FMO impact loan fund reaches $250m first close

European pensions are more comfortable with debt than equity when investing in the developing world, the Dutch institution's investment management chief tells us.

Frontier market agribusinesses are among those that will receive loans from a fund being raised by FMO Investment Management, an affiliate of the Dutch development bank that has reached a $250 million first close.

Managed together with Dutch asset manager NN Investment Partners, the NN-FMO Emerging Markets Loans Fund has a target of $500 million and a hard-cap of $750 million. The vehicle aims to assist efforts to reach the UN’s Sustainable Development Goals, with a particular focus on those relating to ending poverty and hunger, providing affordable clean energy and creating jobs.

To date, the fund has secured an anchor investment from Swedish insurance company Alecta and additional commitments from NN Investment Partners’ parent insurance company, NN Life. It is also backed by an anonymous Dutch foundation and the IMAS Foundation, an affiliate of the INGKA Group that owns Swedish furniture retailer IKEA.

“Emerging-market private loans is… I wouldn’t say easy, but less difficult.”
Yonne Bakkum

Yonne Bakkum, chief executive and managing director at FMO Investment Management, told Agri Investor that the Emerging Markets Loans Fund was launched about three years ago, with European pensions and insurance companies a primary target for the fundraising.

Bakkum said that growing attention on the SDGs, the Paris climate-change agreement and the increasingly high profile of impact investing have all helped FMO’s fundraising efforts in recent years. However, she said, because both impact investing and emerging-market illiquid investments are new to many investors, a significant amount of time has been devoted to educating them.

“Many of the institutions here in Europe are quite vocal around contributing to the sustainable development goals, so this provides them with a good-quality vehicle to do so,” Bakkum said, adding that FMO and NN Investment Partners are talking to institutional investors in the Netherlands, France and the Nordic countries about commitments to the fund.

“For many institutional investors, at least in Europe, emerging-market private equity is very difficult to allocate to,” she noted. “Emerging-market private loans is… I wouldn’t say easy, but less difficult.”

Heavy on agri

Alongside loans to financial institutions and clean energy projects, FMO expects  agribusiness to make up about a quarter of the fund’s investments, she said. She added that the fund would aim to finance a wide range of agribusinesses, in sectors stretching from primary production to processing and logistics. Four of 17 loans already offered from the vehicle are related to agribusiness, according to Bakkum.

Geographically, Bakkum highlighted that Latin America has been a focus of FMO’s past agricultural investment and that the DFI also has a strong focus on Sub-Saharan Africa, though the Emerging Market Loan fund’s mandate stretches across emerging markets.

Loans from the vehicle to agribusinesses will average about $10 million, with terms of between five and eight years, Bakkum said. Interest rates on the loans will likely range between 3.5 percent and 8 percent over LIBOR, depending on the country, sector, loan structure and strength of the borrower.