8/6/2019 A Time to Invest in Africa
http://slidepdf.com/reader/full/a-time-to-invest-in-africa 1/18
A Time to Invest in Africa
Larry SerumaChief Investment Officer
Nile Capital Management, LLC
152 West 57 Street, 32nd Floor
New York, NY 10019
Telephone: 1-877-68-AFRICA
Email: [email protected]
A Time to Invest in Africa
8/6/2019 A Time to Invest in Africa
http://slidepdf.com/reader/full/a-time-to-invest-in-africa 2/18
NILE CAPITAL MANAGEMENT, LLC A Time to Invest in Africa
E XECUTIVE SUMMARY
Africa is an attractive investment region from a number of standpoints, including the
following:
A China play China’s trade and investment in Africa’s is a game changer in two ways. First,
China’s investments in infrastructure have the effect of lowering operating
costs for all companies which increases profitability and boosts local
competition. Second, it forces African governments to improve property rights
and reduce political risk, which hindered international companies from
investing in Africa in the past.
Value African markets are attractively valued. The price/earnings ratio for some
frontier African markets is a lowly 6 times, several standard deviations below
the developed world and other Emerging markets.
Growth 9 of the 15 fastest growing countries in the world are located in Africa. A
middle class is beginning to emerge and foreign direct investment as a share of
GDP is on par with China. Fiscal balances are good with low debt and budget
deficits compared with the developed world.
Uncorrelated The un-crowded nature of African assets also makes them unique in anincreasingly interdependent and contagion prone world. Indeed, the
correlation of returns for African assets among themselves and with the global
assets remained low throughout the financial crisis. Hence most of the risk is
idiosyncratic to the rest of portfolio.
Risks African assets in large part are not accessible or are unknown to the average
investor. For example, Africa has more than 100 companies with revenues
greater than $1 billion dollars per year. The information barrier and the over
exaggerated perception of high risk and political uncertainty keep back
sophisticated investors as well.
8/6/2019 A Time to Invest in Africa
http://slidepdf.com/reader/full/a-time-to-invest-in-africa 3/18
NILE CAPITAL MANAGEMENT, LLC A Time to Invest in Africa
INTRODUCTION
For the past two decades, the attention of investors around the world has been riveted on the emerging
markets of Asia, which includes two of the four high-growth “BRICs” – India and China. Several
emerging markets of Europe and South America, including the two other BRICs (Brazil and Russia),
also have increased their capital flows and allocations in global investment portfolios.
So, as these opportunities, inevitably pull back, fade or become less dramatic, some other high-growth
emerging and frontier markets should become attractive and worthy of consideration to be added to a
sophisticated investor’s asset allocation strategy. Several are located in Africa, the world’s second
largest continent by population and land mass, behind only Asia in both measures. With a population of more than one billion spread among 53 nations and almost 12 million square miles, Africa is becoming
too big for investors to ignore. Yet, its financial markets and expanding public companies remain
unknown and under invested by most foreigners.
Fortunately, events such as the 2010 FIFA World Cup soccer tournament, hosted by South Africa, have
helped to emphasize the dynamic, modernizing, and politically stable side of Africa. Other visible trends
also are helping to shift investors’ attention toward this vast continent and its diverse opportunities for
economic growth and financial market rewards. For example, African companies benefit from doing
business in a place with many native and unique advantages; cheap labor, fast growing population that
is unencumbered by legacy technology or business models, rising commodity prices, market deregulation,
favorable macro economic policies and improving levels of political stability and transparency.
In this paper, I will summarize the reasons for investing in Africa. In addition, I explain the best way to
participate in African markets and manage African risk is through an actively managed mutual fund
that offers “feet-on-the-ground” expertise in Africa.
8/6/2019 A Time to Invest in Africa
http://slidepdf.com/reader/full/a-time-to-invest-in-africa 4/18
NILE CAPITAL MANAGEMENT, LLC A Time to Invest in Africa
W HY THIS IS THE RIGHT
TIME TO INVEST IN A FRICA – A DOZEN REASONS
1. A ground-floor opportunity with potential for high returns
Of all investors who migrated into the BRICs over the past two decades, very few caught the
initial “ground-floor opportunity.” I believe Africa’s economic growth is just forming a powerful
upward curve that will continue for several decades and perhaps become as rewarding as the
BRIC markets over time. Already, we have seen the first wave of strong investment returns from Africa, as summarized in the table below.
