The world may not yet be at peace, but we can’t shake this good feeling. Two months ago, we set off into 2018, looking forward to an auspicious year. That sense of growth and anticipation hasn’t diminished:
  • Sarona Frontier Markets Fund 2 just rounded the 3-year mark since its final close and already its LPs are strongly out of the J-curve, posting increasing gains. We hope to soon issue the first distribution.
  • Our growth pipeline looks increasingly strong, and we’re hiring A-team professionals to keep pace. We’ll likely add NYC to our current Toronto/Amsterdam footprint.
  • Public sector leaders – sovereign, the UN and other multi-laterals – are calling to explore partnerships with our funds.
  • In Q1, we published research on FX risk mitigation for private equity investors in Emerging Markets. (Thanks to USAID for funding the research.)
  • Next quarter, we’ll publish research on demand and supply of trade finance for SMEs in Emerging Markets. (Thanks to Global Affairs Canada for that funding.)

Government of Canada announces $1.5 billion investment in Innovative Development Finance

In its February 27th federal budget, the Gov’t of Canada allocated an additional $1.5 billion for blended finance and sovereign loans. This is excellent news for Sarona and other private intermediaries that invest in Frontier and Emerging Markets.
Private investors are naturally skittish about markets they are unfamiliar with, especially those that have traditionally been thought of as too risky.  But governments have the ability to move markets like never before: by peeling off some of the risk, or boosting the expected return, the public sector is able to drive private capital to countries and sectors that they have previously avoided. Developing countries need more private capital investment, and many G20 governments talk about making that happen. (And then they talk some more, and more …) But Canada’s commitment will actually help get it there. It will also catapult Canada back to a leadership position among public sector players.

By investing alongside private capital, on terms that enhance the risk-adjusted rate of return, Canada will align private capital to achieve the Sustainable Development Goals.

Bravo Canada. You’re back!

What about women?

March 8th marked International Women’s Day – a global celebration of women’s achievement. We’ve come a long way… According to the World Bank, in Sarona’s target markets, women represent 37% of the workforce and, increasingly, outnumber men in higher education. This growing talent pool presents unique opportunities for business and development. Yet women continue to be held back by wage inequality and social pressures. The World Economic Forum, in its 2017 Global Gender Gap Report, calculates that gender parity in the workplace is still over 200 years away. That is unacceptable, so we’re doing something about it.
Last year, we piloted a program with MEDA. With USAID support, they offered our portfolio companies a 3-step Gender Equality Mainstreaming Program. (That’s NGOs lingo; we have no idea what it means, but it’s a cool program):
  1. Assessment: An expert in ‘women in business’ interviewed each of the participating business leaders for several hours to assess the company’s understanding of gender issues and gender strategies.
  2. Deep dive: These experts then visited each company for several days to undertake a deeper assessment, resulting in a series of gender strategies that the business could implement.
  3. Implementation: Each company that wished to take the next step then received assistance (both personnel and cash) to implement the agreed gender strategies. One example is a women-focused HR policy that ensures staff is paid according to merit rather than gender.

The point is this: We can talk all year long, but unless we create change, change won’t happen. We ourselves are a cracked vessel. (Leonard Cohen would say that’s how the light gets in.) But we are committed to doing our best to shorten that 200-year horizon to gender parity.

Last year, we piloted a program with MEDA. With USAID support, they offered our portfolio companies a 3-step Gender Equality Mainstreaming Program. (That’s NGOs lingo; we have no idea what it means, but it’s a cool program):
  1. Assessment: An expert in ‘women in business’ interviewed each of the participating business leaders for several hours to assess the company’s understanding of gender issues and gender strategies.
  2. Deep dive: These experts then visited each company for several days to undertake a deeper assessment, resulting in a series of gender strategies that the business could implement.
  3. Implementation: Each company that wished to take the next step then received assistance (both personnel and cash) to implement the agreed gender strategies. One example is a women-focused HR policy that ensures staff is paid according to merit rather than gender.
The point is this: We can talk all year long, but unless we create change, change won’t happen. We ourselves are a cracked vessel. (Leonard Cohen would say that’s how the light gets in.) But we are committed to doing our best to shorten that 200-year horizon to gender parity.

Some argue that we should invest only in women-owned businesses. Our view is different. We’d rather invest in strong businesses with strong leaders and then seek changes. We seek to help our GPs and portfolio companies understand gender issues and develop strategies to empower women, and specifically, to empower women into business leadership.

