Insights from Capria’s research of 85 principals and partners.
Since launching in late 2015, Capria has received applications from nearly 300 experienced and aspiring local impact fund managers around the globe. To better understand the fundamental components of the best impact fund managers in the world, we performed a deep analysis of 85 principals and partners from the top 36 fund managers from our past three investment cycles. Below are our key findings, globally and for specific regions.
Global: Emerging market fund managers typically have characteristics that correlate with the success of investing in developed markets
Historically, entrepreneurship and engineering have been thought to be strong backgrounds for venture capital fund managers. Research from Duke University’s Fuqua School of Business focusing on the performance of US-based Venture Capital and Private Equity funds confirmed these hypotheses, concluding that first time VC funds achieved stronger returns when a higher percentage of fund managers had entrepreneurial backgrounds and engineering degrees.
In this study’s sample, approximately 12% of fund managers were entrepreneurs themselves and 11% had engineering degrees. We have found these characteristics to be consistent and actually more prevalent with emerging market fund managers – 19% of our shortlisted fund managers have had entrepreneurial experience, prior to starting an impact fund and 21% of fund managers are equipped with engineering degrees. Impact fund managers have frequently referenced that their experience in both entrepreneurship and engineering helped to develop robust processes and standards for investment screening and portfolio company support.
Africa: Women leading the way and a need for GP Support
Approximately 41% of all applications to Capria have come from Sub-Saharan Africa, demonstrating that there is strong demand for GP support in the region. African fund managers typically came from a finance background but few had a history of exits. Additionally, of all our target regions, Sub-Saharan Africa has the highest percentage of female applicants; nearly 33%. According to a study on fund managers by gender, just under 8% of equity fund managers globally are women. Two of the African funds in the Capria Network (Alitheia IDF and Edge Growth) have female principals and one Capria network fund, Alitheia IDF, is an all-female management team.
Furthermore, there are several initiatives run by organizations in Africa with the purpose of empowering female executives and managers in Private Equity and senior leadership across industries. According to McKinsey’s 2016 report, ‘Women Matter Africa’, there are strong correlations with female board and executive committee representation and financial performance. We hope that Africa’s relative equity with regards to gender in the investing field will lead to a more dynamic entrepreneurial and investment ecosystem over time.
Latin America: The most developed local ecosystem of our target markets
Latin America was an outlier compared to other emerging markets, primarily in terms of the sophistication of the local ecosystem. First, high quality Latin American applicants were more likely to have received their undergraduate degrees locally (77% vs an average of 50% for other regions), potentially indicating that higher education opportunities for persons interested in investing were more available. Additionally, 93% of Latin American fund managers had experience working in the region. Also, Latin America was the only market where more people had MBAs than not.
Finally, every fund manager which reached our short list from Latin America had at least 1 prior exit, with over 65% at 4 exits or more. Many fund managers are leveraging their traditional investing experience to transition into impact investing, including Performa Investimentos, a Brazilian investment firm in the Capria network that is raising its third fund.
