Archive for the 'Fund manager' Category

Blockchain, crypto and the changes to stock exchanges in coming 2 years

Hirander Misra of GMEX, speaking at panel organized by lawyers Mackrell Turner Garrett on cryptocurrencies in London on 14 Nov, says: “We get 10 inquiries a week to set up a platform. The bar for setting up a blockchain or crypto exchange is moving much higher. In Mauritius and Abu Dhabi the bar is almost as high as for setting up a normal exchange.

“Digital currency is here to stay, in time some sovereign states will adopt it. In Venezuela, where currency collapsed, people have used bitcoin to get currency out, in Harare people have adopted it. Fidelity and others have started to dip their toes in the water.

“Independent crypto exchanges are opaque, it can be very expensive to get assets in and out. In the last 6-12 months, some of the big custodians have been getting involved, the large banks are going into custody, adopting own products, vaults, etc.

“We talk about ‘decentralized’ but everyone is protecting their own turf, we will end up in worse mess. It can be spaghetti.

“Securities exchanges are very much like they were 25 years ago, standalone, at the time when electronic trading came in. Unless you change you won’t be relevant. There will be change in the next 2 years.

“We still need for regulation and intermediaries, people still want institutions to be accountable. A lot of what we have done in last 30 years is still relevant, our challenge is to make it more efficient.”

GMEX
GMEX Group (GMEX) comprises a set of companies that offer leading-edge innovative solutions for a new era of global financial markets, providing business expertise, the latest technology, connectivity, and operational excellence delivered through an aligned partnership driven approach. GMEX uses extensive market infrastructure experience and expertise to create an appropriate strategic master plan with exchanges, clearing houses, depositories, registries, and warehouse receipt platforms. GMEX also offers the added benefit of interconnection to multiple partner exchanges, to create global networks of liquidity. GMEX Technologies is a wholly owned subsidiary of GMEX Group.

How big are African pension funds?

Here are selected findings from a recent hunt through the Internet:

According to a recent report by PricewaterhouseCoopers, “Africa Asset Management 2020” (get your copy here) total assets under management in 12 selected Africa countries were $293 billion in 2008, more than doubling to $634bn by 2014. They are forecast at $1.1 trillion in 2020. (The 12 countries are: South Africa, Morocco, Mauritius, Namibia; Egypt, Kenya, Botswana, Ghana, Nigeria; Angola, Algeria, Tunisia).

Pensions are increasingly important as many countries set up and grow pension schemes. Mauritius and Ghana are examples of countries with 3-pillar pension systems and some countries are starting to revise their regulations to allow pension funds to invest more widely than just into domestic bonds, money market and equities

How big are the funds and are do they invest in infrastructure?

The giant African pension fund is South Africa’s Government Employees Pension Fund (GEPF), which had an investment portfolio of ZAR1.67trn ($124bn) at 31 March 2017 while accumulated funds and reserves grew at 10.2% a year for the last decade, according to the latest annual report.

The fund has 14 direct investments in 904MW of renewable energy including Bokpoort (50MW concentrating solar power CSP), wind and the 175MW photovoltaic (PV) Solar Capital Plant. GEPF has also backed 646 housing projects and unlisted investments include ZAR3.9bn ($290m) into the Pan African Infrastructure Development Fund run by Harith General Partners, ZAR2.4bn into South Africa’s airports and ZAR996m in telco MTN Nigeria, with a total of 1.2% of assets in infrastructure including roads and power in South Africa and across Africa.

Next-door Namibia has 2.5m people and David Nuyoma, CEO of the Government Institutions Pension Fund (GIPF) told a workshop in October 2017 its total assets were N$105bn ($7.9bn), 64% of the nation’s gross domestic product. Its unlisted portfolio includes residential, tourism and commercial developments, solar power and an infrastructure fund run by Old Mutual.

Botswana Public Officers Pension Fund has assets under management of BWP54.6bn ($2.6bn), including BWP11m invested with Harith.