Our team is growing and our systems are improving  

We are pleased to announce that Victoria Harvie will join the Sarona team this month as our Corporate Accountant, based in our Canadian office. And, after an extended search, we’ve chosen Burgiss as our database and fund/portfolio monitoring platform. Implementation is underway.

Sarona named to the 2018 ImpactAssets Global 50  

Sarona is very pleased to be named to the 2018 ImpactAssets Global 50: that’s seven years in row. We’ve been named to the list every year since its inception. According to ImpactAssets, the list is designed to “identify experienced impact investment firms… these 50 firms have been selected to demonstrate a wide range of impact investing activities across geographies, sectors and asset classes.”

We have so much more to share, but we’ll let you get on with your day. Please feel welcome to join us for our annual Sarona Investor Day on May 14th on the margins of EMPEA/IFC Global Private Equity Conference in Washington: GPs, LPs, great speakers and a reception to cap it off. Let us know if you’d like an invitation.

A new SFMF2 investment: capturing growth opportunities in the Brazilian tech sector

We are pleased to announce that on January 19th, we closed the fourth secondary acquisition in SFMF2: a BRL 13mm (ca. $4mm) investment in Oria Tech Secundario Fund (Oria Fund), managed by Oria Capital. This transaction enabled us to buy into a diversified portfolio of six companies at an attractive valuation while increasing SFMF2’s exposure to an important high-growth region.

The Oria Fund’s portfolio consists of six mid-market technology companies – five in Brazil and one in Argentina – serving the needs of SMEs in fast-growing sectors, including fin-tech, healthcare, retail, telecom and fleet management. Most companies have a specific focus to offer high-quality, affordable products to boost SME growth.

Take Pixeon – a software provider addressing the imaging and workflow needs of diagnostic healthcare providers in small and mid-sized hospitals in Brazil, Chile and Argentina. Responding to strong demand, Pixeon’s revenues grew 270% from 2014 to 2017. Oria Capital aims to assist Pixeon in expanding the company’s operations across Brazil.

Oria Capital’s founders have been active in the Brazilian tech sector since 1990. The full transaction, comprising six companies, closed with BRL 71mm (ca. $22mm) in November 2017. The portfolio has shown strong revenue growth in the past years despite the macro headwinds in Brazil, and we expect strong growth going forward as well. Sarona was selected together with only two other highly respected investors from the region to participate in this opportunity.

Sarona’s experience is paying off: SFMF2’s performance is on track and on an upward trend

We are delighted to bring you this update on Sarona and its latest fund. Our experience confirms Sarona’s investment thesis: focusing on fast-growing mid-market companies in Frontier & Emerging Markets (“F&EM”) can deliver attractive risk-adjusted returns.

We have recently reported on strong performance by Sarona Frontier Markets Fund 2 (“SFMF2”)

“The fund is now convincingly out of the J-Curve, with portfolio valuations on an upward trend and growing quarter by quarter”

By the end of June 2017, the Total Value to Paid-In ratio increased to 1.11x from 1.05x at the end of March.  As our underlying fund managers complete their value-add programs and the portfolio companies grow in value, we expect this positive trend to continue into the future.

Portfolio companies are growing in value and demonstrating results

It took Sarona less than three years to commit ca. 90% of SFMF2 and, of the $150mm raised, over 70% ($93mm) is now deployed and growing in high-quality investments in Africa, Asia and Latin America. Many of these are leading companies in their respective sectors.  While it’s still early in the life of the fund, we have already seen seven exits (four full and three partial) that resulted in a gross TVPI of 2.2x in USD.

Take Lilas in Tunisia as a company example.  This is a firm founded in 1994 by its current CEO, Jalila Mezni, who was recently included in the Forbes list of the 100 most influential women in the Arab world.  Ms. Mezni created the brand in response to the growing domestic demand for quality and affordable personal care products, such as diapers, feminine hygiene products, disposable tissues and towels.  Now the company has achieved nearly 60% market share in Tunisia and exports throughout the Maghreb and West African regions. In 2016, Lilas generated a consolidated net profit of about $13mm on a growing turnover of ca. $135mm. Sarona invested in Lilas in 2015 through Abraaj, a leading global emerging markets GP.  Since then, the company has almost doubled, positively impacting SFMF2’s valuation.  Lilas is only one of the 91 companies active in SFMF2’s portfolio – all striving to achieve growth that matters.

