Africa Capital Group, LLC has just launched an investment fund, the Africa Frontier Fund, LP.
The Africa Frontier Fund, LP is a US-domiciled investment vehicle that invests in all listed Africa-focused companies that trade on any African or global stock exchange. This investable universe consists of approximately 1,000 stocks.
The core strategy of this fund is to invest in a diversified portfolio of African companies that exhibit a combination of high growth and attractive valuation.
The fund stands to benefit from the surge of Africa’s middle class and give investors expanded access to Africa’s fastest-growing stock markets.
The investment strategy of the Africa Frontier Fund is to invest predominantly in domestically-oriented businesses in sub-Saharan Africa. These include companies operating in such industries as:
• Consumer Goods
• Food and Beverage
The long-term performance of the Africa Frontier Fund is based on the growing purchasing power of the African middle class. This rapidly-growing purchasing power is expected to be a strong and persistent trend over the coming decades.
The investment objective of the Africa Frontier Fund LP is long-term capital appreciation. The fund strategy is to invest in a diversified portfolio of African or Africa-focused companies across the market capitalization spectrum.
According to Africa Capital Group, “We employ a bottom-up company-by-company approach to portfolio construction, taking into account such factors as competitive advantage, growth rate, valuation, profitability, financial position, management skill, and accessibility, currency risk, and political risk. We seek to invest in the highest-quality, fastest-growing companies at the cheapest possible prices.”
Africa Capital Group states that the seven reasons to invest in Africa are:
1. Rapid Economic Growth
2. Favorable Demographics
3. Diversification Benefits
4. Accelerating Capital Formation
5. Improving Governance
6. Immense Natural Wealth
7. Under-researched Opportunities
The fund managers’ investment philosophy is based on the following three tenets:
• A long-term perspective and patience are keys to success.
• Great opportunities exist in mid and small-cap African companies that are beyond the reach of most investors.
• Entering positions at attractive valuations is critical.
Africa Capital Group has stated that it will exercise risk control through:
• Diversification: By sector, market cap, and country
• Position Limits: Single stock position limit of 10% and country position limit of 25% (except South Africa)
• Number of Holdings: 30 to 40, on average
The typical investor in the Africa Frontier Fund would one who wishes to contribute to and capitalize on Africa’s rapid economic growth, can tolerate the inevitable ups and downs in African stock markets, and who is looking to maintain a long-term investment position in Africa.
Certain restrictions apply to prospective investors in the Africa Frontier Fund:
1. Limited to 100 investors
2. Requires a minimum investment of $250,000
3. Open to accredited investors only
According to the United States’ Securities and Exchange Commission (SEC), an accredited investor is an individual that exhibits one or more of the following:
1. Earns an individual income of more than $200,000 per year, or a joint income of $300,000, in each of the last two years and expects to reasonably maintain this same level of income.
2. Has a net worth exceeding $1 million, either individually or jointly with spouse.
3. Is a general partner, executive officer, director, or a related combination thereof for the issuer of the security being offered.
Investments in the Africa Frontier Fund will have a lock-up period of one year with quarterly liquidity (60-day notice).
Africa Capital Group will charge a management fee and performance fee of 1% (per annum) and 20%, respectively. The fund has no hurdle rate.
Although the noted fund characteristics are similar to those associated with certain unregistered hedge funds that operate in the US, the Africa Frontier Fund makes no claims to being a hedge fund and has not advertised itself as a hedge fund.
Africa Capital Group has stated that it is willing to accept lower amounts than the stated $250,000 minimum investment for the first ten investors, in order to secure early commitments.
The investment team of the Africa Frontier Fund consists of Peter Thoms, CFA, Chief Investment Officer and Founder of Africa Capital Group; Jan Schalkwijk, CFA, Portfolio Manager; and Ryan Hoover, Director of Research.
* African Business Central (ABC) does not have any business relationship with Africa Capital Group, LLC or the Africa Frontier Fund, LP.
** African Business Central (ABC) makes no claims as to whether or not the Africa Frontier Fund is a hedge fund. African Business Central (ABC) is unaware of the particular regulatory requirements that are applicable to Africa Capital Group, LLC and the Africa Frontier Fund, LP. This publication was created with limited and publicly-available information.
*** None of the information presented above constitutes a recommendation or solicitation by African Business Central (ABC) of any offer to buy or sell any securities.