NETHERLANDS - ABP, the giant industry pension fund for Dutch civil servants, has raised its interest again in microfinance initiatives and invested $30m (€22.3m) in a global private equity microfinance fund from Grassroots Capital.
The latest move means ABP's holding in microfinance debt and private equity has now growth to $215m since it first invested $5m in this strategy with Dexia Asset Management in 2005. (See earlier IPE story: Dutch funds' appetite for microfinance grows)
"This kind of investment is particularly suitable for a pension fund, as it aims to achieve double bottom line returns by investing capital in start-up and intermediate MFIs," said Jan van Roekel, senior portfolio manager at APG, the asset manager looking after ABP's investments.
"Moreover, it will give some of the world's economically most disadvantaged people the opportunity to improve their livelihoods. We believe that, in most cases, social and financial value creation through equity investment in microfinance requires continuous, on-the-ground engagement by operators who are knowledgeable in the local regulatory and capital market environments, and are familiar with the local microfinance industry. These qualities are provided by Grassroots Capital", he added.
Grassroots has now closed the fundraising on its Global Microfinance Equity Fund (GMEF) after receiving commitment worth $117.5m, including one from PGGM, the asset manager looking after money for the Dutch healthcare workers pension fund.
The prospects for this market are also set to continue, claimed David FitzHerbert, managing partner of Grassroots Capital.
"This is clear evidence that institutional investors understand the potential of this asset class for a long term investor. The microfinance industry has survived the financial crisis of the last two years far better than mainstream international banks as small loans to the working poor have proven to be of higher quality than many of the assets of western banks."
In 2008, the sector delivered a return of approximately 6% on investments for the civil servants' pension scheme. (See earlier IPE story: ABP increases microfinance lead)
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