Aim: Growth and income by investing companies in Africa and the Middle East or those based elsewhere that derive earnings from the regions
Minimum investment: Lump sum £1.000, monthly £100
Investment split: 100 in Africa and the Middle East
Isa link: Yes
Charges: Initial 4.5%, annual 1.5%, performance fee 20%
Commission: Initial 3%, renewal 0.5%
Tel: 020 7597 1900
Investec’s Africa & Middle East fund is an Oeic that offers IFAs exposure to a number of frontier markets within Africa and the Middle East.
Chelsea Financial Services managing director Darius McDermott says: “In its basic form, a frontier market is an emerging market with an undeveloped equity market. It is these frontier markets that will allow IFAs to further diversify client portfolios and give them access to potentially high growth areas.”
According to McDermott, the frontier markets of Africa and the Middle East have historically offered investors low correlations with developed markets. “The countries in the regions that this fund focuses on tend to be characterised by recent democratisation, liberalisation and privatisation, leading to economic growth, increased productivity and the emergence of a young middle class,” he says.
The fund will select investments on a bottom up basis driven by fundamental on the ground research. “There will be few investment restrictions other than a minimum and maximum allocation to each region of 20 per cent and 80 per cent respectively. The fund will invest in stocks with a minimum market cap of £100m with a focused portfolio of between 40 and 60 stocks. Sector themes that will be strongly represented in the portfolio will be banking, brewing, construction, agriculture and mobile telephony,” says McDermott.
The adviser remuneration is standard in McDermott’s view and the annual management charge of 1.5 per cent is broadly in line with the competition. However, within the charges is a detail that has become a bugbear for McDermott – performance fees. “A fee of 20 per cent on gains in excess of Libor plus 4 per cent can only be justified if performance greatly exceeds the high-water mark. Otherwise, it seems exorbitant and normally only associated with hedge fund products.”
Scanning the market for potential competitors McDermott says: “Opportunity never knocks for long in the investment community and both JP Morgan and Charlemagne have launched similar funds. The question is whether they are merely bandwagon-ing the latest hot sectors or do they genuinely have conviction in a long-term growth story. I genuinely do feel Investec’s pitch is the most convincing.”
He says this is mainly down to Investec’s strong roots in Africa and its resources in energy and global markets. “Also, the fund managers, Roelof Horne and Amr Seif, have strong track records in Middle Eastern markets. They understand the need for local knowledge, which will be a pivotal factor in the success of any equity fund in this sector.”
Suitability to market: Good
Investment strategy: Good
Adviser remuneration: Average