04.02.2014
By Terry Flanagan

Threadneedle Investments Targets Africa

Threadneedle Investments has partnered with Stanlib, a South African fund manager, as they expect the assets under management of international funds investing in Africa to more than double.

Threadneedle has entered into a promotion and referral agreement to introduce its clients globally to the Stanlib’s Africa strategies Stanlib manages more than $45bn for retail and institutional clients, and specialises in South African and African investments across all major asset classes including property.

Michael Housden, head of Middle East and Africa distribution at Threadneedle said in an email to Markets Media: “Threadneedle is working with Stanlib locally across sub-Saharan Africa because Stanlib has a deep experience of these markets.”

The agreement follows the announcement in August 2012 that Stanlib had chosen Threadneedle to manage more than $800 million in global and emerging market equity and global balanced portfolios. The assets have since grown to more than $1 billion.

As part of the new agreement Threadneedle will introduce strategies including Africa ex-South Africa equity, a strategy focusing on investment in Africa’s frontier markets, global emerging market property and direct property investment opportunities.

At the same time Stanlib will offer African investors access to Threadneedle’s capabilities.

Dylan Evans, head of international business development at Stanlib said in an email to Markets Media that the weakness of the South African Rand and the difficulty of finding good value stock opportunities locally has increased the appetite for international investment.

Evans estimates that assets under management of international funds investing in Africa, ex-South Africa, is between $1.5 billion and $2 billion.

“Hence, we consider the listed Africa, ex-South Africa space could perhaps absorb another $2 billion without causing serious price distortion, giving a potential total of around $5 billion,” added Evans.

He expects this to grow due to the the opening of new stock markets, such as Angola and Mozambique. “We would expect the Angolan market to open for business within the next two years and this market could well be equal in size to Nigeria’s,” he added.

There are 17 African stock markets, excluding South Africa, but of these only two trade in significant volumes according to Evans. He said Egypt has recently been trading over $500 million a week and Nigeria generally trades around $150m a week.

In March ALTX Africa Group, which aims to set up a pan-African trading network, said it had received its first trading license and is slated to launch in Uganda this year.

In addition, Evans said most informed estimates suggest private equity/infrastructure investment in Africa has been been perhaps 10 times larger than listed equity investment.

Stanlib currently manages infrastructure investments in South Africa and will soon be expanding into other African markets. It is also currently in the process of launching a $100 million direct property investment fund focused on Nigerian and Kenyan mixed shopping center and office developments.

Evans said: “Collectively, Africa’s economy is around $2 trillion and is expected to reach $2.6 trillion by 2020 (source: McKinsey). The continent counts some of the world’s fastest growing economies. Yet, very few of the largest 200 pension funds in the UK and Europe are known to have any dedicated exposure to Africa.”

An IMF report this week said that in a recent survey of investment officers, more than 40% of insurance companies intended to increase their allocations to equity and to hard currency corporate debt in emerging Europe, the Middle East and Africa, and emerging Asia. Investment officers expect a 30% increase for emerging markets.

The report said central bank reserve managers, who collectively handle $11 trillion in assets, are also raising their allocation to emerging markets in line with their economic size and diversifying away from hard currencies.

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