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Delayed hospital projects prompt Bill Gates’ foundation to audit private equity firm

Investing in emerging markets isn't for everyone
February 04, 2018 10:27AM

From back: Karachi from above; Bill Gates at the World Economic Forum in 2013. (Credit Bilalhassan88; World Economic Forum/Sebastian Derungs)

One of The Abraaj Group’s funds is being audited after four investors, including Bill Gates, are questioning why the Dubai-based private equity firm hasn’t spent their money.

Abraaj’s $1 billion health-care fund, which started raising capital in 2015, builds healthcare infrastructure in emerging markets across Africa, Asia and the Middle East and is the focus of the investors’ coordinated audit.

According to the Wall Street Journal, beginning in October 2016, Abraaj began raising funds from investors to build hospitals and clinics in India, Pakistan, Kenya and Nigeria. By last April, the fund had $545 million from investors which included The Bill & Melinda Gates Foundation, the International Finance Corporation, CDC Group and Proparco Group.

Months later, in September 2017, less than half of the investors’ funds had been spent, which prompted the four investors to begin requesting the fund’s bank statements.

The Abraaj Group explained the lack of spending was due to delays on its intended projects which ranged in nature, including a new building code being introduced in the Pakistani city of Karachi.

“Some capital was not used as quickly as anticipated due to unforeseen political and regulatory developments in several of the Fund’s operating markets,” writes the group in a statement. “Given the lack of mature healthcare assets in growth markets and the need to develop greenfield as well as brownfield projects, capital deployment is less predictable than that of a standard private equity fund.”

In December 2017, Abraaj voluntarily returned about $140 million to investors, but Gates and three others persisted in wanting an explanation, so in early February, Gates and others hired Ankura Consulting Group to perform a forensic audit to trace their money.

Abraaj has hired KPMG to perform their own audit of their healthcare fund. Distinct from the embattled health fund, the group is raising a $6 billion fund for investments in emerging markets. [WSJ]Erin Hudson