What about the risks?

Our experience proves that risks associated with investing in Frontier & Emerging Markets are often misperceived and lower than many investors imagine.  For example, Lilas’ strong performance was not affected by recent political instability in Tunisia, which has had little overall influence on the local smaller businesses and growing domestic consumption.  In fact, so far, North Africa has been our best-performing region.

Turkey is another example of a country where investment risk can be misperceived. Despite ongoing political instability, the Turkish economy has been performing well –GDP growth remains high at 5% p.a., second only to China and India among the G20, and the Istanbul Stock Exchange posted a five-year high earlier this year.  Sarona’s Istanbul-based fund manager, Pera Capital Partners, has already invested in four sector-leading growing companies and is now accelerating its investment pace in response to increased deal flow.

Private equity investing has a long-term horizon and can weather temporary macro instability better than other asset classes.  Selecting capable managers, able to source high-performing companies in growing sectors of the economy and able to add operational value, is key for risk mitigation as well as performance.

We are happy with the managers we selected for SFMF2:

  • Selection and diversification are reducing manager risk as well as FX and market performance volatility
  • 100% of the funds are performing in line with their originally stated strategies
  • the write-downs ratio is exceptionally low: only five companies (ca. 2% of total portfolio value) are expected to return significantly less than investment cost

FX remains a major source of concern for investors and Sarona continues to work with EMPEA and other partners to finalize its research study on how to mitigate this risk through creative and innovative mechanisms. The final report will be published by year-end.

The outlook for F&EM is bright

From a macroeconomic perspective, the outlook is bright – emerging markets have and will continue to grow much faster than developed markets. Investor confidence is rebounding and capital flows are increasing. Stock markets in many of Sarona’s markets posted five-year highs in 2017.  Opportunities are plentiful and the valuations of private equity are still low compared to the US and Europe, making now a good time to buy.

Sarona honoured as ‘Best for the World’ for exceptional positive social and environmental impact

Sarona was recognized by B Lab as Best for the World for the third year in a row!  In 2012, the inaugural list was sourced from approximately 500 B Corps.  This year, Sarona has again been recognised in the Overall Best for the World category by scoring in the top 10th percentile of more than 2,000 Certified B Corporations. The B Impact Assessment evaluates environmental performance, employee relationships, diversity, involvement in the local community, the impact a company’s product or service has on those it serves, and more.

We were also recognized as Best for the World in the following categories:

  • Best for Workers
  • Best for Customers
  • Best for the Long Term (corresponding to the Governance impact area)

Sarona’s tagline is “Growth that Matters” and this distinction from B Lab  reinforces our belief that sound investments supported by strong Environmental, Social and Governance (ESG) practices can make a significant difference in local communities.

B Lab is an independent non-profit organization founded to create and support a global community of Certified B Corporations that meet the highest standards of verified social and environmental performance, public transparency and legal accountability. The selection criteria for 2017 Best for the World Lists are available here:

Sarona awarded top scores by PRI for excellence in ESG integration

Sarona has received top scores from the United Nations-supported Principals for Responsible Investment (PRI), following the assessment of its latest Transparency Report. We have received the highest score of A+ for Strategy and Governance as well as for integrating ESG factors into our Indirect Private Equity investment process. We also received an A in the Direct Private Equity category.

We are committed to a process of continuous enhancement of our internal ESG capabilities and to encouraging the investment industry to adhere to best practices. Sarona has been a PRI signatory since 2010. The PRI is a network of more than 1,750 organizations, from over 50 countries, representing approximately US$70 trillion. Signatories commit to contributing to the development of a more sustainable global financial system by incorporating ESG factors into their investment practice.

Announcing Sarona’s 2017 Values Report

We believe that applying ethical, social and environmental values to each investment decision builds a better world and helps us generate attractive returns for our investors.

We strive to influence the investment industry to incorporate best practices and work with fund managers and investee companies to improve their Environmental, Social, Governance & Impact (ESG&I) performance. To report on our progress, since 2012, we have been publishing an annual Values Report.

In the 2017 Values Report, we consolidated the data on 22 IRIS metrics, measuring the impact of over 200 of our portfolio companies across more than 50 countries in Frontier and Emerging Markets. We also included 11 case studies that provide a window into how our capital is creating impact on the ground.

