Global investors have been falling over themselves in recent years to gain exposure to the p h e n o mena l e c o n o mic growth renaissance taking place across much of Africa, resulting in a multitude of equity funds focused on the continent’s most dynamic economies springing up in the last few years.
Unfortunately the majority of these Africa equity funds are aimed squarely at large institutions rather than the typical retail investor. The majority of Africa funds also have a very high minimum investment effectively precluding anyone that isn’t a high net worth individual from taking a position. However, there are at least two Africa equity fund offerings that allow retail investors in South Africa to gain exposure to the continent’s economic transformation: the Momentum Africa Equity Fund and the Prescient Africa Equity Fund.
“An Africa equity fund is a great way to diversify your portfolio because a lot of the African countries that make up the funds are far less correlated to South African growth than people realise,” says Johan Steyn, a co-portfolio manager of the Prescient Africa Equity Fund, which currently has about R116.5m in assets under management. “It allows you to buy into the African growth story, which still has a lot of room to run because most of the GDP growth in Africa is coming off of a very low base.”
Investors can access the Prescient Africa Equity fund via two options: a once-off minimum lump sum of R10 000, which can then be left to compound over time or alternatively a R500 monthly debit order. It’s also possible to make a lump sum investment as well as a monthly investment.
The only downside to investing in the fund is cost. Prescient charges an initial fee of 1.14% each time you invest (ie 1.14% of either your lump sum or each of your monthly deposits) as well as an annual management fee of 1.31%. In addition, there is a 1% exit fee should an investor choose to cash in although Steyn points out that there is no performance fee.
“African exchanges often have higher trading costs and the foreign exchange charges can also add up,” says Steyn. “The fees that people pay are invested back into the fund to cover these costs.”
Prescient’s Africa Equity Fund cur-
Momentum Africa Equity Fund