This new fund will provide expansion capital to commodity producers in Africa, many of whom are already receiving trade finance from Heriot, and aims to achieve unlevered annual returns in excess of 40% net to investors. It has a one year lock-up, followed by semi-annual liquidity.
Heriot launched an African trade finance fund (Fund I) in July 2007 which has focused on providing trade finance to mid-sized independent mining companies in South Africa. Fund I raised assets totalling $82m, returned 7.30% in 2007 and 23.93% YTD (to August).
Whereas Fund I provides trade finance to fund the product from the producer to the customer, Fund II provides capital for the purchase of equipment to increase production by upgrading existing plant and equipment, or purchasing new plant and equipment, as well as working capital to fund business development.
The Heriot African Special Opportunities Fund (Fund II)'s initial target markets include manganese, chrome, sugar, cocoa butter and iron ore -markets in which Heriot already has ongoing projects and expertise, with a current emphasis on manganese and chrome (stainless and alloy steels typically contain alloying elements such as manganese and chrome). The managers claim to have few competitors in this environment.
"This fund has huge logistics capacities," said Nicholas Mavroleon, Heriot's representative, to Opalesque. "The fund also has proprietary deal flow which is an offshoot of the existing fund (Fund I). Customers are already lined up as Heriot is already in business with them. It's like old fashion merchant banking."
The risk management technique enables the fund to diversify risk. It is ......................
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South African manager Heriot launches African metals and commodities...
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