THE ALPHA STORY IN AFRICA

LAGOS (Capital Markets in Africa) – Many investors are familiar with the African growth story. The young demographic, growing middle class and attractive GDP growth prospects have been recited before and I am sure we can agree that the long-term growth story sounds superb.

For investors with a long-term horizon, these fundamentals make Africa the perfect place to invest your money for the next 10-20 years especially as most of the developed regions do not possess the same fundamental characteristics.

Many investors we meet across the world, who have recognized the attractive opportunity that Africa offers, tend to contemplate the same question:“ What is the best way to invest in Africa?”

Private equity is often the initial favourite; long-term investors taking a multi-year view on accessing specific opportunities they feel will come to fruition over time. Infrastructure also resonates with investors since Africa still requires a lot of investment in building roads, railways, and other commercial projects. While both types of strategies hold promise, a lot of money has already flown into these somewhat limited spaces, with increased competition for assets leading to elevated entry multiples compared to other frontier markets.

One space which still offers significant alpha, and which many investors overlook at first, is in the more liquid end of the capital structure. We believe that listed equities, still a developing asset class across Africa, offer exciting opportunities at more attractive valuations. Currently the MSCI Africa ex-South Africa Index is trading at a 13x Adjusted Positive P/E versus MSCI World which is on a 17.4x multiple. And unlike most developed markets there are many factors about the overall market which provide additional alpha generating opportunities.

An extract from the INTO AFRICA August Edition: Driving Africa Opportunities. To read the full article, please download by clicking: INTO AFRICA PUBLICATION: AUGUST 2018 EDITION.

Contributor’s Profile
Jaclyn Petrone, Director of Business Development for Laurium Capital. Jaclyn joined Laurium Capital in January 2015 and is responsible for international business development and marketing. Prior to joining the Firm, Jaclyn spent almost eight years at PineBridge investments on the hedge fund and private equity allocation side.