Polar Star plans ag-focused PE fund

The South African hedge fund plans to invest in farms and processing companies from a fund targeting returns of between 8 and 12 percent.

Cape Town, South Africa-based hedge fund Polar Star Capital is in the early stages of establishing a private equity unit to invest in agriculture, a Polar Star representative confirmed to Agri Investor in an email.

The firm, a commodities-focused spin-out from Rand Merchant Bank established in 2010, reportedly plans to raise $115 million in addition to using its own capital to buy small South African farms processing companies and potentially buy commodities directly.

Polar Star director Murray Derksen, who worked in agricultural finance at Rand, told Bloomberg that the fund will target an internal rate of return of between 8 and 12 percent.

“We looked at the increase in corn demand globally, which is about twice South Africa’s annual production. That growth will need to access land and infrastructure in Africa,” he said.

The representative declined to comment further for this article.

The fund will join a number of recently-launched vehicles supporting agriculture in Africa, which is home to about 60 percent of the world’s non-cultivated land, according to the FAO. The African Private Equity and Venture Capital Association reported a rebound in overall private equity activity in Africa last year.

Last month, pan-African private equity firm EXEO Capital reached a $100 million first close on its second food and agribusiness-focused fund. The fund has a hard cap of €200 million and plan to focus on mid-cap opportunities in the processed foods, proteins, dairy and other sectors of east Africa and west Africa.

Also in February, Pearl Capital Partners, a Uganda-based private equity firm, reached a €12 million first close on its Yield Uganda Investment Fund, which has a €25 million target and plans to make about 20 investments in locally-managed business throughout the agricultural value-chain in the east African nation.

In January, AfricInvest teamed with French investor Bpifrance to launch a fund that has raised about €80 million to support small and medium-sized French and African businesses investing in Africa.