Other markets are growing fast. In September 2017, Nigeria’s Pencom put pension fund assets at NGN7.16trn (down to $20.1bn after currency falls) of which NGN5.2bn was in infrastructure funds and NGN221.5bn in real estate including real-estate investment trusts (REITS). Earlier the industry had been growing by 30% a year from 2008-2015. There are 2015 regulations governing investment into infrastructure, and fund managers Asset and Resource Management Company and Harith General Partners, based in South Africa, have teamed up to create a $250m infrastructure fund for West Africa that meets the requirements.

 

Source: PricewaterhouseCoopers

In December 2016, Kenya’s Retirement Benefits Authority then CEO Edward Odundo said the industry would be KES1trn ($9.8bn) by the end of that month. The regulator is investigating structures for pensions and other funds to invest in road Government-led infrastructure such as Nairobi-Nakuru-Mau Summit superhighway (report in Nation newspaper)

Investments of social security schemes in Tanzania were TZS7.8trn ($3.6bn) in June 2015 and had grown 17% in the year, according to the Social Security Regulatory Authority (SSRA). The National Social Security Fund invested for 60% of the $140m Kigamboni toll bridge (Government has 40%).

Social Security and National Investment Trust (SSNIT) in Ghana, has assets GHS8.8bn ($2.0bn) and is invested in power projects, housing, health and other infrastructure in support of Government initiatives.

 

(Figures from author’s Internet research of annual reports of regulators and funds or recent news updates)

South Africa’s PIC aims to invest $1bn into African private equity and development

South Africa’s Public Investment Corporation (PIC) has established 2 funds and plans to invest at least $1 billion into African investments outside South Africa, including R2.5bn ($213 million) in the current financial year to 31 March.

According to South Africa’s Finance Minister Nhlanhla Musa Nene, who is also Chairman of the PIC: “True to the GEPF mandate which requires that we commit 5% of assets under management (AuM) on the African continent, the PIC acted accordingly in the past year. That commitment stands. We have established 2 funds, namely: Africa Developmental Investments and Private Equity Africa, which will assist us to discharge our client-given mandate to invest on the rest of the continent. The commitment to invest in the rest of the continent is born out of a realization that our collective success is premised on economic integration.

South Africa's Finance Minister - Nhlanhla Muse Nene

South Africa’s Finance Minister – Nhlanhla Muse Nene

Acting CEO Matshepo More

Acting CEO Matshepo More

“More importantly, the African economic narration has been positively changing. Over the last decade, the continent’s economic output has tripled, while it is projected that Sub-Saharan Africa will grow at an average of 5% in the coming decade. This growth means that the continent will be the second fastest growing region in the world after Asia. For this reason, the PIC will, in the new financial year, also focus on developmental investments in Africa with a minimum commitment of $500m for developmental investments in Africa and a further $500m towards private equity in Africa. The African story presents the PIC with unique investment opportunities and we are fully aware that part of this strategy should be to grab opportunities in Africa and reap rewards in a manner that promotes inclusive growth and creates decent work for the people of Africa.”

Earlier PIC had established the Pan African Infrastructure Development Fund with a target size of $1bn and attracting $625m of investments in its first year, and set up Harith Fund Managers to manage it.

R1.6trn of assets
The total PIC AuM came to R1.6 trillion ($136bn) according to the annual report for the year to 31 Mar 2014, tabled in Parliament last October. Strong listed equity performance helped boost returns to well ahead of benchmarks (including consumer price index + 3%), and AuM were up from R1.4trn the year before and R1.19trn in Mar 2012 and around R83bn in 1994. Nearly 90% of its assets are from the Government Employees Pension Fund (GEPF), with the rest from the Unemployment Insurance Fund, the Compensation Commissioner Fund and other clients.

Asset allocation at 31 Mar 2014 (NB the annual report also gives contradictory figures on p71):
Asset class %
Local equity 49.11
Local bonds 32.42
Cash & money market 7.12
Properties 4.39
Offshore equity 3.64
Offshore bonds 1.72
Africa equity (ex-SA) 0.5
Isibaya 1.1

African investments
The unlisted investments portfolio is divided into developmental investments, private equity and properties. The annual report separates “Africa” from South Africa and the “Africa” developmental investments are focused on energy, transport and logistics, social and infrastructure, water and ICT; private equity to focus on “consumer-driven sectors, other sectors will be viewed opportunistically” and properties are retail, industrial and offices.

