Apollo Multi-Asset Management is adding two frontier markets funds from boutique fund manager Silk Invest to its Apollo balanced fund.
ilk Invest was founded last year and specialises in the frontier markets of the Middle East and Africa. It runs Arab falcons and African lions, both Luxemburg-based funds which take a bottom-up approach to stock selection.
African lions aims for returns of 15 to 20 per cent a year by investing in 60 to 80 stocks across regions such as Nigeria, South Africa and Ghana.
Arab falcons has similar objectives but invests in the Middle East and North Africa, including Saudi Arabia and Egypt.
Apollo balanced will be investing 2.5 per cent in each fund to take advantage of the long-term growth potential in frontier markets and to provide diversification that underpins its multi-asset investment strategy.
Fund manager Tom McGrath says blending assets with a low or inverse correlation to each other has helped Apollo balanced to slightly outperform the sector average, with lower volatility, since launch in November 2008.
As at September 30, the fund had returned 25.35 per cent since launch compared with a sector average of 24.13 per cent over the same period. The annualised volatility was 8.82 per cent for Apollo balanced compared with 13.69 per cent for the sector average.
McGrath says: “Frontier markets historically did not correlate with other markets. It was only in the mass sell-off that this happened, when they unfairly got dragged down with everything else. Asia and emerging markets have caught up but it feels like frontier markets got left behind when risk appetite lifted. They are unloved by foreign investors and I am hoping they catch up.
“Silk Invest are specialists who are finding some extraordinary companies on tiny valuations. They have a lot of experience in this area and have on the ground managers in a lot of the countries.”