Henry Gabay on Patience in Frontier-Market Investing
The private equity industry likes to talk about patient capital, but the numbers tell a more specific story than the phrase suggests. The typical holding period investors expect when they commit to a fund is three to seven years. Recent data puts the actual median closer to six, the longest since research firms began tracking the figure. That is the industry baseline, built mostly around deals in the US and Western Europe, where legal systems, financing markets and exit routes are predictable enough that a six-year plan can survive contact with reality.
Henry Gabay has spent most of his career investing somewhere that baseline does not quite apply. When he co-founded Duet Group in 2002, and later as he built out the firm’s private equity book, the honest answer to how long a deal would take was almost always longer than the fund documents said, and usually longer than most investors would prefer. Twenty years in, four lessons from that experience stand out as more durable than any single deal Duet has done.
Lesson One: The Data Backs Up What Used to Feel Like a Risk
There is a body of academic work now that didn’t exist when Gabay started. A study using nearly six decades of International Finance Corporation cash flows across 130 countries found that private equity in emerging and frontier markets produced risk-adjusted returns comparable to the S&P 500 over the long run, and that those returns improved specifically as the underlying economies grew. The relationship wasn’t about picking the right sector or timing an exit window. It was about whether an investor was still in the position when a country’s growth curve caught up to the original thesis.
That finding matches what Gabay saw firsthand with Dashen Brewery in Ethiopia. Duet invested in 2012, the same year Diageo bought the Meta Abo brewery and a year after Heineken had entered the market, when Dashen held roughly a fifth of a beer market that was growing quickly but still lacked the roads, ports and distribution infrastructure that more developed markets take for granted. Three global brewers reaching the same conclusion within about twelve months of each other wasn’t a coincidence. It marked a real inflection point in the market. Gabay sat on that board for six years, and his own account of the deal is that what mattered in hindsight wasn’t being first to spot the opportunity, Heineken beat Duet to it by a year. What mattered was staying through the slower work of the market actually maturing into what the entry thesis assumed it eventually would. Modeled on a standard Western holding period, the position would have been exited well before that maturation had fully played out.
Lesson Two: A Longer Clock Is Sometimes the Beginning, Not the End
The uncomfortable part of this argument is that it’s easy to state and hard to underwrite. A fund’s economics depend on returning capital to investors within a defined window, and every year a deal stays on the books past that window creates real pressure on fees, on reporting, on the patience of a fund’s own limited partners. Gabay’s view is that the answer isn’t to ignore that pressure. It’s to be honest about it before a deal closes, not after.
When Duet acquired Moldova’s leading electricity distribution business in 2019, the firm was buying into a regulated utility serving nearly a million customers in a country transitioning from a low-income to a middle-income economy. That kind of asset does not re-rate quickly. Regulatory frameworks evolve slowly by design, and the value case depends on a country’s broader economic trajectory more than on anything a management team can accelerate on its own. Underwriting that kind of deal means accepting the payoff won’t arrive on a conventional private equity clock, and sizing the fund structure accordingly from day one.
Lesson Three: It Only Works if the Fund Is Designed Around It
Dashen wasn’t an isolated bet on a long timeline. Two years after that investment closed, Duet formalized the same thinking at fund level, launching a dedicated $300 million Sub-Saharan Africa private equity vehicle that extended a public-markets program the firm had already been running in the region for four years. Around the same period, Duet built a similar partnership in Egypt, a $300 million fund alongside Cairo-based CI Capital targeting consumer-facing sectors as the country worked to translate a period of improving political stability and economic reform into durable private investment. Neither of those commitments was underwritten on a conventional private equity clock, a clock that most funds are structured around in the three-to-seven-year range as a matter of course. Both assumed the same thing Dashen had: that a market’s growth curve, not a fund’s reporting calendar, would ultimately determine when the thesis paid off.
Lesson Four: Patience Is a Structural Decision, Not a Personality Trait
Gabay has argued that the biggest mistake investors make in frontier markets isn’t misjudging the opportunity. It’s misjudging the clock, and then treating the resulting mismatch as a personal failure of discipline rather than what it actually is: a structural problem that should have been solved at the fund design stage. Capital structured to demand an exit on a developed-market timeline forces one of two outcomes: decisions made too early, or years spent explaining to investors why an exit hasn’t happened yet.
The two-year run Gabay later spent chairing Merit Capital’s board, after Duet brought the wealth manager into the platform in 2018, reinforced a related point. Wealth management businesses compound slowly and predictably; they are not the kind of asset where a longer holding period is a bet on volatility resolving in an investor’s favor. It’s simply how the business works. Each of Duet’s longer-duration positions, Dashen, the Moldova utility, Merit Capital, demanded a different definition of what a reasonable holding period looks like, and none of those definitions matched the industry’s six-year median particularly closely.
The Takeaway for Frontier-Market Investors
Gabay’s advice to an investor underwriting a first frontier-market deal is straightforward: model the holding period the deal actually requires, not the one developed-market peers are using, and raise capital structured to match it. Look for local partners underwriting the same multi-year horizon, not ones hoping for an early exit. And expect the payoff to arrive on the market’s timeline, not the fund’s.
None of that makes frontier-market investing easier. It makes the returns, when they come, considerably more defensible than luck. Twenty years and several long-hold positions into his career, Gabay’s clearest lesson from the work is a simple reversal of the industry’s usual framing: patience isn’t the price of the return in these markets. It’s usually the source of it.
