Ashburton Africa Equity Opps launches with Nigeria bias

Ashburton has unveiled an African equity fund which has a bias to Nigeria at launch and avoids investing in South Africa.

^{Paul Clark}

The Ashburton Africa Equity Opportunities fund has 40 per cent of its invested portfolio in Nigeria, around 20 per cent in Egypt and the rest in Kenya, Tunisia, Mauritius, Morocco and Ghana.

Fund manager Paul Clark says: “Nigeria is the second biggest economy in Africa after South Africa, with strong growth and the largest population in Africa. This is therefore the biggest country in the fund’s investable universe and one with enormous growth potential.”

The fund excludes South Africa because, as an emerging market, it is outside of the portfolio’s frontier market focus.

Around 20 per cent of the fund, which was seeded with $20m, has been invested so far, with the aim is for it to be fully invested by June.

Clark says: “The two biggest chunks of the portfolio would be Nigeria and Egypt at the moment and a good portion in banking stocks.”

“Banks generally speaking are big beneficiaries of the changing political and economic situation across the continent. We continue to have a high exposure there. There may be a point when they [banks] become too expensive but for now we do see a lot of value.”

However, Clark says he does not have exposure to Egyptian banks because of the current political environment.

Around 45 per cent of the portfolio will be invested in banking stocks, 25 per cent in consumer, 10 per cent in IT and telecommunications and the rest will be spread between hotels and real estate. Other themes across the continent include urbanisation and a growing middle class African consumer.

Clark adds: “Valuations are cheap relative to emerging markets globally and the consumer boom is leading to greater demand in other sectors such as infrastructure development, construction and leisure.”

Hargreaves Lansdown senior investment manager Adrian Lowcock says: “We are seeing an increasing amount of funds focusing on the area. Emerging markets have disappointed investors over recent years particularly regions like China.”

Bestinvest managing director Jason Hollands, however, notes that investment opportunities in the area are small compared with other regions.

“The entire frontier markets universe only has a combined market cap of Denmark’s stock exchange. This is a very niche area,” he says.

Source: FundWeb