Annualized Returns1999-2009
Annualized Returns 1 Year 3 Year 5 Year 10 Y
Dow Jones Industrials 18.82% -5.77% -0.67% -0.97%
S&P 500 23.45% -7.70% -1.65% -2.72%
Russell 2000 25.22% -7.40% -0.82% 2.17%
MSCI World 26.98% -7.65% -0.01% -1.94%
MSCI Emerging Markets 74.50% 2.73% 12.79% 7.29%
South Africa 28.63% 3.55% 16.93% 12.68%
Africa Composite -4.32% -0.72% 9.71% 1
Source: Bloomberg; African Data Includes South Africa, Nigeria, Kenya, Mauritius, Ghana, Egypt, Morocco, Botswana,through 12/2009.
For the decade ending 12/31/09, the average annualized return for South Africa was 12.68%,
which easily beat returns from U.S. stocks, global developed markets, and even emerging
markets. An African Composite Index – consisting of South Africa, Nigeria, Kenya, Mauritius,
Ghana, Egypt, Morocco and Botswana – performed even better, returning an annualized 13.83%
over this period.
These returns underscore a fundamental rule of investing: The first investors to enter new high-growth markets often reap the highest returns over time, as a result of taking risk that other
investors are not yet prepared to accept. Africa today is perhaps comparable to the BRIC
countries in the late 1900s. However, Africa also is taking advantage of more rapid changes,
driven by globalization, communications and technology, than most “frontier markets” of the past
century experienced.
8/6/2019 A Time to Invest in Africa
http://slidepdf.com/reader/full/a-time-to-invest-in-africa 5/18
NILE CAPITAL MANAGEMENT, LLC A Time to Invest in Africa
2. Low correlation to domestic, international and emerging markets.
Emerging markets have offered investors opportunities to diversify into new countries, markets,
companies and trends. Africa is rich in low correlation potential because only a few of its stock
markets or public companies are included in popular emerging market indexes or index funds.
Also, the portfolio exposures of large institutions and hedge funds to Africa are still relatively
low, compared to emerging markets. This means Africa has not experienced the liquidity-driven
inflows and outflows of capital that have been seen repeatedly over the past decade in Asia. You
might say that African markets still “move to their own beat,” not the tides of systematic global
market risk.
Perhaps the best measure of portfolio diversification potential is the correlation of investment
returns, and African markets have historically had relatively low correlations with both
developed and emerging markets.
Over a full credit cycle, from January 2002 through June 2009, an African Composite Index has
had a correlation of just 0.59 with the S&P 500, 0.66 with the MSCI EAFE Index, and 0.60 with
the MSCI Emerging Markets Index. Over the same period, the MSCI Emerging Markets Index
has had correlations of 0.82 with the S&P 500 and 0.91 with MSCI EAFE
Correlation: Variability of Returns with S&P 500
25%
61% 59%
89%82%
Nigeria South Africa Africa Composite MSCI EAFE MSCI EM
Source: Bloomberg; Africa Composite Includes South Africa, Nigeria, Kenya, Mauritius, Ghana, Egypt, Morocco,Botswana through 12/2009
8/6/2019 A Time to Invest in Africa
http://slidepdf.com/reader/full/a-time-to-invest-in-africa 6/18
NILE CAPITAL MANAGEMENT, LLC A Time to Invest in Africa
3. Strong economic and market growth
Many African countries have enacted macro economic reforms; credit regulation; labor market
regulation; business regulation and have liberalized markets and implemented free trade
policies. This has led to rapid economic growth. According to World Bank projections, 9 of the 15
countries in the world with the highest rate of five-year economic growth are in Africa. In
addition, African is urbanizing at a faster rate than India, and is already nearly as urbanized as
China, according to a recent report by McKinsey Global Institute. As shown in the graph below,
Africa has as many large cities as Europe, and more than North America (the U.S. and Canada
combined).
Rural vs.Urban Population
8273
454030
1827
556070
North
America
EuropeChina AfricaIndia
Rural Urban
Number of cities with
>1 million of people48 52 109 52 48
Population (millions) 1,219 1,032 1,351 830 349
Source: United Nations; McKinsey Global Institute analysis.
