Today, STANLIB, one of the largest asset managers in Africa, announced the launch of its Pan Africa Debt Fund (the Fund). The Fund will allow investors to tap into the attractive dollar yields, geographic diversification and fast-growing economies presented by the African continent.
The open-ended Pan Africa Debt Fund aims to generate stable income and capital growth with a target return of three-month US dollar Libor plus 6% over a three-year rolling period. Managed by STANLIB’s Credit Alternatives team, the Fund will invest in hard currency debt predominantly listed on global exchanges issued by African sovereigns and corporates. The Fund will always hold at least 60% of assets under management in sovereign Eurobonds and can include up to 30% in unlisted credit.
Johan Marnewick, Head of STANLIB’s Credit Alternatives, commented: “We see tremendous value for our clients in the launch of a pan-Africa strategy. The Pan Africa Debt Fund will meet the longstanding demands of South African and international institutional investors for well-diversified and attractive exposure on the continent, packaged in a compelling vehicle. Our Fund will appeal to institutional investors seeking returns that are less correlated with the performance of other global and emerging market assets.”
Until now, institutional investors, both in South Africa and other territories, have had limited choice in accessing funds that offer broad exposure to Africa’s high-growth frontier and emerging market debt. The Pan Africa Debt Fund offers investors access to attractive yields available in the wider African market, through a vehicle that is managed within a comprehensive risk management framework designed to minimise downside risk.
African debt has a low correlation with global bond and equity markets, which makes it an important tool for diversification within asset portfolios. Additionally, the Fund’s investments will be largely dollar-denominated offering South African investors hard currency exposure.
Adding his voice to the launch of the Fund, STANLIB CEO Derrick Msibi said: “We are extending our capability from being a leading fixed income manager to include growing exposure to emerging markets. We are offering investors carefully curated exposure to African credit through the Pan Africa Debt Fund, which not only offers attractive investment opportunities but also builds and deepens financial markets. Over the next five years, Africa is forecast to be one of the fastest-growing regions globally which will require financial capital. The investments in the Fund will play a role in funding the continent’s post-pandemic recovery, while offering investors exposure to attractive opportunities.”
Africa is expected to have a robust post COVID-19 recovery with growth averaging above 4% from 2022 to 2026. Sub-Saharan Africa specifically will remain the second fastest growing region in the world after Emerging Asia. The continent’s long-term growth is underpinned by structural tailwinds that are expected to drive economic activity for decades including an increasingly developed, burgeoning and youthful population.
Africa is also experiencing higher levels of investment in energy, transport and telecommunications infrastructure, a steady rise in urbanisation and increasing regional integration. These long-term trends should provide the backdrop for Africa’s attractiveness as an investment destination to continue to improve. By adhering to the ESG framework that guides all our investment activities, this Fund will result in an enhanced ecosystem that will contribute to improving standards of governance, and will help to broaden economic development opportunities. Investors in the African Eurobond market have experienced returns in excess of 8% annualised over the last 15 years.
STANLIB Credit Alternatives has a successful 8-year track record of investing in African US Dollar debt assets. In sourcing and risk managing Fund assets, STANLIB will continue to leverage its longstanding relationships with banks and other financial institutions active on the continent.