A team spun out of Carlyle Group Inc. said they’ve got backing from the founders of the US private equity firm as well as Nigerian billionaire Aliko Dangote for a new Africa-focused fund.

Carlyle co-founders David Rubenstein and Bill Conway are among investors in the Alterra Capital Partners fund, Partner Genevieve Sangudi said. The PE firm plans to raise as much as $500 million in the coming months and has garnered $140 million in its first closing, she said.

While large investors including Carlyle, Blackstone Inc. and KKR & Co. have retreated from Africa, smaller firms are seeing opportunities as startups mushroom to fills gaps on a continent that lacks financial and logistical infrastructure. Alterra plans to invest in the telecommunications, technology, logistics, healthcare, consumer and retail sectors, Sangudi said.

“This is an excellent time to put money to work in Africa as many of the current macro themes provide attractive potential investment opportunities,” Sangudi said in an interview. “For example, the power challenges across Africa provide opportunities to invest in private distributed power solutions, while technology continues to drive Africa digital transformation at a rapid pace.”

Other investors in Alterra’s fund include Standard Bank Group Ltd., International Finance Corp., Norfund AS, Germany’s Deutsche Investitions- und Entwicklungsgesellschaft GmbH and Allianz SE’s AfricaGrow fund, Sangudi said.

In mid-2020, during the height of Covid-19, Washington-based Carlyle spun off its $700 million sub-Saharan African fund to its local investment team. The new firm, called Alterra, took over management of Carlyle’s assets.

Alterra, which also includes two other founding partners — Eric Kump and Bruce Steen — has exited six companies and managed to return about $600 million to investors, said Sangudi. The team has invested about $1 billion in 23 companies in Africa.

Recent sales include logistics firm J&J Group to DP World Ltd., oil and gas company Assala Energy Holdings Ltd. to Maurel & Prom SA, agri-tech company Tessara Ltd. to Agrofresh Solutions Inc. and Global Credit Rating Co. to Moody’s Corp.

Alterra has a team of 17 people, including two partners — Paul Maasdorp and Bryce Fort — who joined from Africa-focused private equity group Emerging Capital Partners LLC.

The firm will face competition from other Africa-focused companies such as Helios Investment Partners LLP and Adenia Partners Ltd., which have doubled down on the continent, adapting their operating models and building local capacity.

Last year, firms raised about $7.6 billion for African investments, according to the Africa Private Capital Association. About 82 exits were recorded, the association said.

More from the interview:

• The biggest challenges for private equity investors remain currency risk, and illiquid and small domestic capital markets that contribute to the cost of doing business in many cases, Sangudi said.
• “The new fund will target hard currency-denominated and hard currency-linked investments that offer a hedge against currency depreciation on the continent.”
• Alterra will look to construct a portfolio in which at least 50% of its investments are made to companies that generate the majority of their revenue in US dollar, Sangudi said.

--With assistance from Rob Dawson.