Ethos joins TRG as it eyes starting ‘thematic’ funds
• Launch of new private equity funds for Pan-African region would require capital raising
Ethos Private Equity has completed a deal that will see the local alternative investments firm’s buyout by New Yorkbased TRG (The Rohatyn Group), with the result that it will effectively become the US firm’s Pan-African arm.
In a statement on Monday Ethos and TRG announced the completion of the transaction announced in November 2022 for an undisclosed sum, thanks to approval from local competition authorities, the Reserve Bank as well as shareholders, fund investors and partners in the business.
Ethos CEO Stuart MacKenzie, who will become a partner on TRG’s global executive committee responsible for Africa, said the newly expanded group is now looking at launching additional “thematic private equity” covering the Pan-African region, which will require additional capital raising.
“We can now get on with executing a strategy of building out both products and solutions in Africa in line with TRG’s overall strategy, to provide a suite of alternative investment products and solutions to investors interested in investing in emerging markets and particularly in Africa,” MacKenzie said in an interview.
“Private credit, renewable energy, agriculture and forestry, infrastructure, thematic private equity ... all become things that we will start to investigate for the continent more broadly.”
The combination of TRG, which has about $6bn in assets under management (AUM), with Ethos will boost the group’s total AUM to almost $8bn.
However, MacKenzie says the potential launch of new thematic private equity funds would require additional capital raising from institutional investors, though he declined to give indications of how much money would likely be required for the potential new funds.
“Launching new funds would require us to go to market for those funds — we’d need to bring new capital into those products,” he said. “We don’t necessarily believe bigger is better. We want to have the right capital structures for the opportunities that we would like to invest behind. We’ve got to match capital to opportunity and you have to be flexible to be able to do that.”
TRG, whose investment teams have capabilities spanning public equities, corporate and sovereign debt, private markets and infrastructure, has about $2bn invested in its forestry and agriculture platform alone.
Potentially marrying that sector expertise with Ethos’s geographical experience in Africa, where it has made more than 150 investments since being established in 1984, could see a new Pan-African forestry and agriculture fund being launched.
“We’re certainly looking at the opportunity to partner with their forestry and agriculture platform,” MacKenzie said. “They obviously have domain expertise in forestry and agriculture but no geographic experience [in Africa]. We don’t have domain expertise but obviously we have geographic expertise.”
Another potential growth area for TRG’s newly formed Pan-African forum will be to secure additional advisory contracts for managing existing private equity funds on the continent. Ethos’s management team has already built up considerable knowledge and experience in this domain after being appointed by Brait to manage its portfolio in 2019 and also securing the mandate to manage Ninety One’s Africa private equity funds in late 2020.
“We now have a proven track record of doing that across multiple scenarios, the Ninety One Africa private equity fund being one of those scenarios,” Mackenzie said.
“TRG has a proven ability to do that [in Africa] and across emerging markets as a whole. that We see’that we ll continue as a big to opportunity pursue.”