African Agriculture Fund L.L.C. (AAF)

AAF first closed at US$ 151 million in November 2010 with a target final closing at US$ 300 million by end 2011. The Fund’s key theme is African food production and it will target this opportunity by focusing on three sectors: primary (arable and plantations); secondary (processing and animal feeds); and services/ infrastructure (storage, fertilisers, chemicals, packaging and other inputs).

For commercial capital, the Fund has a unique structure with a class of shares (C Shares) that offers both risk mitigation and an accelerated return of capital and profit up to a 6% hurdle, afforded by the A Shares. This means that for investors in C Shares, at the point in time when they have received their capital and an annualised 6% return, the A Shares will have received no return of capital (whilst the B Shares will have only received a return of just greater than 50% of capital). The A Shares, which have been subscribed for in an amount of US$ 50 million by European Governments and West Africa Development Banks, provide a downside insulation for commercial investors seeking both a first loss protection but accompanied by the expected returns typically delivered by private equity investments.

Financial description

The Fund is targeting a gross return of 17% in US$ with an 8% hurdle. Non-DFI investors are encouraged to invest through the C Shares which provide a preferred return. The result is that when the C Shares have received a return of capital and 6% hurdle, the A Shares (which effectively cede their returns to this point) will have received nothing. A:C ratio is 1:1.