Aureos Capital (www.aureos.com) at the start of November launched its $400m sub-Saharan private equity fund focusing on small- to mid-market companies. Aureos Africa Fund was launched after feasibility and due diligence studies funded by the Commonwealth Secretariat (www.thecommonwealth.org). It will provide long-term capital and support for promising and successful businesses across the continent.

Aureos has already raised $322.8 mln, a quarter of which came from financial institutions, including European pension funds. It is expected to close fundraising at the end of 2009.

The fund is the largest private equity vehicle targeting smaller African businesses. Aureos targets returns over 20% but charges management fees of 2.25% per year (an industry standard is 2%) to cover the many investment professionals deployed to identify suitable opportunities in Africa.

It has spent $106 mln on nine businesses in financial services, technology/media/telecommunications, fast-moving consumer goods, building products, real estate development and agriculture. The companies operate in more than 15 different countries, reflecting the regional character of most of the portfolio companies.

Sev Vettivetpillai, chief executive of Aureos Advisers, said: “It’s 18 months since we started the fund and we raised a very significant $300m plus for Africa in a very challenging market when most investors were pulling out of financial markets. But Africa is the next frontier market that is going to benefit from emerging market flows.”

Commonwealth Deputy Secretary-General Ransford Smith hailed the fund’s launch. He warned that investment in Africa was “critical” if recent development gains were not to be lost amid the current worldwide recession.

The Aureos Africa Fund makes initial investments of up to $10 mln each in small- to mid-size companies which have a strong potential to expand to pan-African businesses within 2 to 3 years via “buy and build” strategies and through carefully executed organic growth.