Investec opens up African investment

1 October 2010

Targeting investors attracted by African opportunities but concerned about the liquidity constraints of African-listed equities, Investec Asset Management has launched a new fund that offers a liquid, actively managed vehicle for accessing the continent's growth story.

The Investec Africa Opportunities Fund, managed by Malcolm Gray, addresses liquidity constraints by constructing portfolios with a bias towards more liquid South African, Moroccan, Nigerian and Egyptian markets, as well as towards stocks listed on various international exchanges that have a significant exposure to Africa.

All stocks within the investment universe will have a minimum market capitalisation of US$100-million. The fund will be daily traded and will have a minimum investment level of $3 000.

Lasting, fundamental changes

In a statement this week, Chris Derksen, head of Frontier Markets at Investec Asset Management, said the company had achieved success for its clients in both listed and unlisted investments since first launching the Investec Africa and Pan Africa Funds in 2005.

"Over the past decade, Africa has undergone lasting and fundamental changes," Derksen said. "Africa's politics are increasingly democratic, its fiscal discipline and sovereign governance are improving, conflict zones are declining, and free market principles are increasingly being implemented.

"Against a backdrop of growing international demand for Africa's resources, it is little wonder that Africa has outstripped global GDP growth for the past decade," he said.

Exposure to the African growth story

Gray said the company believed there was an opportunity to invest in businesses at valuations that undervalued their exposure to improving African fundamentals, and whose equity was often listed on international exchanges with commensurate liquidity benefits.

"Key to our investment process is to identify companies listed on both African and world exchanges that are exposed to the African growth story, its key themes, and where a significant portion of their current or future value accrues from the continent," Gray said. "From a universe of around 200 stocks, the portfolio will typically comprise around 30 stocks."

Stock-specific risk is reduced through on-the-ground analysis conducted by the 27-strong frontier investment team and limits on exposure to an individual stock.

"As one of the largest managers of third party assets in Africa, Investec Asset Management is able to conduct company and country visits regularly as a part of our investment process," said Gray. "Our scale as a significant shareholder across the board in Africa ensures consistent access to management and information."

African investment pioneer

With an established history in Africa, investing on the continent is considered a core capability, said Investec Asset Management, adding that it has built comprehensive investment capabilities for its clients in both public and private equity, and public and private debt.

"Investec Asset Management has been a pioneer in investment in Africa. Founded in South Africa, more than 50% of total assets under management are invested on the continent," the statement read. "Investec Asset Management is one of the largest managers of third-party assets in Africa."

SAinfo reporter