The African investment portfolio outside South Africa was valued at R7.9bn ($672m) at 31 Mar and the largest purchase during 2013/14 was $289m for a 1.5% stake in Nigerian listed cement firm Dangote Cement. The first African investment was a stake in Ecobank Transnational Incorporated Ltd.

Development impact
The PIC also has a strong commitment to investments in economic infrastructure, environmental sustainability, social infrastructure, priority sector (high labour intensive sectors), Small, Micro and Medium Enterprises (SMMEs) mostly in South Africa. According to the Minister: “During the 2013/14 financial year, R11.4bn worth of unlisted investments were approved, of which R4.8bn have already been disbursed. The impact on social returns was significant:
• In excess of 7,805 jobs (directly and indirectly) were created and 78,636 jobs were sustained
• 309 SMMEs have been funded and underwent entrepreneurship training
• The PIC is emerging as a leader in the development of green industries by directly and indirectly funding renewable energy projects that will generate in excess of 1,558 megawatts of electricity.”
The PIC is also supporting black asset managers through training as part of a BEE (black economic empowerment) incubator programme for South Africa’s asset management industry and has entrusted some R50bn of assets to 12 firms. It is also supporting transformation of stockbroking and said it paid 86% of brokerage fees to brokers that met Level 4 or better BEE as classified by the Department of Trade and Industry, and aims to pay 50% of all brokerage to Level 2 or better firms in the current year.

Acting CEO Ms Matshepo More (previously Chief Financial Officer, the previous CEO Elias Masilela resigned on 31 May 2014) said that “developmental” unlisted investments in the year came to R6.9bn and in the current year to Mar 2015 it will invest at least another R2bn in “social and economic infrastructure”.

Profit was R209m (up from R130m in 2013) and 1% of profit after tax is set aside for corporate social responsibility. It has a Corporate Governance and Proxy Voting Policy outlining its shareholder activism and is a signatory to the United Nations Global Compact and the United Nations Principles for Responsible Investing. One example was blocking takeover of listed pharmaceutical company Adcock Ingram by Chilean company CFR “to unlock value using local talent and also to preserve jobs”.

The PIC annual report was reported in South Africa’s Business Day in January and on South Africa Info in October 2014 and the last annual report can be obtained here.

Africa’s leading bond and debt summit

ADCM 2013

ADCM 2013

ADCM 2013

ADCM 2013

Top speakers including Government leaders, policy-makers, bankers, investors and experts will be debating the future of Africa’s debt capital markets on Monday 30 June at the London Stock Exchange. The African Debt Capital Markets ADCM 2014 conference is organized by African Banker magazine. I am honoured to be moderating some sessions.

Among the conference highlights are debates on whether African governments have been using bond proceeds wisely, the future for African bond issuances, local currency markets and the challenges of deepening the debt capital markets. There will be calls for policy-makers to make changes to support securitization and other steps to boost finance for development, jobs and growth, following successes in Asia and the world.

Speakers include the Hon Kweku Ricketts-Hagan, Ghana’s deputy Minister of Finance, and Dr Abraham Nwankwo, Director-General of the Nigeria Debt Management Office and Jaloul Ayed, a former Minister of Finance from Tunisia. There will also be Mary Eduk from the Securities and Exchange Commission in Nigeria, Uche Orji of the Nigeria Sovereign Investment Authority, and Stephen Opata from Bank of Ghana.

Stock exchange leaders include Sunil Benimadhu, dynamic head of the African Securities Exchanges Association and CEO of the Stock Exchange of Mauritius, Moremi Marwa CEO of the Dar es Salaam Stock Exchange and Innocent Dankaine from the Uganda Securities Exchange.

Banks, fund managers and stockbrokers include HSBC, Renaissance Capital, Investec, Ecobank and Exotix and there will be many leading legal and other experts including rating agencies Moody’s and Fitch.

There will be a special focus on the Nigerian Debt Capital Markets. Other panels will cover infrastructure, public-private partnerships, sovereign Eurobonds and local currency markets, shadow banking, Islamic finance, new institutional investor trends, and Africa’s standing among global markets.

