Deal focus: LeapFrog taps Asian appetite for impact

LeapFrog Investments is tracking increased Asian LP interest in impact strategies, a perspective most recently underscored by a USD 200m commitment from AIA Group. The Hong Kong-based insurance company has agreed to participate in multiple LeapFrog funds – a deal that somewhat echoes a USD 500m investment last year by Singapore’s Temasek Holdings, which took a stake in the GP as well.

Four years ago, Asia made up 4% of LeapFrog’s LP base. Today, it is 30%, with insurance and sovereign wealth representing two of multiple channels. Andrew Kuper (pictured), LeapFrog’s founder and CEO, also flags pension funds and superannuation funds with some kind of social mandate, as well as the family office communities in Singapore and Hong Kong, which are growing in number of members and in cheque size.

“This next generation of wealth in Asia is looking at how they can contribute to society,” he said. “Now that they have children, they are more interested in their legacy and the world in which these children will grow up. They are often second-generation or advanced first-generation, so they have a broader frame in terms of Maslow’s hierarchy of needs.”

Customised long-term mandates are not unusual in LeapFrog’s world. US insurer Prudential Financial contributed USD 350m to a separate account that has invested in three insurance players in Africa and Asia; the allocation was subsequently increased to USD 500m. The likes of Prudential, Temasek, and AIA are patient capital, but not entirely patient.

“These institutions still want robust returns in private equity timeframes, but they have an investment dimension and an operational dimension,” Kuper added. “They have longer horizons for themselves, their constituents, and their shareholders than other institutions, which means they can look to multiple funds and vintages, and really lean into impact.”

LeapFrog – described as a UK-based impact investor with an extensive Asia footprint – is currently in the market raising its fourth flagship fund, which has a target of USD 1bn. Past LPs include 10 of the world’s largest insurance companies, three global investment banks, all of the major development finance institutions, and asset managers such as Teachers Insurance & Annuity Association of America-owned Nuveen.

Larger funds allow LeapFrog to cater to LPs looking to deploy USD 100m-plus as well as those writing cheques of USD 10m. AIA was seen as a good fit because its goal to help 1bn people live healthier, better, and longer lives echoes LeapFrog’s efforts to bring essential services to 1bn emerging consumers. They will work together on enhancing offerings across financial services, healthcare, and climate.

Co-investment and continuation funds may come into as well, Kuper explained, without offering further clarification. He points to MedGenome as the kind of story AIA wants to participate in. The company has become the largest genetic diagnostics and research business outside of China and the US, receiving investment from Novo Nordisk Foundation, Peak XV (formerly Sequoia Capital India), and Sofina.

“It’s all about personalised medicine and giving people what they need, not something developed in Texas for Caucasians. There are also elements of democratisation – making healthcare available at lower cost – and bending the curve back towards prevention,” said Kuper.

Other investments seen as tapping into inclusion mandates include PasarPolis, an Indonesia-based embedded insurance player that serves the gig economy, and Sun King, which makes solar power more affordable by providing upfront finance so individuals can install panels at home. The company launched in Africa but closed a USD 330m Series D round last December that will support an Asia rollout.

The final close of LeapFrog’s third fund in 2019 – at nearly twice the size of its predecessor – coincided with what Kuper described at the time as a “fundamental inflection point” in terms of the availability of investment opportunities and interest from LPs. However, the process of institutionalisation was proving difficult, notably the absence of common standards across measurement and reporting.

He is encouraged by the progress made since then, highlighting the introduction of the Operating Principles for Impact Management (OPIM) and the emergence of groups with impact audit capabilities. One of these, BlueMark, now maintains a leaderboard of investors – including LeapFrog – that have achieved top-quartile ratings across all the impact principles.

“We started out with a set of minimum standards to prevent impact washing. Now, OPIM can be incredibly advanced, not just a tick-box exercise for impact-lite,” said Kuper. “At the same time, there is increasingly a race to the top – people want to be on that leaderboard.”

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• Topics
• South Asia
• Southeast Asia
• Fundraising
• GPs
• LPs
• India
• Impact investment
• LeapFrog Investments
• AIA
• Asia