A few highlights from the report include:

  • Sarona is leading the way on how progress towards the SDGs is measured and managed. We have recently signed the Stockholm Declaration alongside leading European investors and government entities, representing over $200bn AUM. Co-led by the UN Global Compact and GRI, and supported by UNPRI, this initiative represents a first-of-its-kind commitment by private and public sector players to work together on setting measurement and reporting standards
  • Sarona evaluates how its investments contribute to the SDGs.  We mapped each of our 200+ investee companies’ alignment with the individual Goals and found that we are most closely aligned with Goal 8 (Decent Work and Economic Growth), Goal 16 (Peace, Justice and Strong Institutions) and Goal 5 (Gender Equality)
  • We take a disciplined approach to ESG integration. In 2016, Sarona completed the development of the Social and Environmental Management System to ensure that our investee funds and companies understand the ESG issues and implement best practices
  • Our investments continue to generate economic opportunities and improve lives in local communities. In 2016, Sarona’s portfolio companies employed over 127,000 people, 27% of whom were women; the vast majority of the companies provide high-quality jobs, benefits and working conditions. 85 million people benefitted from our companies’ activities. 100% of the companies are in full compliance with local labour, tax and environmental regulations and two-thirds of the companies have an official policy documenting their commitment to the environment

To read the full report, please click here.

Sarona signs the Stockholm Declaration

The investment community, including large institutional investors, is increasingly adopting the UN Sustainable Development Goals (SDGs) as a framework for sustainable investing. According to a recent report, the SDGs present a $12 trillion investment opportunity.  However,  for the capital to flow, the world needs a  common framework on how to manage, measure and report on progress towards the Agenda 2030.

In an effort to address this challenge, Sarona signed the Stockholm Declaration.  Co-led by the UN Global Compact and GRI, and supported by the UNPRI, the initiative known as “Action Platform Reporting on the SDGs” represents a first-of-its-kind commitment by leading investors and government entities to work together on setting measurement and reporting standards for the SDGs.

The Declaration includes the following:

“… Achieving the SDGs will require an annual investment currently estimated to $5-7 trillion which urgently demands the mobilization of mainstream capital. Investors should see the 17 goals as 17 business opportunities, where investors can move beyond exclusion criteria to inclusion based investment strategies focused on investing with a positive impact on the SDGs.

The 17 SDGs provide an opportunity for responsible investors to establish how they incorporate issues such as climate change, working conditions and board diversity into their investment approach to minimize negative impacts and foster sustainable development.

The SDGs also provide investors with an insight on how government decision-making and company behaviour will shape the development of the global economy over the next 15 years. By setting policy makers’ priorities, the SDGs could be a key driver of global GDP growth and source of investment opportunities.

To achieve real impact on the ground, focused and coordinated effort and accomplishments are key. This however needs to be complemented by a set of well-defined and relevant reporting indicators linked to the SDGs to support investors and companies in achieving the Goals. Impact and real change should be measured and managed.”

To read the full Declaration and for the list of signatories: Stockholm Declaration.

Sarona tackling FX risk in F&EM

Fear is a strange thing – never more so than for private equity investing in emerging markets.  Investors fear what they don’t know, and local currency risk is a big unknown.  With nearly 75% of F&EM PE funds being denominated in USD, local currency depreciations can have a material impact on investor’s returns.

It’s clear that existing hedging tools don’t work to reduce currency risk for private equity investors.  These tools are designed for debt, where cash flow amounts and timing are easier to predict.  For private equity, we need new tools and new thinking.  That’s why Sarona has joined forces with USAID, EMPEA and Crystalus to seek innovative solutions that, by mitigating FX risk, could catalyse private capital flows into developing economies.

This study is an important first step to unlocking billions of dollars currently on the sidelines as it underlines the substantial demand from private institutional investors for local currency risk mitigation and provides clear and compelling guideposts in developing solutions.  The first progress report of the Sarona-led research project “Expanding Institutional Investment into Emerging Markets Via Currency Risk Mitigation” is now available for review and we welcome your comments and suggestions on the matter.

Read the full report here.

SFMF2 – On track, with some exciting exits and more to come

It is still early days, but we are pleased with the investment pace and delighted with the results achieved so far, especially in view of the considerable headwinds the portfolio has faced from the strong US Dollar.

