Investec Africa & Middle East P Accumulation GBP

Africa and the Middle East are being touted as the next frontier markets to come to fruition as they show potential to grow at attractive rates versus other emerging markets. It is a region full of opportunity and while it would be wrong to rule out risks such as political and social unrest, it has nevertheless undergone reforms to liberalise its economies over the last decade.

Countries like Egypt, Morocco, Tunisia and Jordan benefit from large and young populations where increased productivity and higher incomes have led to improving standards of living and higher consumption. Other markets like UAE, Oman, Qatar, Bahrain and Kuwait are benefiting from soaring oil prices, strong currencies and major upgrades to their infrastructure.

Opportunities also abound in other parts of Africa. The continent is now starting to compete in terms of trade. GDP growth has outpaced the rest of the world since 2001 and was in excess of 6% last year compared to global growth of 3.8%.

Investing in these frontier markets is higher risk and volatility is likely to persist. However, the region is rife with opportunities and Investec has recently launched an Africa & Middle East Fund in order to capture the growth opportunities. Investing in Africa is nothing new to Investec. The company was established in South Africa and has been managing African assets for the last 16 years.

The fund was launched on 2 June and is jointly managed by Roelof Horne and Amr Seif who are based in South Africa and London respectively. They also have support from offices based in Botswana and Namibia.

It has a concentrated portfolio of 40 to 60 stocks which further increases risk, but there is also good diversification across sectors with exposure to financials, industrials and telecoms amongst the largest sectors.

Although many African companies have suffered from liquidity issues in the past, this is beginning to improve. The Middle East can also have restrictions in terms of foreigners owning shares in their companies, but again things are gradually becoming more liberalised - the only market that is completely restricted is Saudi Arabia.

Investec will close the fund to new investment once it has reached £500 million so that existing investors are not compromised in terms of performance and liquidity. Given the high risk nature of investing in this region, we suggest clients only have very limited exposure to the region (1-2%) and investors must take a long term view of at least 10 years.

The Investec Africa & Middle East Fund is not currently in the Wealth 150 list of our favourite funds in each sector, but we are keeping a close eye on it to see how the theme develops.