The International Finance Corporation (IFC), the World Bank’s private sector lending arm, has announced that it is planning to launch an IFC Asia Fund with a US$1-1.5 billion target.
Since the 1980s, the IFC has invested in emerging market private equity funds, and in 2000 created a group dedicated to investments in funds. Since then, the IFC has backed roughly 10 percent of funds entering emerging markets, and currently holds a US$3 billion portfolio committed to about 180 funds worldwide. Around 50 percent of the funds backed by IFC are run by first time managers.
The proposed IFC Asia Fund will mobilize capital for investment alongside existing IFC holdings in emerging markets across the Asia-Pacific. This new fund would be managed by the IFC Asset Management Company LLC (AMC).
Created in 2009 to expand the supply of long-term capital to developing markets, the AMC mobilizes and manages third party funds for investment, and encourages larger institutional investors to invest alongside the IFC.
According to the IFC, the IFC Asia Fund will consist of 20 percent IFC investment at an overall cap of US$200 million. Located in one of the IFC member-states, the fund will focus on several sectors including manufacturing and services, infrastructure and financial markets.
“IFC’s investment will send a strong signal of IFC’s commitment to the region, reinforce investors’ confidence and encourage investment in the region,” the IFC said.
By co-investing in new IFC Portfolio projects, the fund is expected to be exposed to all sectors within the infrastructure, manufacturing, agribusiness and financial markets that the IFC is currently invested in.
12 Billion Yuan Investment
The IFC also announced plans late last month to invest 12 billion yuan (around US$2 billion) in China’s interbank bond market. The agreement between IFC and the People’s Bank of China will enable the IFC to diversify its financial assets and enhance liquidity management while increasing the stability to offer RMB-denominated loans for private sector development in China.
According to the IFC press release, “This agreement will significantly expand our ability to offer local-currency financing to support private sector development in China. It complements our ongoing efforts to deepen China’s domestic capital markets, a strategic priority for IFC.”
Other projects the IFC is expected to launch this year in East Asia & the Pacific include initiatives with the Myanmar government to improve the nation’s business environment and strengthen trade finance; investing in Chinese efforts to mitigate climate change; and help Laos improve environmental and social standards in the nation’s hydropower sector.
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