Auvest Group, a principal investor offering investment management services to institutions and family offices, has launched the Auvest MENASA Opportunities Fund I, aiming to raise between $250m and $300m.

The Abraaj Group will take on the role of cornerstone investor in the Fund with a $30m commitment.

The Fund will invest in the small and medium enterprise (SME) sector across the Middle East, North Africa and South Asia (MENASA) region.

Arif Naqvi, Founder and Group CEO of The Abraaj Group, said: “We are delighted to invest in the Fund and support Auvest’s talented and capable management team. We also welcome the opportunity to contribute to the growth of the private equity and SME eco-system in the MENASA region, an objective Abraaj has always proactively supported since its inception.”

“It has long been acknowledged that the SME sector in growth markets is a formidable engine of employment and economic diversification. The access to long-term capital will enhance the growth of the sector and allow thriving businesses to take advantage of the underlying opportunity and strong fundamentals of the region,” he added.

Auvest was founded in 2007 by Humayun Shahryar, who formerly held the role of Executive Director, Board Member and Head of the investment team while working at Abraaj, from inception until early 2006.

Most of the members of the Auvest management team have previously worked at Abraaj and Auvest represents the first spin-off from one of the most established regional private equity firms, symbolising the evolution of the MENASA private equity industry.

The SME sector in the MENASA region plays a vital role in creating long-term employment opportunities as it accounts for over 90% of businesses in most MENASA countries.

SMEs in the MENASA region provide 45% of employment but only contribute 25% to GDP, implying a low level of productivity, as these firms often lack the financial resources needed to invest in the growth of the business.

Private equity can play a dual role in providing capital and helping SMEs with strategic, operational and financial initiatives, resulting in revenue and profitability growth.

While the Fund will be sector agnostic, Auvest has identified attractive industries such as retail, restaurants, logistics, packaging, education and healthcare for their investment potential.

These sectors also possess the necessary attributes for the creation of regional champions through organic growth and/or bolt-on acquisitions.

The Fund’s core target countries will be Egypt, the United Arab Emirates, India, Sri Lanka, Oman and Jordan, given the strong presence of investable SMEs that can provide a base from which expansion can be pursued into other regional markets.

The Fund has a strong deal pipeline with a number of transactions currently under discussion across various sectors.

Humayun Shahryar, Founder and CEO of Auvest Group, said: “A vibrant SME sector is critical to reduce income inequality and enhance business productivity. The lack of access to funding is a key constraint to the growth of SMEs in the region."

"SMEs often do not have the equity base to support bank lending or the scale required to raise capital from the public markets, leaving private equity as the most viable source of funding. This anchor investment from Abraaj represents a milestone for our new Fund and further validates the exciting investment opportunity that exists in the region and the SME sector in particular,” he said.