TBN National Conf. '11 - Sev Vettivetpillai - Aureos Advisers

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Sev Vettivetpillai couldn't join us at the conference so his colleague, Geetha Tharmaratnam (Global Head of ESG) presented the work of Aureos Capital, focussing on small to medium-sized businesses and finding the 'missing middle'. Includes principles and case studies.

Be sure to check out the other presentations, videos and audio recordings from the conference at www.tbnetwork.org/uknc11/media

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  • Initial Investment: Aureos Legacy Fund in 1998, follow on investment through Aureos Africa FundCreation of strong linkages from rural to urban societies, creation of a recognised Kenyan brand, exporting to East Africa, Southern Africa, Egypt and the Middle East
  • TBN National Conf. '11 - Sev Vettivetpillai - Aureos Advisers

    1. 1. Aureos Capital<br />Sev Vettivetpillai, CEO/ CIO<br />1<br />Private Equity Creating Embedded Enduring Development Impact in the Emerging Markets<br />Building the Impact Venture Ecosystem<br />19/05/2011<br />
    2. 2. 2<br />Filling the “Missing Middle” in Emerging Markets<br />Aureos is an emerging markets (EM) focused global private equity manager, with US$1.3Bin funds under management and 260 deals completed in the small to medium-sized business segment in the last 2 decades<br /><ul><li>Aureos developed a platform approach, investing in low middle-income countries, utilizing the more developed human and capital infrastructure of these countries to expand businesses into low-income countries
    3. 3. Aureos’ investments in small and medium sized enterprises span multiple crucial sectors. This sector diversification has compounded the development of the SME sector which represents an overwhelming proportion of enterprises in Emerging Economies, often providing the highest employment rates and significantly contributing to GDP output. By investing in these businesses, Aureos is working to fill the “Missing Middle” in the Emerging Markets.
    4. 4. The Aureos investment team is highly experienced in developed markets and emerging markets, possessing a diverse range of skills, backgrounds and nationalities. The team is based in 29 offices globally. Experience has shown that investee companies are attracted to Aureos’ hands-on support, value addition and access to its global network of sector specialists, investment/operating partners, and commercial relationships.
    5. 5. Signatory to the UN PRI, embedding strong Environmental, Social and Governance standards. </li></ul>We feel that the Aureos platform has become a trusted brand primarily based on our long term vision to build a world class small and medium-sized focused PE firm, the motivation of the global team of partners and the blue chip governance model that we have adopted<br />
    6. 6. 3<br />The global focus on small to medium-sized businesses<br />In many markets, Aureos is one of very few players with a concentration on deals covering small to medium-sized businesses. The firm is definitely unique as a provider of such capital on a global scale<br />Underserved segment<br />Specialized experience<br />Aureos has had nearly two decades of specialized expertise serving small and medium-sized businesses, in a hands-on engagement model which positions us favourably in deal sourcing and execution as we have come to be seen as a preferred partner<br />The underlying growth in emerging markets where we invest is partially fuelled by the emergence of a new entrepreneurial class and an increasing number of skilled management teams looking to scale up and professionalize their businesses<br />Growing class of emerging entrepreneurs<br />3<br />
    7. 7. A strategy to scale-up businesses coupling our PE+ principles with risk and sustainable investing practice, backed by a seasoned team<br />Acting as a growth partner, and using portfolio management practices, Aureos Identifies strong companies and furnishes them with the tools to grow through<br /><ul><li>Global collaboration with colleagues internationally
    8. 8. Empowerment of management
    9. 9. Instilling modern managerial disciplines</li></ul>Aureosfocuses on 3 distinct risk mitigation practices, namely, diversification, later stage investments and cash yield to mitigate the 5 broad types of risk to which its is exposed<br /><ul><li>Currency risk
    10. 10. Liquidity risk
    11. 11. Country risk
    12. 12. Business risk
    13. 13. Sector risk</li></ul>Risk mitigation<br />PE+<br /><ul><li>As a signatory to the United Nations Principles for Responsible Investing (UNPRI) Aureos has adopted best practice in Environmental, Social and Governance (ESG) practice
