Wednesday, October 21, 2009

MEDA launches new private equity fund

MEDA Investments Inc., a private investment company and pioneer in microfinance, has launched a new fund for high net worth investors.

The Sarona Frontier Markets Fund is a fund-of-funds that invests in microfinance as well as small- and medium-sized businesses in developing countries.

Serge LeVert-Chiasson, vice-president of MEDA Investments and Sarona Asset Management, says the new fund will use the services of “the world’s best and most promising small- and medium-sized enterprise fund managers who have a clear double and triple bottom line focus and will provide a risk/return profile that is attractive to commercial investors.”

MEDA (Mennonite Economic Development Associates) is a not-for-profit company dedicated to helping the lives of families who are living in poverty in the developing world through investment, primarily microfinance. MEDA is currently active in 44 countries and makes investments based on its network of agents and partners around the world, LeVert-Chiasson explains. “Those partners provide us with really good insight into foreign markets and we’ve discovered that microfinance has really come of age. You’re seeing a lot more interest from Wall Street and some of the European financial centres. They see both the opportunity to make a successful return on their investments combined with a positive social impact.”

“Our target market is high net worth individuals who are interested in being part of the solution; they are seeking commercial returns but also high social and environmental impacts in their investments in the developing world,” LeVert-Chiasson adds.

MEDA’s history dates back to 1953 when a group of Mennonite businessmen invested in a dairy farm in Paraguay, an early investment in a socially-motivated small business.

“We’ve been investing in these markets for decades and we’ve discovered that investing in developing markets is much less risky than people are led to believe,” he adds. “You have to make intelligent bets on people and markets and culture, which many Canadian investors don’t have the capacity to do because you have to have an understanding of the local culture.”

The closed-end fund is available only to accredited investors in both Canada and the United States and has its first closing date on December 31, 2009. LeVert-Chiasson says MEDA would like to offer the fund to smaller investors; however legislation in the U.S. and Canada prohibits public fund offerings with illiquid assets.

Investors interested in supporting MEDA’s work can do so through its program of promissory notes, LeVert-Chiasson adds. “The downside is that interest rates are lower but it does allow investors who may not fit the definition of accredited investors to support our activities.”

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