides microfinancing in as well as lending to small and medium enterprises. The bank began as a non-profit organization but has now grown to become one of the country’s largest banks, said Mr. Pierluca. It also has investments in Kyrgyzstan and India. It is now looking closely at the Philippines, Sri Lanka, and would like to invest in Indonesia. The firm is currently awaiting regulatory approval to open its Singapore office. Mr. Pierluca says microfinance is growing quickly in Asia too because of rapid economic growth in the region, as well as changing regulations as governments start to understand the benefits of microfinance for their economies.

According to Mr. Pierluca, about $72 billion of assets around the world are being invested in microfinance right now, having grown significantly over the last 10 years. He said around four or five large private-equity funds currently invest in microfinance, and he is seeing more interest from those firms, as well as large financial institutions, in the sector.

In 2007, microfinance-related deal volume was below $100 million, growing to between $300 million to $400 million a year, he said, fuelled largely by private-equity activity but also large banks that are looking to acquire microfinance lenders.

Part of the reason, he said, is that some of these institutions, which extend small loans to entrepreneurs in emerging markets, are now accumulating assets of up to $1 billion, making them “relevant for the large private-equity funds.” Many of these institutions have also matured from just making small loans to being full-fledged banks, with the most mature of these being in Latin America.

The returns are also attractive. “We’ve seen a few deals deliver internal rates of return of over 10% or 15% to international investors, even over 20%,” he said. In terms of risks, Mr. Pierluca said the business model of microfinance is highly transparent, facilitated by international organizations with much readily-available information.

The main risk for microfinance businesses is in political interference, he said. For example, in the Indian state of Andhra Pradesh, Mr. Pierluca said the government decided to change the frequency and method of collecting installments on loans to pander to the electorate, making it difficult for lenders to operate, although critics of microfinance also contend that micro lenders in India sometimes charge exorbitant interest rates and use coercive methods to recover debts.

In response, the Indian government introduced a bill in May to regulate the sector, giving powers to the central bank to set the maximum rates that can be charged by micro lenders.

Among Bamboo Finance’s investors, or limited partners, are Dutch pension fund ABP, the government of Abu Dhabi’s Aabar Investments, and other family offices and high net worth individuals.