Events in North Africa could provide opportunities, according to fund manager

Feb 16, 2011 by Charles Gubert

The political upheaval being witnessed in North Africa could provide substantial opportunities for Insparo Asset Management‘s newly launched African long/short equity hedge fund.

The Insparo Africa Equity Fund, which was unveiled earlier this month with $7.5 million in seed capital, invests in market leading companies across North Africa and sub-Saharan Africa employing minimal leverage. Unlike its flagship fund, the strategy will make investments in South African equities – although this is limited to 20% of the portfolio. It focuses on consumer-facing companies – a sector that offers high growth potential and attractive yields.

However, the turmoil seen in Tunisia and Egypt (and increasingly Algeria), could be a positive prospect for the fund.

“The recent events in North Africa make this an auspicious time to be launching a fund like this – 2011 is an exciting year for the African electorate with 17 presidential elections scheduled and we are witnessing the birth of a new nation (South Sudan),” said Jamie Allsopp, the fund’s manager.

He added: “Although we are taking a long term view with our investment strategy, the recent volatility will provide good entry points into the positive long term story of Africa.”

The firm believes the rapid rise in African consumerism and urbanisation, coupled with widespread political reform and its overall strong growth outlook, make the continent a highly attractive investment prospect.

It is estimated that 50% of the 25 fastest growing economies in the next five years will be African and foreign direct investment into the continent has swelled enormously. China announced in December 2010 that its bilateral trade with Africa had increased by 45% to reach a record $115 billion.

“The rise in consumption in Africa in the last decade has been remarkable, but there is still a huge amount of room for growth. The penetration of goods and services in Africa is still relatively low and African consumers are projected to spend $1.8 trillion in 2020 – an astonishing increase of over a trillion dollars from 2008,” said Allsopp.

Insparo estimates the Cayman Island-domiciled Africa Equity Fund will make average unlevered annual returns of between 15% and 20%.

This is Insparo’s second hedge fund. It is aiming to emulate the success of its flagship $189 million multi-strategy Africa and Middle East fund, which has returned 36% since its launch in June 2008.


Investors , Launches

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