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September 9 2013

LeapFrog announces first close of Fund II at US$204 million

  • LeapFrog Fund II will focus on eight markets in Africa and Asia where financial services growth is nearly 18% per annum and 4x global nominal GDP growth
  • Investors include major insurance groups – Swiss Re, PartnerRe, MetLife Inc., Prudential (USA), XL Group and Achmea – and global banks and asset managers such as JPMorgan Chase & Co. and TIAA-CREF

London, Monday 9th September 2013

LeapFrog Investments, the emerging markets fund manager, today announced the initial raise of US$204 million for its second fund. The fund will invest in companies in Africa, South Asia and Southeast Asia that provide financial services such as insurance, savings, pensions and investment products to emerging consumers. Several of the world’s largest insurers, reinsurers, banks and asset managers have invested in the first round.

“The entry of these leading financial institutions indicates the increasing attractiveness of the emerging consumer segment – the millions of people eager to join the middle class but who are not there yet,” said Dr. Andrew Kuper, LeapFrog Investments’ President and Founder. “There are 1.9 billion emerging consumers in LeapFrog’s target regions, and their spending power is forecast to rise from $2 trillion today to $5 trillion in the coming decade. Financial services are crucial springboards for households and businesses, but access is very limited. LeapFrog backs the best companies to serve this vast and untapped market.”

Insurance groups that have invested in the initial raise include MetLife Inc., Prudential (USA), XL Group, Achmea, PartnerRe and Swiss Re. Global banks and asset managers that have committed include JPMorgan Chase & Co., Christian Super and TIAA-CREF. The fund also obtained backing from five of the world’s leading development finance institutions: CDC, DEG, the European Investment Bank, FMO, and Oikocredit.

The capital was raised in just eight months. Many participants are repeat investors from LeapFrog’s first fund, a US$135m vehicle, with some now doubling or tripling their allocation.

“The emerging consumer represents a striking growth opportunity,” said Lata Reddy, Vice President at Prudential [NYSE:PRU]. “Financial services penetration within this segment is low, the need for products is high, and competition is still limited. LeapFrog Investment’s differentiated strategy puts it at the forefront of emerging markets private equity. The team has demonstrated that investments in financial services for the emerging consumer can yield performance while transforming communities.”

“We’re very focused on approaches that leverage global finance and our capabilities to address long-standing economic challenges around the world,” said Peter Scher, Executive Vice-President, JPMorgan Chase & Co [NYSE:JPM]. “Our partnership with LeapFrog Investments is a perfect example of this effort. Leapfrog’s strategy presents a compelling investment opportunity to financially empower millions of people in historically underserved communities in Africa and Asia.”

To date, LeapFrog’s portfolio companies have reached over 18 million people across 13 countries with financial products. LeapFrog’s track record includes partnering with major brands such as Mahindra IBL and Shriram CCL in India, ARM in Nigeria and Apollo IL in Kenya.

The new fund aims to make equity investments of up to US$60m, and will continue to focus on LeapFrog’s priority markets of Indonesia, the Philippines, India, Sri Lanka, Kenya, South Africa, Nigeria and Ghana. Financial services growth in these markets in 2012 was on average 17.4%, over four times nominal global GDP growth, representing a sustained bright spot for emerging markets.

LeapFrog Investments will continue to be guided by a business philosophy of profit-with- purpose, combining strong financial returns with robust social impact. “Crucially, 12 million of the 18 million people our companies have reached so far are emerging consumers, living on less than US$10 per day,” said Kuper. “We are demonstrating that smart businesses that provide empowering products actually grow faster and are more competitive than their peers.”

“LeapFrog Investment’s differentiated strategy puts it at the forefront of emerging markets private equity. The team has demonstrated that investments in financial services for the emerging consumer can yield performance while transforming communities.”

Lata Reddy, Vice President, Prudential