Convergence has awarded proof-of-concept stage support under the Blended Finance Accelerator for Fund Managers (A4FM) to Àrgentil Capital to structure the Àrgentil Investment Fund, a USD 75 million growth-oriented private equity fund targeting underserved small and medium-sized enterprises (SMEs) in Nigeria and Ghana, incorporating a dual-currency structure to enable participation from both international investors and domestic pension funds.
Private equity investment in West Africa remains limited relative to the region’s growth potential, particularly for SMEs, due to persistent challenges including foreign exchange volatility, exit uncertainty, and governance risks. Domestic institutional investors, especially pension funds, have historically had minimal exposure to private equity, constrained by regulatory limits, conservative investment mandates, and a preference for liquid government securities. However, recent regulatory reforms and increasing pressure to diversify portfolios are gradually opening space for pension fund participation in alternative assets. This evolving landscape presents an opportunity to mobilize local institutional capital, provided that investment structures can effectively address FX risk and align with institutional requirements.
Àrgentil’s proposed structure is positioned within this evolving landscape, aiming to unlock local institutional capital into SME equity at scale. The fund adopts a dual-currency, blended capital structure in which catalytic junior capital is used to absorb key risks, particularly FX and early-stage investment risks, thereby improving the risk-return profile for institutional investors. This approach is designed to enable participation from both domestic pension funds and international investors while maintaining commercial return expectations.
Over time the fund aims to support job creation and income stability through SME growth, strengthen enterprise resilience through improved governance and capital structures, and contribute to the development of local value chains. In addition, the strategy seeks to promote climate resilience and operational sustainability across portfolio companies.
Design question and learning potential from the market: How can blended finance be structured to mitigate FX and early-stage investment risks while enabling institutional participation in SME equity in frontier markets?
Àrgentil’s approach tackles one of the most persistent barriers to institutional investment in frontier markets: foreign exchange risk. By designing a dual-currency investment structure that enables participation from both domestic and international investors. The model combines a local currency vehicle for pension fund participation with a USD-denominated structure, supported by a first-loss layer calibrated to absorb FX volatility and early-stage investment risks.
By aligning the structure with the specific constraints of domestic pension funds, such as regulatory requirements, ticket sizes, and return expectations, the fund aims to unlock local institutional capital in SME equity for the first time at scale. The approach also incorporates active portfolio management and governance frameworks to mitigate minority investment risks and enhance value creation.
The Accelerator will support the refinement of the FX structuring framework, strengthen the local currency sleeve, and advance investor engagement, particularly with local pension funds, to validate and operationalize the model.
