November 1, 2018 / 4:03 AM / 18 days ago

Buyout firm Cerberus to buy SGI for foothold in frontier markets

NEW YORK, Nov 1 (Reuters) - Private equity firm Cerberus Capital Management LP said on Thursday it has agreed to buy SGI Frontier Capital Pte Ltd, giving it a foothold to invest in frontier markets in Asia and Africa.

Singapore-based SGI, which does not disclose its assets under management, invests in countries such as Ethiopia, Georgia, and Mongolia. These are considered earlier in their economic development than emerging markets like China and India.

Cerberus' new frontier markets platform will be run by SGI Founding Partner Gabriel Schulze and SGI Managing Partner Alexander Benard, and will initially invest out of SGI's existing assets and Cerberus' funds.

"The main attraction of the deal was the people. Gabriel knew Steve, our Co-CEO," Cerberus Chief Operating Officer Mark Neporent said in a telephone interview.

"We felt there was a tremendous intellectual and cultural fit. Our philosophy is if you go into a new market you have to live in it and be imbedded. Historically, we've had no presence in these markets where Gabriel and his team have been imbedded for many years."

Cerberus may eventually raise a dedicated frontier markets fund but currently feels it already has ample resources to make investments in these markets, Neporent added.

The deal comes as private equity investor confidence in frontier markets is being tested by concerns over the size of opportunities in some markets, particularly in Africa, as well as the strong performance of Western economies.

Africa-focused private equity fundraising fell from $4.5 billion in 2015 to $700 million in 2017, according to industry tracker Preqin. Emerging Asia-focused private equity fundraising, which excludes Hong Kong, Japan and Singapore, rose over the same period from $80 billion to $101 billion.

A Preqin survey last month found 53 percent of alternative assets investors plan to increase investments in emerging Asia and 30 percent plan to increase allocations to Africa.

New York-based Cerberus, whose co-founder and co-CEO Stephen Feinberg earlier this year was appointed chair of U.S. President Donald Trump's intelligence advisory board, has over $35 billion in assets.

Schulze, whose great-great-grandfather William Boyce Thomson founded gold mining conglomerate Newmont Mining Corp in 1916, used his family wealth to set up SGI in 2006.

In June, The New York Times reported that Schulze's early contacts with Jared Kushner, President Donald Trump's son-in-law and a senior White House adviser, facilitated a dialogue which led to a summit between Trump and North Korean leader Kim Jong Un. Schulze has declined to comment on that report. (Reporting by Joshua Franklin in New York; Editing by Christopher Cushing)

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