ISLAMABAD: Pakistan is unlikely to get any benefit from the ‘IFC Emerging Asia Fund (the Fund)’ being set up by the Asian Infrastructure Investment Bank (AIIB) to provide investors with the opportunity to invest in the fund’s proprietary pipeline of investments in Emerging Asia.

In the document, which will be presented to the AIIB executive board in September to approve establishment of the Fund, Pakistan is not among the key target markets. China and India have been considered as ‘established markets’, while Indonesia and the Philippines as ‘developing markets’ and Bangladesh, Cambodia, Myanmar, Sri Lanka and Vietnam mentioned in the ‘frontier markets’ category.

While the Fund has a target size of $1 billion and intends to select equity and quasi-equity investments in companies, entities or other arrangements to build a diversified portfolio of investments across emerging Asia, the Beijing-based AIIB seeks to commit $150 million to the Fund. Pakistan joined the bank as a member in December 2015.

Key target markets include established markets, and frontier markets. The Bank will only permit its investment, or the proceeds of its investment, to be deployed in Bank member countries.

The investment objective of the Fund is to make non-controlling equity, quasi-equity, and equity-related investments in companies, entities or other arrangements in IFC member countries in Emerging Asia.

According to the document, the Fund is well aligned with the Bank’s mandate to foster sustainable economic development, create wealth and improve infrastructure connectivity in Asia by investing in infrastructure and other productive sectors and promote regional cooperation and partnership in addressing development challenges by working in close collaboration with other multilateral development institutions such as the International Finance Corporation (IFC).

The Fund will benefit local projects in Emerging Asia by attracting additional capital inflows from global long-term investors. The Bank also expects long-term income and capital gains by providing not only capital to the Fund, but also by participating in co-investment opportunities with both the Fund and IFC.

The Fund is an Emerging Asia growth-focused private equity fund with a returns-driven strategy, selectively investing growth capital across multiple sectors with IFC over a five-year period. Each investment generates both financial returns and positive and measurable development impact.

It will attempt to achieve its portfolio diversification through industry, geographic and vintage diversification. The target sectors of the Fund are infrastructure, financial institutions and manufacturing, agribusiness and services.

The investment strategy of the fund is in line with IFC’s, which combines an asset strategy with a sector strategy. The asset strategy consists of providing support to regional champions and well-established local players seeking to expand outside of their home markets and across the region, continuing support to existing clients through capacity building programs and offering end-to-end financial solutions and building relationships with new players in technology and other innovative sectors.

The sector strategy is designed to maximise macro-economic impact and job creation while minimising sector-specific risks. In line with this approach, the Fund aims to build an overall investment portfolio that strikes an appropriate balance between the financial and real sector.

The Fund is managed by IFC Asset Management Company (AMC), a wholly-owned subsidiary of IFC. As the manager of the Fund, AMC mobilises and manages capital for investment in developing and frontier markets.

It was created in 2009 to provide investors with access to IFC’s emerging-markets investment pipeline and to expand the supply of long-term capital to these markets, enhancing IFC’s development impact and generating profits for investors by leveraging IFC’s global platform and investment standards and approaches.

As of March 2017, AMC managed 13 investment funds covering equity, debt, and fund of funds, having raised approximately US$9.8bn. Investors in funds managed by AMC include sovereign wealth funds, pension funds, multilateral and bilateral development finance institutions, national development agencies, and international financial institutions.

Published in Dawn, July 23rd, 2017