Glen Finegan, co-manager of the First State Global Emerging Markets fund, has been investing into Egypt and South Africa, saying equities in the BRIC nations are popular, and therefore too expensive.
"We favour South African countries which are expanding into the rest of Africa, abut also see value in Egypt, Kenya, and Botswana. We are not usually top-down in our approach, but we see value in consumer-led industries; mobile phones and supermarkets, for example, all of which are growing in Africa," he said.
Data from Financial Express shows that in sterling terms the MSCI South Africa index has outperformed the BRIC nation indices in the six months-to-date.
Performance of MSCI South Africa index over 6-mths
Source: Financial Express Analytics
Stephane Bwakira, manager of the STANLIB Standard Africa Equity Fund explains this performance.
"Africa as a whole recorded positive GDP growth in excess of three per cent in 2008-2009, two years in which the developed world suffered from the worst recession since the 1930s. Looking further into 2010 and 2011, both years in which the recovery in the developed world is likely to be lukewarm, the IMF is predicting GDP growth for Africa of a healthy 4.7 per cent in 2010, rising to 5.9 per cent in 2011," he said in a note published 29 July.
Both Finegan and Bwakira refute criticism that Africa is only worth investing in because of its commodity resources.
First State avoids the resources sector because of an SRI approach, Finegan said, while Bwakira points out that the sustained growth seen in Africa since 2008 happened at a time of subdued commodity prices.
"This bolsters our contention that African economies are now being driven by their own internal momentum. High commodity prices are the icing on the cake for Africa but they are not an essential pre-requisite for growth," Bwakira said.
The managers are not the only ones who have been drawn to the World Cup-hosting continent.
Asset management boutique Silk Invest points to Nigeria, which has a population of more than 150 million, as an important market for investors.
"Nigeria has much in common with Brazil; a similar amount of people, abundant resources, an increasingly functional democracy and a well regulated financial system," Baldwin Berges, managing director at Silk Invest said, comparing investment opportunities to the popular South American region.
He adds that the Nigerian central bank dealt efficiently with defaults in the banking sector and that the political system there is maturing into a democracy, increasing its investor appeal. Silk Invest runs two Luxembourg-based UCITS funds which invest in Africa; African Lions and Silk Road Income.
Of the funds mentioned it is the First State Global Emerging Markets which has returned the most to investors over a one year period. As an IMA sectorised fund it is also likely to be the most accessible to UK investors. The Silk Road Income fund is not compared over the period as it did not launch until May 2010.
Africa funds, 1-yr
Source: Financial Express Analytics
One drawback for investors looking to increase their exposure to Africa is its lack of equity income prospects, with few companies paying out dividends, Finegan said.
“While large companies such as a Nigerian brewery might be paying out dividends, most companies in the geography are expanding, so ploughing their earnings back into the business,” he said.