Investec Asset Management Ltd. is tapping into a political and economic revival in Africa to launch two mutual funds investing in the continent's equities markets, which boast five of the 10 top-performing stock exchanges worldwide in 2004.
The first, an offshore dollar-denominated open-end fund, targets U.S. and European institutional investors looking to diversify their emerging markets or alternative assets portfolios in a long-only strategy, said Anna Parlevliet, Investec's head of international sales. The Investec Pan Africa Fund is a long-only strategy investing in 35 to 45 stocks in Egypt, Morocco, Tunisia, Nigeria, Kenya, Mauritius, Botswana, Namibia and South Africa. Although the focus will be on stocks, there may also be some exposure to government bonds.
"With the political stability and economic growth in the last couple of years, investors are seeing this as a sign that there's good opportunity here," Ms. Parlevliet said.
The second fund is the $60 million Investec Africa Fund, a rand-denominated unit trust aimed at South African institutional investors. It predominantly invests in African equities outside of South Africa, which has the continent's largest stock exchange.
In addition to high returns, institutional investors are also drawn to African equities for their low correlation to equity markets of developed countries, she said. Excluding Zimbabwe, Africa's markets returned an average of 34% in 2004, compared with 22% for other emerging markets. Four African stock markets — Egypt, Ghana, Malawi, Zambia and Uganda — increased by more than 75% in 2004. The Ugandan stock market increased by 60% in the same time period.