Private equity funds are facing significant challenges as they seek to attract scarce capital for investments into emerging and frontier markets. Top-down investors may be uneasy with the macro environments of certain markets due to concerns about government stability, civil unrest, and fragile regulatory frameworks. These are risks that private markets find very difficult to hedge and present a specific challenge to emerging market private equity funds.
MIGA offers a solution to these issues by providing its guarantee coverage to private equity funds that meet our eligibility criteria and commit to our environmental, social, and anti-corruption policies. Those funds are offered a master contract of guarantee that reserves MIGA capacity and provides up-front pricing to the General Partners of the fund for a specific period (two to three years). The fund managers may use this contract to raise funds from institutional investors who are interested in taking the commercial risks (and returns) associated with these investments. We then provide political risk insurance to each underlying investment using our regular underwriting process.
MIGA has provided master contracts to several private equity funds investing in sub-Saharan Africa, especially in the agribusiness sector. We recently collaborated with the Overseas Private Investment Corporation to offer reinsurance on a master contract that will support investments in 13 countries across sub-Saharan Africa.