The African Private Equity and Venture Capital Association (AVCA) has released the second of its special report series exploring the ‘Currency Risk Management Practices in African Private Equity and Venture Capital’, alongside The Currency Exchange Fund (TCX) and MFX Solutions.
The African Private Equity and Venture Capital Association (AVCA) has released the second of its special report series exploring the ‘Currency Risk Management Practices in African Private Equity and Venture Capital’, alongside The Currency Exchange Fund (TCX) and MFX Solutions.
Overall, the survey demonstrates that although currency risk is present throughout the investment process, it was most impactful for both fund managers and LPs at the time of portfolio exit.
The report identified that foreign exchange volatility and foreign currency shortages remain some of the biggest challenges facing private equity investors in Africa. For example, 64% of LPs and 86% of GPs surveyed perceived currency risk as important or very important when investing in African private equity.
The report also found that over half of LPs and GPs confirmed that currency risk has slightly or significantly increased in the last 2-4 years, making it a significant challenge for private capital.
The survey correspondents also highlighted the challenges related to the mitigation of currency risk in Africa, with 94% of participating GPs citing the high cost of hedging facilities as the main factor constraining adoption.
