What Is Quasi-Equity?
Quasi-equity is a hybrid investment instrument that combines features of both debt and equity. It provides the security of debt with the upside potential of equity, making it an attractive option for investors seeking balanced risk-reward profiles.
Unlike traditional equity, quasi-equity doesn't grant voting rights or direct ownership. Instead, it offers returns linked to company performance while maintaining creditor rights in case of liquidation.
How You Earn Returns
Performance-Linked Returns
Returns are tied to company performance metrics like revenue, EBITDA, or specific milestones rather than fixed interest rates.
Priority Payments
Quasi-equity holders receive payments before equity shareholders, providing better cash flow predictability.
Example Return Structure
You invest GHS 10,000 with returns linked to 5% of annual revenue plus 2x capital return upon exit. If revenue grows from GHS 200,000 to GHS 500,000, your annual returns increase proportionally while maintaining creditor protection.
Your Rights as an Investor
Creditor Priority
Higher claim on assets than equity holders in liquidation
Performance Monitoring
Access to key performance indicators and financial metrics
Fixed Term & Exit
Clear maturity date and predefined exit mechanisms
Covenant Protections
Financial and operational covenants to protect your investment
Risks to Consider
Performance Risk
Returns depend on company performance; poor performance may result in lower returns.
Subordination Risk
While senior to equity, quasi-equity may be subordinate to traditional debt instruments.
Complexity Risk
Terms can be complex and require careful understanding of performance metrics and triggers.
Quick Facts
Ideal For
- • Investors seeking balanced risk-reward
- • Those wanting creditor protection
- • Investors comfortable with performance-based returns
- • Portfolio diversification seekers
- • Medium-term investment horizons