LeapFrog ‘wrapping things up’ on Fund IV raise

LeapFrog Investments is in the process of completing fundraising for its latest flagship offering, which has benefitted from the strong early performance of its first investments, according to global head of investor solutions Yalin Karadogan.

Emerging Consumer Fund IV launched with a $1 billion target in 2022 and continues the firm’s strategy of seeking financial inclusion and healthcare impact in emerging markets. The long-time impact firm announced in October last year that the fund would hit a final close at the end of February.

“We are not fundraising any longer in terms of new outreaches,” Karadogan told New Private Markets. “There are currently several final legal processes and approvals we need to go through with a select group of LPs.

“We are wrapping things up. It [final close] is expected to take place in the next couple of months.”

Karadogan declined to comment on how much the firm has raised. The announcement in October said that a “significant share” of the fund’s $1 billion target had been collected. LPs in the fund include Eli Lilly and Company, International Finance Corporation, European Investment Bank, Van Lanschot Kempen, Ford Foundation, Temasek and Prudential Financial.

Karadogan said that inking a few deals while still seeking more capital has helped encourage LPs to commit. “Because fundraising processes for a lot of funds in PE take longer than they did a few years ago, investors considering a final close have the ability to take a really good look at what’s in the fund already before making the decision whether or not to commit to the fund.

“This gives investors an opportunity to really see the early performance of the portfolio companies in the fund, such as the three investments in Fund IV that are off to a very strong start.”

LeapFrog has so far made three investments from the fund, all of which have delivered strong early performance figures, according to Karadogan. Indian healthcare company Redcliffe received investment in June 2022 and has since tripled its revenues. Sun King, which provides financing for solar home systems in Africa, received investment in December 2022 and has recorded an annual revenue growth of 30 percent in US dollars. A deal for insurtech company Bolttech was only completed in September, but the firm saw revenue growth of over 40 percent across all of 2023.

Several managers have suggested that completing a few deals has helped encourage LPs to commit to impact strategies in the current fundraising climate. EQT’s head of impact Jen Braswell, for example, said as much after the firm closed its long hold impact strategy on €3 billion earlier this month.

Unlike EQT, which was marketing a brand-new strategy, LeapFrog can point to a track record in the impact space. Emerging Consumer Fund III, the current offering’s predecessor, closed at $743 million in 2019. It achieved revenue growth of 22 percent across the portfolio in 2023, Yalin said, though he suggested that this did not give LPs the same insight as making investments from the current fund.

“You could look at Fund III and say ‘Hey, given the strategy is the same, I have a feeling for what kind of investments Fund IV is going to do,’ but I actually see, talking to investors, that they do get good value from knowing what the companies actually are that the fund has invested in and see actual early trading performance. It’s a bit like getting to look inside the tin rather than reading what it says outside,” Karadogan said.