Indonesia: A multisectoral fund to support companies with high growth potential

Falcon House Partners (FHP) is an independent asset manager based in Jakarta and Singapore. It operates in venture capital, mainly in Indonesia, via significant minority holdings or majority holdings in SMEs and midcaps. After having raised and fully deployed a first USD 212m fund in 2012 (Falcon House Partners I - FHP I), in November 2016 FHP conducted the final closing of a new vehicle (Falcon House Partners II - FHP II) totaling USD 400m. The investment strategy of the FHP I & II funds is to operate in various sectors that benefit from the growth in Indonesia’s economy, by supporting companies that are family-owned or still not very institutionalized, and which have strong growth potential to become groups that meet the most demanding governance and management criteria.

Falcon House Partners Fund II (FHP II) is the second fund deployed by the Falcon House Partners management team. FHP II aims to build an equity or quasi-equity investment portfolio in 10 to 12 companies, with unit tickets ranging between USD 25m and USD 50m. This will allow it to have significant minority holdings or majority holdings in SMEs and midcaps. For Proparco, it involves a USD 15m equity investment alongside several institutional investors, including several Development Finance Institutions, such as IFC, DEG and FMO. FHP II is a multisectoral fund which aims to invest in companies operating in the food, agribusiness, health, logistics, education, retail trade, hotel, tourism and financial sectors. The final beneficiaries targeted by the fund are rapidly growing Indonesian middle classes which do not have access to a range of services to meet their needs, especially outside the island of Java.

The project’s main expected outcomes are as follows: i) the creation or safeguarding of several thousand jobs; ii) an impact on the development of capital markets in a context where the private equity market is underdeveloped and where there is extremely limited access to equity financing, with FHP also being one of the only funds operating in the midcap segment; iii) support for sectors which generate impacts thanks to the fund’s operations in several subsectors, such as health (hospitals, clinics), education (universities, schools) and agribusiness. This operation is giving Proparco the opportunity to support the private sector in a geographical area where venture capital is still underdeveloped and, in this respect, promotes access to long-term capital for companies. Finally, this investment is allowing Proparco to enter a high-potential market which benefits from little investment by venture capital players. This entry would be difficult to achieve directly without a partnership with an investment fund.