Star turns

As musician and campaigner Bob Geldof launches a $1bn private equity fund, his long-time ally in philanthropy, Bono, is learning that limited partners demand results.

In August it emerged that Irish rock star-turned-philanthropist Bob Geldof is co-sponsoring a $1 billion Africa-focused private equity fund, dubbed “8 Miles Fund I ‘A’”.

Geldof is joined by former Doughty Hanson senior principal Mark Florman, who – during his seven-year stint as a senior principal at the London-based private equity firm – co-founded the Centre for Social Justice in 2004 – a UK think tank aimed at reducing poverty – and founded Build a School in Africa in 2002.

The fund’s first close is expected early in the fourth quarter with more than $150 million in committed capital, according to a source with knowledge of the matter. The International Finance Corporation, a development finance organisation owned by the World Bank, and CDC Group, a development-focused fund of funds owned by the UK government, are understood to be considering commitments. They would be joining another DFI, the Africa Development Bank, which this summer approved a $50 million commitment to the fund.

8 Miles – which is named after the distance between the southern tip of Europe and northern Africa – will take a multi-sector pan-African investment approach, according to a statement from the ADB, which added that the fund will likely make 20 investments, ranging from $15 million to $80 million, with an expected average size of $32 million.

The fund marks a shift for Geldof, who has traditionally used his profile to draw attention to reducing poverty in Africa primarily through charitable donations. Private investment approaches – such as those which have for many years been promoted by development finance institutions like CDC and IFC – have now attracted the frontman’s attention as a way of developing Africa’s economy. Earlier this summer Geldof addressed delegates at the launch event for CDC’s annual development report, as previously reported in PEI, praising the organisation’s work.

Geldof, who raised millions through the live aid concerts in the 1980s, has faced criticism that the money raised by the event was not diligently monitored to ensure it reached the intended sources. Zambian economist Dambisa Moyo, for instance, last year told the Carnegie Council for Ethics in International Affairs that past aid drives have supported corrupt African regimes, adding “a lot of the aid money that goes to Africa actually ends up, at best, financing non-productive use”.

Critics of aid may, therefore, be pleased that Geldof has redirected his approach towards the continent by turning to the private equity model of investment.

The travails of Geldof’s long-time ally in philanthropic exercises – U2 frontman Bono – will serve as a reminder, however, that while celebrity profile may help with fundraising, investment performance is another story.

Bono’s media-focused private equity firm, Elevation Partners, is managed by four business and private equity professionals alongside Bono himself. It raised $1.9 billion in committed capital in 2005 and has for the last five years targeted investments in the $50 million and $300 million range.

The firm, which boasts Silver Lake Partners’ co-founder Roger McNamee as a managing director, has experienced mixed performance to date. The firm has achieved two exits: the $620 million sale of video game developer VG Holding to trade buyer Electronic Arts, a deal which generated a 2x multiple; and the sale of handheld computer business Palm to Hewlett Packard, which made only a narrow profit of around $25 million on a $460 million investment.

In September Elevation’s LPs recently denied the firm’s request for an extension of its debut fund’s investment period. The investors told Elevation it “needed to concentrate on the portfolio, get some realisations and return cash to them and hopefully in a year if that all works [the firm] would be able to go out and raise capital and have a Fund II”, Kevin Albert, Elevation’s former fundraising chief, told PEI.