LeapFrog’s $500m commitment marks Temasek’s largest impact-fund investment

The fresh capital from Temasek will be used to anchor LeapFrog Investment’s future funds focused on Asia and Africa.

Impact investor LeapFrog Investments has received $500 million from Temasek Holdings, the largest capital commitment the firm has received from an LP and the Singapore investor’s largest single commitment to an impact fund.

Capital from Temasek will be used to anchor LeapFrog’s future funds focused on Asia and Africa. Under the pair’s “strategic partnership”, it will also acquire a minority stake in LeapFrog, according to a joint statement this week.

LeapFrog would not disclose exact figures on Temasek’s shareholding or its fundraising targets. The vast majority of the investment is earmarked for future funds, which the firm is “thinking about actively”, Nick Moon, a partner at LeapFrog, told Private Equity International.

“Temasek are an exceptionally high-quality partner and they’ve committed a record-breaking amount of capital to an impact manager. We are very focused now on growing the business and continuing our specialism in financial services and healthcare.”

LeapFrog will continue to be managed and controlled by its team of partners, and Temasek will take one non-executive seat on the firm’s management board following the investment.

Along with anchoring the next generation of LeapFrog’s funds, Temasek’s capital will also be used to build out the firm’s investment teams and expand into new specialist areas, growing its expertise in digital finance and consumer insights, Moon said. He added that the firm is also planning to have a dedicated team that works entirely on understanding consumer behaviour within its portfolio.

Growing AUM

LeapFrog gathered $744 million, surpassing its $600 million target for its latest vehicle, LeapFrog Emerging Consumer Fund III, in May 2019. It raised $400 million for LeapFrog Financial Inclusion Fund II in 2014, and gathered $350 million for an Africa-focused separate account with Prudential Financial in 2016, according to PEI data.

LPs in LeapFrog’s funds are repeat backers, including global insurers Admiral, AIG and AXA; pensions and asset managers such as Nuveen, Partners Group Impact, Christian Super and HESTA; as well as development finance institutions DEG and International Finance Corporation.

LeapFrog’s primary investment sectors – healthcare and financial services – have seen accelerated growth due to the pandemic, Moon said. The firm’s portfolio companies have grown on average at 30 percent per year since investment, he added.

Rapid urbanisation, digitisation and emerging consumers in high-growth markets in Africa and South and South-East Asia have been key investment themes for LeapFrog, which has been investing since 2007.

The firm closed a slew of investments and exits in 2020 including leading a $55 million investment round into Medgenome in India, backing a $54 million round for insurtech company PasarPolis in Indonesia, as well as investments in life insurers SoftLogic Life in Sri Lanka, AIICO in Nigeria and ICEA Lion in Kenya.

“We’re looking forward to being able to get into the market again and to work with pipeline opportunities,” Moon said. “The need for purpose-led investments is more important than ever after what we’ve all been through with covid-19 globally.”

Temasek’s head of impact investing, Benoit Valentin, said in a statement that its partnership with LeapFrog “underscores Temasek’s commitment to investing for impact”.

Temasek will look to deploy more capital across leading impact funds that are aligned with its objectives, a spokesman for Temasek told PEI.

Asian focus

Two-thirds of Temasek’s S$306 billion ($227 billion; €191 billion) portfolio was invested in Asia as of 31 March. It invests across six sectors: financial services; TMT; consumer and real estate; transportation and industrials; life sciences and agribusiness; and energy and resources. It has backed funds managed by Asian agribusiness-focused Trendlines Group, Italian manager Fondo FSI, and venture capital firm Monk’s Hill Ventures, according to PEI data.

Via its philanthropic arm Temasek Trust, Temasek in 2019 launched impact fund ABC World Asia, which raised S$385 million. The fund will back companies focused on climate and water solutions, food and agriculture, health and education and smart and liveable cities, according to a statement.

“At this point, we view ABC and LeapFrog as the two core pillars of our impact investing strategy,” the Temasek spokesman said. “Both are focused on delivering impact outcomes in addition to financial returns.”