May 23, 2011

Africa Poised for ‘Explosive’ Frontier Market Growth: Consultant Advises 1-2% Overall Allocation

In an article found here Asset International magazine (a subsidiary of PlanSponsor) notes that Africa “may provide some of the most robust investment opportunities for funds.” The article notes that investment plan consultants have been strong supporters of investment opportunities in the continent, and quotes prominent consultant Adam Tosh saying that “over the next five years, exposure to Africa should make up 1-2% of a total investment portfolio.” The author also highlights a previous article which recommended that “institutional investors look to smaller emerging markets to boost returns.” The earlier article pointed to research begun in January 1997 which found that that a basket of non-BRIC emerging markets had outperformed the BRICs by 39%. A similar story exists for Africa. As you can see here, a composite of some of Africa’s largest stock exchanges has significantly outperformed other emerging markets over the past decade, while a providing a lower standard deviation of returns. Thus, the opportunity for investment in emerging markets beyond the BRICs – notably Africa - is compelling both on a pure return basis, as well as from the standpoint of added diversification. For more information about investing in Africa, please contact Nile Capital Management at (646)367-2820 or We know Africa - from Cairo to Capetown.

1 comment:

  1. The trouble I see with Africa is that unlike the former communist bloc back in the 90's, you don't really see the same education levels of citizens and civil societies that existed when the Soviets pulled out of Eastern Europe or the FSU. Sure, there is a commodity play and an agricultural land play, but in addition to shallow capital markets, outside of SA, you have the difficulty of imagining that a functional, productivity-based society is on the near-term horizon. However, what you do have is a whole industry fresh with funds from the Soviet break-up, promoting the region as if it were the next big thing.
    I'm not trying to be overly negative, I just don't see the runway or the exit strategy being remotely visible, which is an essential element in frontier investing. For example, you put a chunk of money to work, is the legal system strong enough(or will it be strong enough in the next several years) to even remotely ensure the profits will benefit shareholders.
    It just seems to me that there is a little mismatch between the substance of the opportunity and the level of promotional activity I have observed at conferences and in print over the past several years.