The continent has more than 500 million people of working age (15 to 64 years old). By 2040,
that number is projected to exceed 1.1 billion – more than in China or India. Over the past 20
years, three quarters of the continent’s increase in GDP per capita came from an expanding
workforce, the rest from higher productively – according to McKinsey Global Institute.
4. A significant number of African companies are generating strong cash flows, earningsand profits
Africa’s stock markets and public companies collectively represent approximately $1 trillion in
market capitalization. Among Africa’s 53 countries, about 23 have active stock markets, on which
about 1,500 companies are listed, in total. It boasts more than 100 companies with revenues
greater than $1 billion. Some of the largest African companies are well known with international
brands, for example, South African Breweries (one of the world’s largest brewers), Anglo
Platinum (the world largest producer of platinum) and Old Mutual (a financial services
8/6/2019 A Time to Invest in Africa
http://slidepdf.com/reader/full/a-time-to-invest-in-africa 7/18
NILE CAPITAL MANAGEMENT, LLC A Time to Invest in Africa
company). These three companies collectively have about $47 billion in sales. The largest and
most active national stock markets are in South Africa, Egypt, Morocco and Nigeria.
The public companies identified as investable opportunities in Africa are profitable with strong
cash flows and dividend yields. A recent study by Oxford University economists Paul Collier and
Jean Warnholz found that the average annual return on capital for the African companies they
studied was 65% to 70% higher than that of comparable firms in China, India, Indonesia, and
Vietnam. Because the cost of capital in Africa is relatively high, many companies have pricing
power driven by a combination of price inflation and increasing consumer demand, and they have
demonstrated strong rates of annual earnings per share growth.
5. Increased global demand for commodities
Africa holds an estimated 30% of the world’s mineral reserves, including 40% of proven goldreserves, 60% of cobalt, and 90% of platinum global reserves. In addition, it has 10% of the global
reserves for oil and 6% of proven gas reserves. As the BRIC countries industrialize, their
demand for natural resources will keep increasing, and they are turning to Africa as a source of
scarce natural resources – especially energy and strategic and industrial metals. The U.S.
National Intelligence Council estimates that 25% of the U.S. oil imports will come from Africa by
2015. Additionally, according to the United Nations projections, the world food production may
need to rise by 70% from 2005-07 levels over the next 40 years to feed the growing population.
Africa has almost 600 million hectares of potentially suitable arable land that is not currently
under cultivation, representing about 60 percent of the world available cropland. The global
“green revolution” in agriculture could potentially unleash new technologies and investments in
Africa.
6. Political risks have been exaggerated
The stereotype of an African country ruled by one-party or military dictators is outdated and
exaggerated. More than 90% of African nations now have functioning democracies, compared to
just 12% a quarter century ago. According to Freedom House, 63% of Africa’s population now
lives in countries designated as “free or partially free.” This is comparable to the ratio in Asia
(66%) and better than the ratio for all countries in the world (59%).
Several African countries once known for their unfavorable political or economic climates have
learned from previous mistakes and have become role models for political/economic stability. A
case in point is Nigeria, which was mired in war and military rule for 30 years after gainingindependence from the United Kingdom in 1960. In 1999, Nigeria regained a democratic
government and it has enjoyed political stability and a peaceful transition in political power ever
since. Between 1999 and 2006, Nigeria privatized more than 116 enterprises. In addition,
Nigeria has paid off its external debts, enacted prudent fiscal policies, and cleaned up its banking
system.
8/6/2019 A Time to Invest in Africa
http://slidepdf.com/reader/full/a-time-to-invest-in-africa 8/18
NILE CAPITAL MANAGEMENT, LLC A Time to Invest in Africa
7. The China factor
Chinese trade and investment in Africa is a game-changer. According to Dr. Chris Alden, an
author who monitors cross-border trade and investment in Africa, China alone has increased its
trade with Africa from $10 billion in 2000 to $90 billion in 2009. Dr. Alden has written: “Led by
Chinese petroleum companies flush with massive foreign currency reserves and a strong political
mandate, Chinese businesses have been on an acquisition spree for resources across the African
continent since 1996.” Additionally, from 1990 through 2008, Asia’s share of African trade
doubles to 28 percent, while Western Europe’s portion shrank from 51 percent to 28 percent,
according to a recent study by McKinsey Group.
