Category Investments

Ethos launches AI Fund to focus on Digital Industrial Revolution

06 November 2018 Ethos Private Equity

• Fund targeting R1 billion - R600m first close completed and two initial investments successfully concluded: Channel VAS & Vertice MedTech Group

• Roger Grobler & Nic Kohler partnering Ethos to lead AI Fund
• Fund targets businesses that will benefit materially from AI algorithmic decision making

Ethos announced the first close and first two investments by its maiden AI fund, Ethos AI Fund I today. The Fund is targeting R1 billion and already has R600 million from first close investors, including Ethos Capital and Standard Bank. The Fund has been established in partnership with Nic Kohler and Roger Grobler, both former insurance industry CEOs. It is the first Fund of its kind in South Africa.

Speaking about the Fund’s establishment, Stuart MacKenzie, Ethos CEO stated:
“As part of Ethos’ ongoing evolution into alternative assets, we are delighted to launch the AI Fund, in partnership with Nic and Roger. This Fund will co-invest alongside other Ethos-managed Funds, originate proprietary investments, and is expected to generate differentiated value for our investors by helping our portfolio companies to navigate and benefit from artificial intelligence.”

Roger Grobler, Ethos AI Fund partner added:
“For both Nic and I, this Fund is the culmination of over two-decades of working in data-driven businesses, and leverages the entrepreneurial blood, sweat and tears that comes from starting and managing businesses in South Africa, Australia and India. We have seen first-hand the immense value of algorithmic decision making.

The Fund’s aim is to identify and invest in businesses which we believe will benefit disproportionately from artificial intelligence – specifically algorithmic decision making. These algorithms typically help companies make high-frequency decisions in multiple places along the value chain. As these decisions are not ideally suited to human capabilities – typically due to computational complexity and volume of data utilised – the use of algorithms releases intellectual capacity, allowing people to focus on other rewarding areas of work, such as creativity, relationships, strategy or communication.”

Commenting on the Fund’s first investments, Nic Kohler, Ethos AI Fund partner said:
“With R600m in first-close commitments, we have already successfully concluded two investments: Channel VAS in the Fintech sector and Vertice, an Ethos-established medtech group. Channel VAS already deploys industry leading algorithmic decision making, and we will assist them to diversify and expand their product offering. Vertice seeks to disrupt the Medtech value chain by leveraging AI to enable smarter decision making.”

The Channel VAS and Vertice investments have been made alongside Ethos Fund VII and Ethos Fund VI.

Ethos – historically known for its large buyout funds – has been successfully attracting capital to a number of specialist fund offerings, raising c. R4.5 billion in the past 24 months from institutional and development investors: R2.5 billion for Ethos Mid Market Fund I; over US$100 million in the first close of Ethos Mezzanine Partners 3, which is targeting US$150 million by mid-2019; and R600 in first close commitments to AI Fund I.

In addition to its specialist funds Ethos has achieved a first close of, Ethos Fund VII that is expected to have a final close in mid- to late-2019.

Ethos has successfully concluded 11 investments in the past year and over 100 since 1984, has over 30 Investment and Value add Professionals operating on the ground in Sub-Saharan Africa making it the most established fund manager in the region.

“Ethos’ growth has been founded on our willingness to invest in the Firm’s platform and capability sets. We have a long track record of innovating around our value chain to drive differentiated returns for our investors. The Ethos AI Fund is unique in the region and puts us at the leading edge of an exciting secular growth theme. Artificial Intelligence technology is developing rapidly and is of deep strategic interest to us given its potential to drive the economic fortunes of nations. The Ethos AI Fund I will play a pivotal role in creating strong Artificial Intelligence capabilities within our portfolio companies, enabling them to make better, data-driven decisions, adapt accordingly and thrive,” concluded Ethos CEO, Stuart MacKenzie.


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