Africa has niche in portfolios

DAKAR – Exposure to Africa should make up one to two per cent of a total investment portfolio over the next five years, according to investment advisory firm Rogerscasey.

As government debt in the region attracts higher ratings and a middle class grows, the United States-based firm says Africa can improve an emerging markets strategy.’We are recommending that emerging markets be at least 20 per cent of any pension fund or total portfolio,’ said Cynthia Steer, chief research strategist and managing director for fixed income at the firm, which advises on more than US$315 billion in assets.’In terms of Africa, we would hope that commitments reach one to two per cent of a total fund over the next five years both in liquid and illiquid investments,’ she said.She favours debt, private equity, infrastructure, agriculture and timber as African investment sectors.’Infrastructure is an area where large dollars can be put to work. There are a number of opportunities such as deepwater ports and railway lines,’ she said.’In agriculture, one of the issues is, you can grow it but you also need to get it to market,’ she said, referring to the need for investment along the supply chain.Sub-Saharan domestic debt has attracted a great deal of outside interest in the past year, and Steer sees opportunities across the continent.’In the debt markets, overall country ratings in Africa have vastly improved. Today, investing in emerging market debt in Africa is not only about possibly investing in South Africa but also Egypt, Morocco, Tunisia, Ghana or Nigeria and many other countries,’ Steer said.Africa’s reputation as only for investors who are willing to take big risks for big rewards can be undeserved.’What’s been holding people back [from Africa] is an outside perception of risk, of volatility, but it doesn’t need to be high risk. You can get anything between 12 to 15 per cent return with 20 to 25 per cent perceived volatility, which is a really good return for equity investments,’ she said.’You won’t get that in all parts of Africa, but you can add Africa as an element into an emerging markets portfolio.’Rogerscasey is recommending strategies and managers which will begin investing with commitments of between US$25-100 million, Steer said. – Nampa-Reuters