DUBAI (Reuters) - Abu Dhabi-owned fund Invest AD is betting on its range of investment products to tap growth opportunities in fast-growing Africa, a continent which the state-owned investment firm believes is still undervalued for its potential.
"If you look at Africa, there are opportunities across the board and it's not as well-defined as in some other more mature markets. So we want to build a suite of products that captures that growth," Chief Investment Officer David Sanders said in an interview.
As part of the move, Invest AD has converted its existing Emerging Africa Fund to a Ucits standard fund -- viewed as more regulated, transparent and liquid -- to lure risk-averse European investors, Sanders said. The fund expects to be $40 million in size by the end of May.
The firm will retain a portion of the existing fund in a different Cayman Island structure and look at less liquid investments, the executive said.
The company teamed up with Japan's SBI Holdings set up a $75 million Africa fund in 2010 and invested in the 2011 initial public offering of Bank of Kigali, Rwanda's largest bank by assets.
The joint venture, which does not shy away from investing in unlisted companies, is closely studying opportunities in countries such as Tunisia, Morrocco, Ghana and Nigeria.
"We have some early due diligence. Our aim is to be a financial investor and not take controlling stakes. Occasionally you will visit a listed company and you will find a better unlisted company or the flip side is also true," Sanders said.
COMPELLING VALUATIONS
Valuations in the continent are still compelling for investors, the executive said, adding markets in the region lagged other regions which have seen a sharp recovery after the 2008 financial crisis.
"If you see where the global markets are today, we are pretty much back to levels seen in 2008 but markets like Africa have lagged and there is enough value for them to catch up in the near-term," said Sanders, who was previously senior fund manager at National Bank of Abu Dhabi.
At the end of March, Invest AD's emerging Africa fund had allocated 33 percent in African banks, followed by a near 12- percent allocation to telecommunication firms.
"For us, the overarching theme in our investments in consumer. With in that, you look at banks, telecoms, retail as opportunities. If you see consumer spending in Africa last year was more than in India," Sanders said.
The fund has returned 10.1 percent year-to-date and its top holdings include companies such as Nigerian Breweries (NB) and Moroccan home builder Addoha.
Global institutional investors plan to boost their asset allocation in African markets over the next five years, and are shifting to long-term investment strategies from more speculative, short-term bets, a survey released in January by Invest AD and the Economist Intelligence Unit (EIU) showed.
Invest AD is owned by Abu Dhabi Investment Council (ADIC), which focuses on countries closer to home and is a separate entity from Abu Dhabi Investment Authority (ADIA), one of the world's largest sovereign wealth funds.
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"If you look at Africa, there are opportunities across the board and it's not as well-defined as in some other more mature markets. So we want to build a suite of products that captures that growth," Chief Investment Officer David Sanders said in an interview.
As part of the move, Invest AD has converted its existing Emerging Africa Fund to a Ucits standard fund -- viewed as more regulated, transparent and liquid -- to lure risk-averse European investors, Sanders said. The fund expects to be $40 million in size by the end of May.
The firm will retain a portion of the existing fund in a different Cayman Island structure and look at less liquid investments, the executive said.
The company teamed up with Japan's SBI Holdings set up a $75 million Africa fund in 2010 and invested in the 2011 initial public offering of Bank of Kigali, Rwanda's largest bank by assets.
The joint venture, which does not shy away from investing in unlisted companies, is closely studying opportunities in countries such as Tunisia, Morrocco, Ghana and Nigeria.
"We have some early due diligence. Our aim is to be a financial investor and not take controlling stakes. Occasionally you will visit a listed company and you will find a better unlisted company or the flip side is also true," Sanders said.
COMPELLING VALUATIONS
Valuations in the continent are still compelling for investors, the executive said, adding markets in the region lagged other regions which have seen a sharp recovery after the 2008 financial crisis.
"If you see where the global markets are today, we are pretty much back to levels seen in 2008 but markets like Africa have lagged and there is enough value for them to catch up in the near-term," said Sanders, who was previously senior fund manager at National Bank of Abu Dhabi.
At the end of March, Invest AD's emerging Africa fund had allocated 33 percent in African banks, followed by a near 12- percent allocation to telecommunication firms.
"For us, the overarching theme in our investments in consumer. With in that, you look at banks, telecoms, retail as opportunities. If you see consumer spending in Africa last year was more than in India," Sanders said.
The fund has returned 10.1 percent year-to-date and its top holdings include companies such as Nigerian Breweries (NB) and Moroccan home builder Addoha.
Global institutional investors plan to boost their asset allocation in African markets over the next five years, and are shifting to long-term investment strategies from more speculative, short-term bets, a survey released in January by Invest AD and the Economist Intelligence Unit (EIU) showed.
Invest AD is owned by Abu Dhabi Investment Council (ADIC), which focuses on countries closer to home and is a separate entity from Abu Dhabi Investment Authority (ADIA), one of the world's largest sovereign wealth funds.
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