Recently, we have had the pleasure of announcing some very positive news to our investors:  three successful exits from companies in India, Malaysia and Nigeria, as well as earlier exits from two companies in Algeria.  These exits resulted in a cumulative 2.4x multiple.

It took Sarona less than three years to commit over 90% of its second fund and, of the $150mm raised, 60% – or $91mm – are now deployed and growing in high-quality investments in Africa, Asia and Latin America.

At the same time, we were pleased with new additions to the SFMF2 portfolio:

  • In April, we were able to close on our second direct co-investment, Transfast, a remittance company servicing primarily the flows of expatriate workers and their families across Frontier and Emerging Markets. SFMF2 invested $5mm alongside Apis, a financial sector fund in our portfolio.  The company is currently present in over 120 countries, and its services are available to 88% of the world’s population
  • All our GPs continue to invest apace and SFMF2 now includes close to 100 companies, all striving to achieve Growth that Matters

We continue to monitor the portfolio closely and expect 2017 to finish as well as it started.


As investors learn about Sarona’s success in the Blended Finance space, and about our dedication to development finance for profit and purpose, we begin to receive requests to explore new opportunities in closely related fields such as

  • Trade finance: the Canadian government has provided a grant to MEDA, an international development firm and one of Sarona’s shareholders, to fund a feasibility study on trade finance in F&EM.  Sarona will co-ordinate a pilot project to explore how to increase the profitable deployment of short-term loans for working capital needs of SMEs across the developing markets we already operate in
  • Climate change: the Canadian government and Sarona continue to engage at multiple levels with the intent of eventually launching a blended finance vehicle to support innovative climate change mitigation and adaption investments across the developing world
  • African health: discussions with public and private sector investors have begun for the design of a fund focused on improving access, quality and efficiency of healthcare services across the African continent

We are fully committed to responsible growth and, as we consider new opportunities, we will continue to serve our investors’ interests first and foremost.

A Sarona-led initiative to mitigate FX risk in private equity portfolios

USAID (U.S. Agency for International Development) has agreed to sponsor a project led by Sarona, titled “Expanding Institutional Investment into Emerging Markets Via Currency Risk Mitigation,” to better understand the challenges involved and to identify potential FX risk-mitigation mechanisms that could catalyse private capital flows into developing economies.

At Sarona’s invitation, EMPEA (the Emerging Markets Private Equity Association) surveyed 119 individuals active in EM PE to better understand practitioners’ current use of hedging instruments, as well as the features they would seek in an ideal hedging solution.  The survey’s findings feed into a research and development process to identify, develop and pilot a new hedging solution / mechanism that could help mitigate currency risk for private equity investors in emerging markets.

The first progress report is available in digital format upon request.

Sarona on the Convergence Blended Finance platform

In April 2017, Sarona was included on the platform as Convergence officially launched its Investment Network, an online matchmaking platform that connects private, public and philanthropic investors with one another to invest in blended finance deals in Frontier and Emerging Markets.

Convergence was launched in Addis Ababa, Ethiopia, in the summer of 2015, during the third International UN Conference on Financing for Development.  Sarona was humbled by the recognition it received from the Canadian government and the World Economic Forum as one of only two asset management firms identified by Convergence at the time.  Case study: Sarona Frontier Markets Fund 2.

Nomination for the RI Europe - 2017 Best Responsible Investor Report by an Asset Manager

We are honoured to have been shortlisted by RI for the 2017 Best Responsible Investor Report in the Asset Manager category (Medium & Small Firms, AuM below $25bn).  The award is sponsored by Responsible Investor, dedicated to responsible investment, ESG and sustainable finance for institutional investors globally.  We are currently working hard on updating the latest Sarona Values Report, which will be published by the end of June.

Marina Leytes joins Sarona Asset Management

Kitchener, Canada & Amsterdam, the Netherlands – 09 May 2017


Sarona Asset Management is pleased to announce that it has appointed Marina Leytes as European Head of Investor Relations, Business Development and ESG & Impact.  She has already started contributing to our efforts from New York City, and will be based in our Amsterdam office as of ‎June 1st.

Marina has more than 15 years’ experience working in the alternative investment space, having previously worked in NYC for a $3 billion AUM real estate fund of funds now part of Carlyle.  She holds a Master in Economic and Political Development from Columbia University.  After concluding her studies, she dedicated herself to Impact Investing, collaborating with organisations such as the World Economic Forum, ImpactAlpha and The ImPact.