Allan Gray Africa Equity Fund berths in Nigeria

Allan Gray Investment Management Nigeria Limited has introduced into the Nigerian capital market its Africa Equity Fund, which it invests in a focused portfolio of companies with significant business interests in Africa, regardless of the location of the Stock Exchange listing.

The Fund price is reported in US dollars but the underlying holdings are denominated in various currencies, meaning that returns are likely to be volatile.

“The Fund aims to outperform Africa equity markets over the long term without taking on greater risk of loss. The Fund’s benchmark is the MSCI emerging and frontier markets (EFM) Africa index (total returns),” said Thando Mhlambiso, managing director, Allan Gray Nigeria.

Allan Gray Nigeria was founded in 2012. The firm is a wholly-owned subsidiary of Allan Gray Group, establish in South Africa in 1973.

The minimum investment amounts for this Fund is $50,000 and subsequent investment of $1,000. Investors are charged 0.5 percent when transacting in fund shares, both on subscription and redemption. “This is paid into the Fund to offset the costs associated with the transaction that are borne by the Fund. Allan Gray International Proprietary Limited may waive this charge in the case of significant offsetting flows,” Mhlambiso said.

The Fund, which is not available to South African residents, is suitable for investors who: seek exposure to African equities; are comfortable with stock market and currency fluctuations; are prepared to take the risk of capital loss, and typically have an investment horizon of more than five years.

Mhlambiso further told investors at a forum in Lagos aimed at showcasing Allan Gray Africa Equity Fund that: “We invest in shares that we believe offer superior fundamental value while taking into account risk and return. We research companies and assess their intrinsic value based on long-term fundamentals; we then invest in businesses where our assessment of intrinsic value exceeds the share price by a margin of safety. This approach allows us to identify shares that may be out of favour with the market because of poor near-term prospects, but offer good value over the long-term. The Fund’s holdings will deviate meaningfully from those in the index both in terms of individual holdings and sector exposure.”

The annual management fee ranges from 0.5 percent to 2.5 percent, depending on the relative return of the fund to the benchmark, before fees. “The fee is calculated on a base of 1.5 percent plus one twenty-fifth of the cumulative three-year relative performance, subject to a floor of 0.5 percent and a cap of 2.5 percent. For example, if the cumulative three-year performance of the fund is 20 percent and that of the benchmark is 15 percent, the fee rate is: 1.5 percent plus (20% minus 15%) divided by 25, which is equall to 1.7 percent,” he said.

 

Iheanyi Nwachukwu