    14. 14. Aureos believes its ESG focus results in better returns</li></ul>Seasoned team<br />Aureos offices globally are staffed with experienced professional who:<br /><ul><li>Are of local origin and are well connected in each country where we invest
    15. 15. Adhere to a culture of entrepreneurialism, with which we engage our investee companies</li></ul>Sustainable investing<br />An investor initiative in partnership with UNEP FI and the UN Global Compact<br />4<br />
    16. 16. A financial ecosystem - appropriate financing is necessary for the appropriate stage of the development of the value chain<br /><ul><li>Small and Medium Sized enterprise account for up to 90% of the formal and informal businesses in the Emerging Markets, contributing to a significant GDP output and employing the most people. The latent potential in developing this sector has been well recognised.
    17. 17. The funding needs of these businesses differ by size of company and by stage of development of the enterprises</li></ul>5<br />
    18. 18. The challenging barriers to growth when developing SMEs<br />Scale<br />Poor management discipline<br />Management capability<br />Lack of governance, systems and processes<br />Difficulty accessing capital markets<br />Access to markets<br />Access to growth capital<br />Time<br />
    19. 19. Brookside Dairies <br />Quality & inclusiveness – “Milking” the value chain<br /><ul><li>Founded in 1993 following the deregulation of the Kenyan dairy sector, Brookside is the leading milk processor in Kenya
    20. 20. Directly employs 1,500 Kenyans and indirectly supports 150,000 Kenyans in the value chain including farmers, suppliers, retailers, transporters, distributors. Further employment of 10,000 people in Tanzania and Uganda through regional procurement, processing and distribution networks
    21. 21. Milk sourced from over 100,000 farmers in Kenya, 95% of whom are small scale producers
    22. 22. Unique dairy model within Africa – successful implementation of sourcing milk on scale from small farmers, well developed cold chain with rural collection points and on-site testing for quality
    23. 23. Success factors: strong management team, utilisation of technology, defined expansion strategy, constant innovation to manage supply and demand volatility
    24. 24. Active management of challenges in the value chain, Brookside offers farmer outreach, training and small loans in conjunction with another Aureos investment (Equity Bank)</li></li></ul><li>Dipped Products<br />From Plantation to Product - scaling globally<br /><ul><li>Leading large scale glove manufacturing company in Sri Lanka, internationally reputed firm producing approx 5% of global glove production
    25. 25. Sustainable Certification: UN Global Compact, CEO Water mandate, the tea factories/ plantations are certified with Global GAP (Good Agricultural Practices in global markets), the rubber plantations are accredited by the Forest Stewardship Council (FSC).
    26. 26. Unique “Firstlight’ initiative integrates sustainable sourcing with CSR programmes for Sri Lanka’s rubber smallholders DPL smallholder programme “Firstlight” is empowering over 3,000 small-scale rubber farmers by purchasing at regular and fair market price, providing education, technical help thereby them to tap into their potential and building capacities for their communities
    27. 27. First company to produce certified fair trade gloves
    28. 28. Aureos exited from this investment in 2010.</li></li></ul><li>Africa<br />Thank YouAureos Advisers Limited<br />Asia<br />Pancake House, Philippines<br />Latin America<br />This financial promotion is issued by Aureos Advisers Limited which is authorised and regulated by the Financial Services Authority (“FSA”). All Aureos Funds (the “Funds”) are defined as “Unregulated Collective Investment Schemes” (“UCIS”) and the promotion of a UCIS either within the UK or from the UK is severely restricted by statute. Consequently, this document is only made available to professional clients and eligible counterparties as defined by the FSA and also to persons of a kind to whom the Fund may lawfully be promoted by an authorised person by virtue of Section 238(5) of the Financial Services and Markets Act2000 and COBS 4.12.1R. Shares or Interests in the Funds should only be purchased by persons with experience of participating in unregulated schemes and any other person who receives this document should not rely upon it.<br />

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