Now that I have had a moment, some comments on specific items I think worthy of further reflexion.

First, on the CDC article, I would l highlight the same thing that caught Shaheen's eye in early comments:

CDC is unapologetic about making money, Richard Laing, its chief executive told the FT earlier this year. The government-owned private equity fund of funds does business in the poorest countries around the globe, but CDC, which started life in 1948 as the Colonial Development Corporation, has a determinedly commercial outlook.

“Being commercial and developmental go hand in hand,” says Laing. “It’s the only way to ensure it is sustainable. Historically there’s been too much investment in non-sustainable enterprises and you do damage, not good, by investing in businesses that are not going to last a long time.”

I absolutely agree. Development money - especially as doled out by the EU - has often been nothing much more the subsidies or worse yet, formalised bribery to the ruling elites to the detriment of the wider population. Wrapped up as it might be in high-flying rhetoric about poverty and the like.

Now, with respect to the follow-up observation

That is not to say that CDC, which currently has about $3bn in net assets, is unwilling to put its money in regions that other emerging market investors shy away from. The group spreads its investments between two broad categories of emerging markets funds: ‘best of breed’, which account for the majority of its investments, and what it calls “pioneering” funds – which address a particular area of market failure, a sector, size bracket or region where it believes risk is being mis-measured with an ensuing lack of investment. Examples have included investment in smaller companies, in early stage mining in Africa, and a buyout fund in India.

It strikes me that the best use of quasi-public to public money in these sort of endeavours is to put the risk capital where the private sector is not going to go. So, in India, why a buyout? I am sure they will see returns, but should perhaps they not target areas where capital is not as readily available. In Africa, sub-Saharan there is a general capital shortage, so buyout or mid caps make sense. India?

Now, here's one of the nice lessons:

CDC’s return on net assets in 2005 was 35 per cent and the group recycles profits into new investments. Figures for last year are not yet out but the group’s five-year average return in “in the high-teens” says Laing. “It is not a venture model,” where a handful of so-so investments and the odd flop can be born thanks to that one extraordinary success. “That is a dangerous model in emerging markets – you’re unlikely to get a significant number making 20 times your money.”

I absolutely agree. In a developed market the venture model of one for four losses is a killer. At the same time you have to have a venture outlook, but looking to be even smarter to get one win, two semi-wins for the remainder of failures.

I've seen that work, and for that hard work, yeah, you get returns that a lot of private money will sneer at; although it all depends on whose money you are managing and at what time frame. A ten to twenty year perspective with the idea of diversifying your exposure, now, well, that makes a great deal of sense. And if net fees in the short term you can hit 20 percent, well, hopefully you have enough investors with a long term vision, thinking of themselves as pre-positioning.

On the other hand, hot money - the hot money that is pouring into "altnerative asset classes" in emerging markets, well it's going to get fucked, just like it was in 89.

CDC places its capital with about 26 fund managers, including those at Actis and Aureos, the two emerging market investment groups spun out of CDC as the company moved away from direct investment. The approach is robust: “There is sometimes a view that businesses in developing markets should be let off being commercial. They have to be as strong or even stronger than in developed markets to cope with the disadvantages.”

On the latter statement, I can not but agree.

Information required for due diligence should be available, he says. “Businesses have got to pass a certain minimum or the fund manager won’t invest. There’s no reason for companies in the developing world to have second rate standards.”

Nice sentiment, but frankly as Shaheen can say from inside, to get to 75% of a good developed market standard, you need to do 215% of the work.

Still, you can often get there at less cost.

There are some differences. Diligence work is arguably heavier – both for CDC when vetting funds that are often in their infancy, and for the funds themselves. Exits, in parts of the world with nascent equity markets and scarce deal flow, may take longer to come by. “Structuring is also really important in these deals,” says Laing. The funds use self-liquidating instruments, such as convertible debt, to extract a return at an early stage. “In a scenario where you can’t get an exit, you are getting an on-going return and your money back, having got a yield on it. Companies learn that capital doesn’t come for free and it offers downside protection in the event that you can’t sell the equity.”

One of the best things in terms of the "Anglo Saxon' approach to development financing as I have seen it is discipline.

CDC UK does not tolerate, as far as I have seen, the utter crap that the EU, French and Belgian development funds have tolerated.

That is to say, making sure that companies are forced to be serious about capital. Serious about "good governance" (or at least "not utterly rapacious rent seeking governance" - let's be reaosnable).

More comment on this series in the near future.