Tuesday 29th June 2021
This month, we interviewed new member Educate Global, a private equity firm that invests in essential sectors in emerging markets, financing value chains that lift up women and the real economy. Managing Director Sandrine Henton spoke with us about the firm’s investment thesis, its first fund, and how it’s building the talent pipeline for female fund managers.
Alliance: What does Educate Global (EG) do?
Sandrine Henton: Educate Global is a private equity fund that invests in medium-sized businesses in the Health, Nutrition and Education sectors in the East Africa region. Health, nutrition and education are essential sectors, but they are chronically underserved in the region. Investment in emerging markets, particularly in Africa, typically goes to energy, infrastructure and financial services. Food, health and education have always been at the bottom of the barrel in terms of financing. But it’s these essential sectors that will power recovery from the pandemic. That’s where we will see the vast majority of jobs and transactions that move money through the real economy.
Alliance: Your focus is on health, nutrition and education—why? What is your investment thesis, especially with regard to gender equity?
SH: Women are the employees in these sectors — nurses, farmers, and teachers. Women are also the key decision-makers in these sectors; they pay the healthcare and education bills and buy the groceries. And so, women will be the beneficiaries of investment in these sectors as both workers and consumers. We are also targeting to invest in women-led businesses, and help our portfolio companies improve D&I at the board level and throughout their organizations.
Alliance: What funds do you have, and what are their goals?
SH: Eventually, we plan to have regional teams leading regional funds investing in the three essential sectors across Africa and the Middle East. Our first fund, Education Enabler Fund I, is focused on East Africa. Education accounts for just 2 percent of invested capital globally. Yet, by 2030, we will have 4 billion children in the world — a huge portion of that in Africa, which has a young, growing population — that will not go beyond the first year of secondary school. It’s high time we bring investment capital to the education sector. It impacts so many critical parts of the future, from reproductive health to migration to climate change.
Alliance: Is there an opportunity for other Alliance network partners to take part in the Education Enabler Fund I?
SH: Absolutely. Alliance members can take part as partners. So far, many of our first investors have been banks. We were one of the first funds selected for an investment allocation from the African Women Impact Fund, a fund-of-funds managed by Stanlib-Multi Manager section teams, part of the Standard Bank Group in collaboration with the UN Economic Commission to Africa which is targeting one billion dollars in the hands of women fund managers in Africa. We are also partnering with Goldman Sachs on a campaign to spark new conversations within the investment community, through Launch with GS, its own billion-dollar investment in women-led businesses and women fund managers in emerging markets. It’s great to see the investment banking sector mobilized to support fund managers in sectors and regions they find it hard to reach themselves.
Local commercial banks can also help by lending to the education sector. During the pandemic, many students in Africa were out of school for a long time, and many might not return post-pandemic if out-of-work parents can’t afford school fees. So, many private schools that served middle class children are now struggling financially. We are looking at financing solutions to consolidate the market and restructure the education sector in Africa, in order to strengthen it. We’ve got to prop up the education sector, and banks have a huge role in that.
Alliance: How are you applying a gender lens to your work? (Women led businesses, representation of women in mgmt./staff; products/services for women’s markets, etc).
SH: Our organization is more than 65 percent women owned. We also have equal gender representation at all levels — within the team, on the board and on the investment committee. We encourage our portfolio companies to do the same within their own organization.
In terms of the fund itself, the sectors we invest in are also the sectors in which women are the employees and key decision-makers as consumers.
Alliance: What is EG’s internal diversity and inclusion strategy? Do you have initiatives to get more women into leadership positions?
SH: To get more women into leadership roles, we have focused heavily on succession planning. It took us two years to get to 50 percent women in the team because the talent pool with investment experience in the region is mostly made up of men — but we got there. Now, we are recruiting women at the Principal level with the expectation that they will build investment track records in Fund 1 and then become a partner in Fund 2. That way, women can gain the full experience they need to lead funds. This is a way to widen the talent pool and enable women to gain the track records they need to lead, knowing that by and large they aren’t starting at the same place as white men in terms of opportunity.
We’ve also created incentives that encourage a sense of ownership at all levels of the organization. Everyone on the team has access to equity ownership and carried interest. This incentivizes talent to come on board, develop good governance and feel real ownership over the success of the firm as an asset manager longer-term.
Alliance: Have you seen a difference in performance with funds that have a higher percentage of women on the senior investment team?
SH: The performance data for women-led funds is so well-versed already, I won’t even go into it — we all know why we should invest in women-led funds. But another change we are seeing is in the size of the funds. I think the industry is waking up to the fact that having just a couple of very, very large funds covering an entire region is limiting, and there is a discrepancy between how much these funds can deploy and how much they are raising. It’s really time to bring mid-market funds to Africa because those are the funds that support the real economy, which is where women work and live. I believe this is where the next alpha is — with women-led, mid-market funds that invest in the real economy.
To get there, we have to change how we do due diligence. We have to start investing in first-time teams. Investing in successor funds often excludes women fund managers by definition.
Alliance: In subsequent funds, do you intend to target women entrepreneurs, especially the very small entrepreneurs who are often in the informal economy and underserved by incumbent financial services providers?
SH: There is this notion that if you’re focusing on micro, you’re more impactful than if you invest in midcaps. I’d like to dispel that. The real economy functions through value chains. In value chains, you need connected players — those are the midcaps. Medium-sized businesses are what connect the farmers and the small entrepreneurs. And so, we look for midcaps that have specific intangible assets with customer distribution networks in rural areas, where most of the women and youth reside. By financing the medium-sized businesses that connect different players, you can lift the full value chain.
Alliance: You took part in the first online edition of our All-Stars Academy earlier this year. How did your participation help you refine your current business model and strategy?
SH: One big takeaway away for us was the huge importance of data. We have a great strategy and thematic focus, but we can improve how we connect the data — with more intention — to strengthen our entire model.
Another concept we took away was equity. There’s always the desire to go for equality, but equity requires understanding people’s needs and giving them what’s needed to reach an equal state.
Alliance: How did you first hear about the Financial Alliance for Women, and why did you decide to join?
SH: Before the pandemic, we were introduced to the network during the Billion Dollar Breakfast at the Alliance Annual Summit in 2019, to which we were invited by Beyond the Billion (formerly Billion Dollar Fund). We’ve gained such a sense of community and more visibility through the network. It has been great to be a part of it.