8. Massive infrastructure development
Africa is expanding its network of roads and highways, ports and airports, electric and water
projects, and communications infrastructure at a faster rate than any continent in history. Again,
Chinese investment is driving the expansion. Recently, China has funded development of 10
major hydropower projects in Africa with a combined capacity of 6,000 megawatts and has built
or rehabilitated 3,000 kilometers (about 1,900 miles) of African railroads.
China has committed to investing its growing reserves into real assets around the world. In
particular, it seeks commodities to secure its future economic growth as an industrial power and
consumer economy. To harvest commodities from Africa, China has been contributing vast
amounts of money and expertise to the improvement of African infrastructure. This has had theside effect of reducing operating costs thus helping local companies grow. Looking forward,
China’s participation in local economies forces African governments to improve property rights
and reduce political risk.
African governments are negotiating better agreements with foreign investors or corporations
that require investors to develop domestic industries or invest in local infrastructure, for
example, Arcelor Mittal’s commitment to build rail and port infrastructure in Senegal. Vale
plans to spend $5billion to $8 billion on mines, ports, and railways in Guinea and Liberia. De
Beers signed a $7 billion deal to mine diamonds in Botswana, including a commitment to build a
diamond sorting facility. Diamond sorting, valuing, and aggregating will now occur domestically,
creating 3000 high paying jobs. Tullow Oil and its partners plan to spend $8 to $10 billion
dollars on infrastructure projects and to build an oil refinery in Uganda. In general, mostresource deals that are negotiated with African governments have an infrastructure or
industrialization component.
8/6/2019 A Time to Invest in Africa
http://slidepdf.com/reader/full/a-time-to-invest-in-africa 9/18
NILE CAPITAL MANAGEMENT, LLC A Time to Invest in Africa
9. Economies not mired in debt
Unlike Japan, the U.S., and many economies of Europe, African nations have reasonable levels of
debt relative to GDP. For example, Nigeria has a debt-to-GDP ratio of only about 18%, compared
to more than 100% for Japan, Italy and Greece. (See graph below.) In addition, the high rates of
GDP growth of African nations gives them more flexibility to repay sovereign debts than many
mature economies will have.
National Debt Vs. GDP
Nigeria
Germany
ItalyPortugal
Japan
United Kingdom
Spain
FranceGreece
United States
0%
20%
40%
60%
80%
100%
120%
140%
-12.0%-10.0%-8.0%-6.0%-4.0%-2.0%0.0%
Budget Deficit (%GDP)
N a t i o n a l D e b t ( % G D P )
Source: IMF World Economic Outlook, April 2010, CIA Factbook 2009, Renaissance Capital
8/6/2019 A Time to Invest in Africa
http://slidepdf.com/reader/full/a-time-to-invest-in-africa 10/18
NILE CAPITAL MANAGEMENT, LLC A Time to Invest in Africa
10. Steadily increasing capital flows
As investors discover opportunities in Africa, capital flows to the continent are increasing at a
rapid pace. As shown in the graph below, capital flows to Africa now exceed those to three of the
four BRIC countries, all except China. Capital flows and remittances to Africa more than doubled
over just a three-year period (2005 to 2008), according to the United Nations Conference on Trade
and Development (UNCTAD). South Africa hosting the FIFA World Cup will boost the capital
flows in 2010. Capital flows are supported by the rate of return on foreign direct investment in
Africa being higher than in other developing countries (see end notes).
Capital Flows: AfricaCompared to the BRICs
(in $billions)
0
20
40
60
80
100
120
Africa India Brazil Russia China
2004 2005 2006 2007 2008
Source: UNCTAD
8/6/2019 A Time to Invest in Africa
http://slidepdf.com/reader/full/a-time-to-invest-in-africa 11/18
NILE CAPITAL MANAGEMENT, LLC A Time to Invest in Africa
11. Valuations in African stock markets remain attractive
Leading public companies in Africa remain attractively valued, especially compared to their
counterparts in the BRICs and other emerging markets or developed markets. For example, an
analysis by Renaissance Capital estimated 2011 multiples of enterprise value/EBITDA ranging
from 7.2 to 3.1 for five African markets. Many companies in Africa also enjoy attractive pricing
power and profit or EBITDA margin, as shown in the graph below.
