In this interview, the Managing Director of FBNQuest Funds Limited, Ijeoma Agboti, discussed the company’s history, past successes, the transition of the business model, recent activities and future prospects.
FBNQuest Funds Limited was formerly FBN Funds Limited; please tell us about this transition.
FBNQuest Funds Limited is the Alternative Investments business of FBNQuest, predominantly focused on private equity and selectively on real estate and private credit. As a part of the Merchant Banking and Asset Management group, the transition from FBN Funds Limited to FBNQuest Funds Limited was in line with our evolution under FBN Holdings. ‘FBNQuest’ for us was a brand development driven by the fact that over the years we have become bigger, stronger and more diversified as a subsidiary group. We wanted a name that embodied our 125-year-old history as part of FBN Holdings, but which also speaks to where we believe we are headed with our clients.
We are taking our investors and our clients on a journey, we are growing perspectives, we are innovating, we are growing wealth, and we are diversifying. Currently, we are offering a lot more to our markets. We identified that people were becoming uncertain of where to go to meet their various objectives from an investment perspective within our business. So, we decided to create a brand name that holistically carries all of the businesses we do.
How would you say this name change has influenced the business?
The transition has impacted the business in many positive ways. Interestingly, within the FBNQuest Funds Limited business specifically, we are evolving a great deal. This is a 15-year-old business, which started as an SME investor back in 2003. Since then, we have significantly evolved our strategy from investing in SMEs and small enterprises to investing in larger businesses. We have also grown our team and our assets under management. Now that we have become FBNQuest Funds Limited, we are diversifying into new products, adopting new business models, and have watched our portfolio mature and divest. So we think our growth, and the journey we are on aligns quite well with our journey as FBNQuest overall.
You are one of the leading private equity and principal investing companies, having invested in more than 70 private companies directly in Nigeria. What do you see as your key achievements so far?
We have watched most of our businesses do very well and have had successful portfolio exits. In our private equity model, simply put, the goal is to invest in a business at an attractive valuation and actively work with the company’s management team to help them create value for the business. With this support, the company grows its revenues, earnings, and customer base, and this is what enhances the company’s valuation at the end of the day which we then return to our investors.
Furthermore, over the past few years, we have diversified our business model to go beyond just direct investment in companies. We have taken positions in other private equity funds. Doing this has allowed us to stick to what we do best but at the same time diversify into other African markets and investment strategies. We have very selectively taken positions in a few other private equity fund managers to grow our portfolio, diversify and enhance value..
Can you shed more light on the investments of FBNQuest Funds Limited outside Nigeria?
Historically, we have invested predominantly in Nigeria. Our approach to diversifying outside Nigeria is to align with the growth of our portfolio companies, which we believe supports the objective of enhancing their revenue and customer base and growing into other markets. What we do is work with our businesses to achieve that kind of growth. Investing in other private equity funds has been a great opportunity for us to invest in several businesses in other African markets indirectly.
This has been especially significant in technology, having invested in two ICT funds with an approach that is Pan African. We have been able to see some interesting technologies out of Kenya, West Africa and Central Africa through these managers who are very much experts in the space, and we will continue to grow our African reach along these lines
You mentioned the change in your business model – what was this change?
Our business model has evolved in two significant ways.
One is our transition from being an SME investor to being a midcap growth investor. We started in 2003 when the CBN mandated that commercial banks set aside a certain percentage of their annual earnings for investment in small and medium enterprises. We then made a conscious decision as a firm to further develop our private equity practice and institutionalize it. Secondly, we have historically been a proprietary private equity manager. This means that we have invested our own assets. Again, with regulatory tightening, but in line with our growth and the essence of our name (FBNQuest Funds Limited), we wanted to be able to offer our client base a full, diversified suite of investment opportunities. We, therefore, sustained the business, and have evolved it in a manner that meets the needs of our clients.
Overall we consider private equity to be a diversifier and a return enhancer. For many investors, their investment portfolios are predominantly fixed income and public equity strategies. We want to help our clients and the broader market enhance and diversify their positions by offering them another side of the market. We are actively working on our maiden fund which we will offer to both new and existing clients.
What would you say are the key drivers for this new business model?
A key driver is the quest to offer the market something unique. With the new fund we are working on, we are very focused on bringing local investment into local opportunities which is why we have been engaging local investors closely. We want to be able to understand what their constraints are in accessing private equity, what types of product will enhance their interests, and importantly what is conducive to them from a regulatory perspective. We want to address the need for a local approach to supporting local businesses.
What types of companies does FBNQuest Funds Limited invest in?
We look at high growth businesses with high margin potential and strong customer traction. They also need to be focused on serving our local market and exhibit the potential to expand to other markets in Africa.
At FBNQuest Funds Limited we like sectors that touch the consumer both, directly and indirectly, such as industrials, hospitality, services businesses, ICT, consumer businesses and financial institutions. Overall, we prefer to be agnostic because you always want to be able to take a bit of a top-down approach. Strong management teams who are keen and aligned with our objectives for growth is another important aspect of the types of business we look at.
For a potential investor, could you take us through the FBNQuest Funds Limited investment process?
We start with a market view, looking at various industries and decide where there is alignment with the country’s growth. Once we have sourced the most interesting deals, we start our multi-step diligence process. We look closely at their financials, their people, their history and their growth prospects. We ensure that the business objectives are appropriately ambitious, yet achievable. We perform extensive commercial, financial and regulatory due diligence.
Once we have made a decision about making an investment in a company, there is a closing process. Another very important aspect of our diligence is deciding very early how we can exit the business, which is essential. Our decision making is driven by our investment committee before we proceed to close.
What have been the learnings in this position and what do you think is the future prospect for this business?
Our business has very strong prospects. FBNQuest Funds Limited comes from a very strong history, and we are associated with a fantastic brand. The learning for me has been not just getting to know this business, but also the broader FBNQuest business and the individuals who have made it as strong as it is. Understanding the different aspects of our overall business, the clients that we serve and meeting their needs is the greatest ongoing learning. This way we are all able to answer questions about who our clients are, what they need and how we can meet those needs. It includes assessing the broader private equity market, identifying what is specifically lacking for investors, how we can help, and the gaps we can close as FBNQuest Funds Limited.
I believe we have identified some very important things that now define our growth and evolution as we structure our maiden and future products. We have a strong team who are responsible for bringing the business as far as it has come. Therefore, I credit them a great deal. I think together, and with the support of our leadership, we are excited about the future of our alternative investments business and where we can take our clients.