New Star Heart of Africa - Not all doom and gloom
By Meera Patel | 03 Apr, 2008
In November 2007, New Star launched their Heart of Africa Fund. You might wonder why I would be highlighting a fund like this at a time when volatility is rife in global markets.
Despite global market uncertainty, the fund has held up very well since its launch, although please note this is a short time frame and past performance is no guide to the future. The fund is up 9% since launch while the average fund in the Specialist sector is down 6% (Source: Lipper, from 09/11/07 to 01/04/08). This performance has been achieved despite the political tensions in Kenya and the fund’s exposure of 8% of the portfolio has not hindered overall performance. It has also had a high exposure to cash which the manager, Jamie Allsopp has been investing carefully as and when opportunities arise.
This is a high risk investment and while political instability and corruption have been prominent in the region for many decades, the investment landscape has also changed significantly over the years. Many regions are offering strong economic growth and an improving corporate climate.
What’s more, the fund does not have to invest in every sub-Saharan country and the manager can cherry pick the best companies with highest level of accounting standards from the region. Currently, the fund has 36% in Nigeria which is the highest single country weighting with the remainder spread across other countries like Ghana, Zambia, Kenya and Malawi.
The fund has just exceeded £50 million. This is a milestone for a highly specialist fund. New Star stated at the outset that they will cap this fund at £100 million for a minimum of two years. This is partly to do with liquidity which could potentially dry up in a region like this, and by keeping the fund fairly small and nimble ensures existing investors’ interests are kept at heart. Despite the clear risks associated with the fund, we continue to believe the fund’s long term prospects are bright and it remains on our Wealth 150, a list of our favourite funds in each sector.