African Non-financialCompanies
in 5 Markets – 2011
Estimated EV/EBITDA
3.1x
5.0x 5.0x
5.6x
7.2x
Senegalese Zambian Zimbabwean Kenyan Nigerian
African
Non-financialCompanies in 5 Markets
– 2011 EstimatedEV/EBITDA 29%
34%37%
39%
56%
Nigerian Zimbabwean Kenyan Zambian Senegalese
Source: Renaissance Capital (Kato Mukuru)
8/6/2019 A Time to Invest in Africa
http://slidepdf.com/reader/full/a-time-to-invest-in-africa 12/18
NILE CAPITAL MANAGEMENT, LLC A Time to Invest in Africa
12. Africa is a young and vital continent with vast opportunities for growth
As populations in the U.S., Japan and western Europe grow increasingly older, Africa’s
population pattern (by age) resembles that of the United States at the start of the post World
War II Baby Boom. In Nigeria, Africa’s most populous nation, the median age of the population is
just 19 years, compared to 37 in the United States, 40 in the U.K., and 45 in Japan.
As a result, Africa’s population is not limited by low birthrates or the burdens of providing
pensions and care for the elderly. Most young people in Africa yearn for a better life and middle-
class comforts, and their aspirations are driving a powerful wave of urbanization, infrastructure
development and consumer markets growth.
8/6/2019 A Time to Invest in Africa
http://slidepdf.com/reader/full/a-time-to-invest-in-africa 13/18
NILE CAPITAL MANAGEMENT, LLC A Time to Invest in Africa
THE V ALUE OF A CTIVE
M ANAGEMENT IN A FRICAN
INVESTING
Although the dozen reasons listed above make a compelling case for investing in Africa, caution is
prudent. In most Africa stock markets with the exception of South Africa, trading liquidity is fairly
thin by developed market standards. In addition, African markets, like other frontier or emerging
markets, tend to have less developed regulatory structures, and there are additional risks that
investors should consider such as the high cost of capital, relatively high inflation rates, and
currency fluctuations. Volatility is also an issue, Africa and frontier markets in general, havehigher volatility relative to developed markets. In general, it’s a good idea to consult your financial
advisor before investing in Africa or any other frontier or emerging markets.
For many investors, a wise “first step” into Africa can be taken through a diversified, professionally
managed fund that focuses on stocks of the highest quality companies. As the portfolio manager for
such a fund, I travel extensively to Africa on a frequent basis, mainly to visit companies. Of course,
I am also touring and studying the countries in which these companies are located. Because Africa
is changing faster than just about any other place on earth, I need to keep updating my knowledge
and “feel” for its macro, political and social structures.
Based on personal experience, here are a few attributes investors should look for in selecting
an African fund or manager:
Big-picture vision In addition to developing in-depth knowledge of how specific African
companies are run, we focus on company leadership and vision, the business
model, and how it fits into the bigger picture of African consumer and
infrastructure market developments. We seek to know the businesses in
which we invest. For example, a good percentage of African companies are
family controlled without the short term pressures of quick profits typical of
public companies. A recent study by Boston Consulting Group, a strategic
consulting company, finds that many CEOs for the largest African companies
have an average tenure of 9.4 years compared to 6.8 years for CEOs who runFortune 500 companies. The long tenures enable management to effect long
term visions into practice.
Feet-on-the-ground
research
Our company, Nile Capital Management, employs a dedicated analyst based in
Cape Town, South Africa, who organizes and conducts some of our research
coverage on the continent in a structured way. We work together to develop a
360-degree view of the continent, its national economies and leading public
8/6/2019 A Time to Invest in Africa
http://slidepdf.com/reader/full/a-time-to-invest-in-africa 14/18
NILE CAPITAL MANAGEMENT, LLC A Time to Invest in Africa
companies. In addition, we have a vast network of local contacts in all the
markets where we invest.
