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LeapFrog ends Fund III investing with three financial services deals

The impact manager waits for regulatory approval and begins to plan Fund IV.

LeapFrog Investments is expected to close on three deals in the coming weeks that will invest the remaining capital from the firm’s emerging markets impact strategy.

The final investments are set to be in the financial services sector, with two companies based in Asia and one in Africa, according to sources familiar with the firm’s plans. The sources declined to name the companies while LeapFrog awaits regulatory approval of the deals.

Closing the deals will end the investment period for LeapFrog’s $743 million Emerging Consumer Fund III, which launched in 2017 with a $600 million target. The fund became one of the largest investment vehicles ever raised by a dedicated impact manager, investing in financial services and, for the first time, the healthcare sector.

LeapFrog has begun planning to launch a successor vehicle this year with a larger fundraising target, sources told New Private Markets.

According to LeapFrog’s website, previous Fund III investments have helped scale companies that provide banking, insurance and healthcare services in developing countries where customers live on less than $10 a day.

In emerging markets, increasing access to mobile phones has allowed for the penetration of digital banking services, including micro-lending and online transactions. Through Fund III, LeapFrog has invested in Zepz (formerly WorldRemit), a global remittance provider offering digital money transfer services. The firm also invested in NeoGrowth, which provides online micro loans and insurance products to small businesses in India.

LeapFrog’s new focus on healthcare seeks to provide essential services in underinvested markets. The firm’s investments in this sector includes Goodlife Pharmacy, an East African healthcare provider; the pan-African medical and surgical supplies distributor Pyramid Pharma; and Ascent Meditech, an orthopaedic equipment manufacturer in India.

Social entrepreneur investors Andy Kuper and Jim Roth co-founded LeapFrog in 2008. News of the firm’s launch broke when former US president Bill Clinton endorsed LeapFrog’s mission during a speech at his Clinton Global Initiative foundation.

LeapFrog has received $1.6 billion in commitments to its three fund strategies and reports 26 percent annual portfolio growth, according to the firm’s website. Fund I raised $150 million and Fund II collected $400 million.

Investors span global markets and include insurers, pensions, foundations, family offices and development finance institutions. Insurers including Admiral, AIG, Hannover Re and Prudential Financial, as well as the Rockefeller and Ford foundations, committed to LeapFrog’s third fundraise.

Last March, Temasek, a government-owned investment company in Singapore, committed $500 million to future LeapFrog funds while purchasing a minority stake in the firm.