Could Abraaj’s difficulties cool interest in investing in poorer markets?
Healthcare Nova has been reporting regularly on the worsening troubles facing Abraaj, the under-fire global investment institution investing in markets across Africa, Asia, Latin America, the Middle East and Turkey. It has displayed impressive – and laudable – ambition, striving to assemble massive healthcare networks in larger, poorer, cities. But as other investment firms now pick over the bones of what is left of Abraaj’s grand designs, will this put other large investors off putting money into healthcare in emerging markets?
A source watching the Abraaj situation closely gives us a qualified ‘no’ in response to that question – but he’s still expecting a knock-on effect. He tells us: “First and foremost, it takes out a really big player – assuming it is taken out. Abraaj were a possible exit for a lot of smaller funds and it’s one less option; small healthcare companies will find it harder to sell as Abraaj were always one of the names in the mix.
“Will it have a cooling effect generally? I’ve not witnessed any myself but the IFC made a big bet on Abraaj and not everyone will be happy with that decision now – what is happening will be fuel to the critics of that strategy. It will certainly be reflecting on why it put so much money in. They didn’t only put money into Abraaj of course, but it was a big flagship. So it might have a cooling effect on the IFC, and development finance institutions (DFIs) generally will take note of what’s happening.”
A source close to Abraaj believes larger, more distant funds especially may be put off. He tells us: “Those raising funds to invest in emerging markets right now will probably find that doors which had started opening in places like the US will have slammed shut.
“Large institutional and pension funds might be thinking very carefully now, having looked at what’s happening and feeling like they dodged a bullet (by not investing). But given the other pools of capital out there with a mandate to invest in these markets, there’s still plenty money looking for a home. Three or four were raised in the last few years and that investment will continue to happen.”
A spokesperson for the European Bank for Reconstruction and Development declined to comment on Abraaj specifically, but was keen “to reinforce the need for investment in healthcare which has direct impact on the quality of life in many countries”. She added: “In addition to providing (money) the EBRD also works with governments in countries where we invest to develop legislative frameworks which enable robust financing structures, with the participation of private sector, for complex hospital projects as well as other infrastructure.” Reading between the lines, that’s a suggestion that for EBRD at least, they want things to be seen as business as usual.
As for the IFC, it has been contacted for comment – and as of the time of going to press, have yet to respond.
We would welcome your thoughts on this story. Email your views to David Farbrother or call 0207 183 3779.