For more information, look at the website here.

Women hedge fund managers outperform men

For the second year running, women hedge-fund managers outperform men on average, according to a Reuters report of a study by professional services firm Rothstein Kass. It quotes Meredith Jones, a director at Rothstein Kass, who said it could feed speculation that women are better investors: “There have been studies that show that testosterone can make men less sensitive to risk-reward signals, and that comes through in this study.”

The firm has its own Women in Alternative Investments Index which includes 80 of roughly 125 hedge funds worldwide run by women. It said that, over the period 1 Jan – 30 Nov 2013, the hedge funds run by women and tracked by the index returned 9.8%, compared to only 6.13% gain in the HFRX Global Hedge Fund index. Over 6 years from Jan 2007 to June 2013, hedge funds run by women returned 6%, compared with a 1.1% loss at the HFRX Global Fund Index.

The Standard & Poor’s 500 stock index gained 4.2 percent during the same time.

Although the hedge fund industry manages $2.5 trillion, hedge funds run by women manage only a tiny fraction. Although some institutional investors such as Connecticut’s pension fund have programs designed to make allocations to firms run by women and minorities, the small size and number of women-run funds has been its own barrier to large investments.

Jones said that an Oct 2013 survey of 440 senior women, including fund managers, investors, and service providers, showed growing optimism about the role of women in an industry historically dominated by men.

Egyptian Exchange holds workshops with mutual funds to boost liquidity

The Egyptian Exchange (www.egx.com.eg) is busy with workshops for mutual funds, investment banks and managers of investment institutions, aiming to boost trading volumes through better communications between market participants and listed companies.

Trading floor of Egyptian Exchange - Dec 2012  pic: Tom Minney

Trading floor of Egyptian Exchange – Dec 2012 pic: ACMN, Tom Minney

The workshops gave investor relations (IR) officials of the listed companies a chance to present their work plans and investment options and the fund managers could also discuss latest developments and current market variables.
According to an EGX press release, Dr. Mohammed Omran, EGX Chairman, said the EGX is keen to boost stock market liquidity. Fund managers praised the communication with listed companies and said it adds to the disclosure provided by EGX. It gives a legal framework for officials of listed companies to answer questions from the institutional investors.
This is a high priority in the current Egyptian economy where all market participants need to work hard to keep the Egyptian Exchange strong and active capital market in the short and medium term.

Finch Africa wins “fund of the year” for Africa ex-South Africa

Pan-African fund manager Finch International Advisors received top honours as its Africa Opportunities Fund was named Africa ex-South Africa Fund of the Year. The award was presented at a Inaugural Africa Fund Manager Performance Awards gala reception on 11 October in Cape Town, South Africa.
Africa FM Editor-in-Chief Antony Ireland remarked, according to a press release from Finch: “Finch Africa has clearly distinguished itself as the best-performing fund in Africa ex-South Africa as it more than doubled the return of the next best competitor. Under the stewardship of highly- experienced CIO Jenni Chamberlain, the fund generated a very impressive +31.01% return and 1.48 Sharpe Ratio over the 12-month period through 30 June.”
Finch CIO Jenni Chamberlain responded: “We are honored to have been selected from amongst such talented African fund managers. This year’s outstanding performance may be attributed to the strength of our investment team as there is no substitution for hands-on experience and local market expertise.”
“We would like to thank Africa FM and Pageant Media for fostering awareness of Africa as a credible investment destination for institutional investors across the globe.”
Todd Moss, Senior Fellow at the Center for Global Development (CGD) and member of the Finch Advisory Board commented, “The award is testament to management’s long experience in the region and the team’s disciplined bottom-up approach. For those looking to add African market exposure, the Finch Africa Fund speaks for itself.”
Finch is a wholly owned subsidiary of Altree Financial (www.altreefinancial.com), a financial services group based in Bermuda and regulated by Bermuda Monetary Authority (BMA) with offices throughout Africa, Asia, Europe and the Americas including Altree Custody Services, trusts, and Securities Africa stockbroker with a main office in Johannesburg.