High-growth
countries
Nile Capital Management combines top-down macroeconomic analysis and
bottom-up fundamental analysis. The first step in our investment process is to
develop a macroeconomic view and ranking of all 53 African countries. This
analysis helps to identify countries with sustained growth, political stability,
sound governments, strong economic policies and reliable regulatory/
governance frameworks. Based on this analysis, most of the companies we
currently like are in Africa’s “big four” economies – South Africa, Egypt,
Morocco and Nigeria. These four countries also represent geographic diversity,
including southern, western, and northern regions of the continent. Although
we are value investors (buy growth companies at value prices) we do not ignore
the macro economic environment in which we invest.
Enduring themes We believe in participating in Africa’s most compelling themes including
consumer growth, infrastructure growth and commodities. The urbanization
theme also is powerful because it is a measure of upward mobility in emerging
markets. It means more people can move off farms or from rural areas and into
urban areas with higher paying jobs, and this in turn creates upward mobility
and opportunities for companies to sell to a variety of consumer market
segments.
Long-term focus Finally, Africa represents an opportunity for patient investors who want to
diversify among a wider band of companies and are looking for long-termcapital growth. Some stocks in a diversified African portfolio will exceed
expectations and others will not, and that is the nature of all high-growth
emerging and frontier markets. For most investors, it makes sense to invest in
companies through a mutual fund, because researching Africa is more
challenging than most other parts of the world, including other emerging
markets.
8/6/2019 A Time to Invest in Africa
http://slidepdf.com/reader/full/a-time-to-invest-in-africa 15/18
NILE CAPITAL MANAGEMENT, LLC A Time to Invest in Africa
I am originally from Uganda and I have spent most of my career managing global hedge fund assets as an
investment professional. In this line of work, I have been able to compare high-growth opportunities all
over the world, especially in global emerging markets.
I believe Africa is the world’s next great “BRIC-equivalent.” For that reason Nile Capital Management has
made the commitment in investment talent and resources essential to helping investors successfully
navigate the various markets in Africa.
In conclusion, it is a prudent idea to invest through a company that understands and has experience in
Africa and has made the commitment to invest its time and financial resources to visit Africa on a regular
basis. Nile Capital Management is the only US based Investment Adviser that exclusively focuses on
investing in Africa. Our company investment products provide investors an opportunity to build a globalportfolio that includes exposure to Africa.
Larry Seruma is the Chief Investment Officer and Managing Principal of Nile Capital Management.
Nile Capital Management, the Adviser to the Nile Africa series of funds, is a New York City based asset
management firm with in-depth investment expertise that covers the entire African Continent, from Cairo to
Cape Town. By focusing on Africa, the company seeks to identify and capitalize on the best investment
opportunities in the continent and expand investor’s access to emerging/frontier markets. Additional
information is available at www.nilefunds.com
8/6/2019 A Time to Invest in Africa
http://slidepdf.com/reader/full/a-time-to-invest-in-africa 16/18
NILE CAPITAL MANAGEMENT, LLC A Time to Invest in Africa
References:
Chris, Alden. 2007. “China in Africa”. Published in association with the International African Institute,
the Royal African Society and the Social Science Research Council.
Babilis, Sofia and Valpy Fitzgerald. 2005. “Risk appetite, home bias and the unstable demand for
Emerging Market assets.” International Review of Applied Economics
Bigsten, Arne, Paul Collier, and et al. 2000. “Rates of return on physical and human capital in Africa’s
manufacturing sector.” Economic Development and Cultural Change
Collier, Paul and Jan Willem Gunning. 1999. “Explaining African Economic Performance.” Journal of
Economic Literature
Lucas, Robert B. 1990. “Why doesn’t capital flow from rich to poor countries?” American Economic
Review.
Maxim, Pinkovskiy, and Sala-i-Martin, Xavier. 2010. “African poverty is falling, much faster than you
think!” Massachusetss Institute of Technology, Columbia University and NBER
Seruma, Larry. 2001. “The case for an L-shaped economic recovery.” Barclays Global Investors
Seruma, Larry. 2000. “A review of the economics for search and block trading.” Barclays Global
Investors
Seruma, Larry. 1996. “A critical examination of the New York Stock Exchange “Uptick Rule”.” The
University of Chicago, Booth School of Business
Sharpe, William F. 1966. “Mutual Fund Performance” Journal of BusinessKaplan, Steven N. and Luigi Zing ales. 1997. “Do investment cash flow sensitivities provide useful
measures of financing constraints” Quarterly Journal of Economics
The Wall Street Journal. July 2010. “Bull’s eye on Africa: Carlyle chief sees upside”
Todd, Moss, Ramachandran Vijaya, and Standley Scott. 2007. “Why doesn’t Africa get more equity
investment? Frontier stock markets, firm size and asset allocations of global emerging market funds”
Center for Global Development.
