The company says that as South Africa makes up over 70 per cent of Africa’s stockmarket, it would dominate any general African equity portfolio. In the interests of diversification when making asset allocation decisions, it will have one fund devoted to South Africa while the other fund will focus on Africa excluding South Africa.
The Standard South Africa equity fund will invest in a concentrated portfolio of 40-50 South African stocks. It will target returns of 4 per cent above the Johannesburg Stock Exchange All Share index over rolling two-year periods.
Fund manager Richard Middleton has been running the South African based Stanlib capital growth fund since 2002. He has also worked for Liberty Life Asset Management and Rand Merchant Bank.
The Standard Africa Fund will invest in 45-60 stocks in up to 20 regions. Its initial major holdings will be in Egypt, Morocco, Nigeria and Kenya. The fund will also invest in shares of companies listed outside Africa that derive the majority of their revenue from the region. These may include mining and exploration companies listed on AIM or the Toronto Stock Exchange.
The Fund will be managed by Stanlib’s head of Africa investment John Mackie. He will be assisted in Johannesburg by Stephane Bwakira and Thabo Ncalo. The team will also draw on Standard Bank’s network of 17 offices in Africa.
The scarcity of information relative to companies in more developed markets can lead to mispricing so the team will make company visits to assess companies first-hand. They will also explore themes such as resources, telecoms, infrastructure, financial services and tourism.
According to Stanlib, there is more to the region than resources. It says the consumer and services sectors look set to benefit from growth in the future due to domestic demand from the growing middle class.
Other parts of Africa have been less popular with international investors but Stanlib believes this is changing. It says most African nations are now stable, have reduced their debt or eliminated it completely inflation. It also says interest rates in most areas have fallen to levels than are on a par with emerging markets in general.
These funds enable high-net-worth clients to access markets that are difficult to access except as part of a global emerging markets fund, of which Africa is likely to represent a small part.
Investec recently developed a feeder fund to open up its Africa fund range to UK investors, but this is aimed at institutional investors who can invest at least $1m.
Stanlib may attract high-net-worth money on the back of its track record in South Africa, but high potential rewards from these funds are matched by higher risks.