Warnholz, Jean-Louis. 2008. Is investment in Africa low despite high profits? Centre for the Study of
African Economies. University of Oxford
Endnotes
Past performance does not guarantee future results
8/6/2019 A Time to Invest in Africa
http://slidepdf.com/reader/full/a-time-to-invest-in-africa 17/18
NILE CAPITAL MANAGEMENT, LLC A Time to Invest in Africa
Definitions
Beta: A measure of the volatility of the portfolio in comparison to an index or the market as a whole
Treasury Bills (T-Bills): U.S. Government Treasury Bills
Volatility: The annualized standard deviation of the returns of a security
Correlation: The degree to which two or more attributes or measurements shows a tendency to vary
together
Frontier markets: Are defined by the IFC as smaller markets within the universe of emerging markets.
The typically have lower market capitalization and liquidity than developed or emerging markets. They
typically suit investors seeking high, long term returns and low correlations with other markets. They
typically have higher risk than developed or emerging markets
Rate of Return: The rate of return is calculated as investment income for the current year by the average
of foreign direct investment stock of the previous year and the current year. The figures for rate of return
are based on 39 countries in Africa, 33 Latin America and the Caribbean, 11 in West Asia and 18 in Asia.
Source: United Nations Conference on Trade and Development
S&P 500 Index: The S&P 500 Index is a large capitalization-weighted index of 500 widely held securities,
designed to measure broad US equity performance
MSCI EAFE Index: The MSCIEAFE index is a market capitalization weighted index designed to measure
the equity market performance of developed markets (Europe, Australasia, Far East), excluding the US &
Canada
MSCI EM Index: The MSCI EM index is a float-adjusted market capitalization index designed to measureequity market performance in global emerging markets. The index includes 26 emerging economies:
Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Korea, Malaysia,
Mexico, Morocco, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, Turkey
Index: It is not possible to invest directly in an index
Diversification: Diversification does not measure a profit or protect against a loss in a declining market
Russell 2000 Index: The Russell 2000 Index measures the performance of the 2,000 smallest companies in
the Russell 3000 index, and represents approximately 8% of the total market capitalization of the Russell
3000 Index, with all values expressed in US dollars
Risk Disclosures: Mutual Funds involve risk, including possible loss of principal. Because the Fund willinvest the majority of its assets in African companies, it is highly dependent on the state of the African
economy and the financial prospects of specific African companies. Certain African markets are in only
the earliest stages of development and may experience political and economic instability, capital market
restrictions, unstable governments, weaker economies and less developed legal systems with fewer
security holder rights. Adverse changes in currency exchange rates may erode or reverse any potential
gains from the Fund’s investments. Exchange Traded Funds are subject to specific risks, depending on
the nature of the underlying strategy of the fund. These risks could include liquidity risk, sector risk, as
well as risks associated with fixed income securities, real estate investments, and commodities, to name a
8/6/2019 A Time to Invest in Africa
http://slidepdf.com/reader/full/a-time-to-invest-in-africa 18/18
few. Non-diversification risk, as the Funds are more vulnerable to events affecting a single issuer.
Investments in underlying funds that own small and mid-capitalization companies may be morevulnerable than larger, more established organizations. The Fund’s exposure to companies primarily
engaged in the natural resource markets may subject the Fund to greater volatility than investments in a
wider variety of industries. There is a risk that issuers and counterparties will not make payments on
securities and other investments held by the Fund, resulting in losses to the Fund. In general, the price of
a fixed income security falls when interest rates rise. The Fund may invest, directly or indirectly, in "junk
bonds.” Such securities are speculative investments that carry greater risks than higher quality debt
securities.
CONTACT
152 West 57 Street, 32nd Floor
New York, NY 10019
Telephone: 1-877-68-AFRICA
Email: [email protected]
www.nilefunds.com