For a long time, economic growth in Sub-Saharan Africa has been impeded by poor infrastructure. Figures released by the Think20 engagement group reveals that the continent’s infrastructure investment needs have risen in recent times.
The current financing gap stands at US$67-billion to US$107-billion per annum. Yet, not much efforts have been made so far to close the gap and with little or no access to international capital markets, the pace of growth has slowed down.
To reverse this trend, asset manager Stanlib has launched a Pan Africa Debt Fund. Via this fund, investors will be able to leverage attractive dollar yields, expand the geographical reach of their portfolio.
There is currently a very low correlation between African debt and the global bond and equity markets. This has created a significant opening for investors who desire to diversify their asset portfolios.
Also, the fund’s investments will mostly be dollar-denominated, shielding investors from currency volatility which is a factor that significantly increases the risk associated with investing in African assets and equities.
“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,” a report stated.
The fund will prioritize investing in hard currency debt predominantly listed on global exchanges issued by African governments and corporations.
“We believe that the fund will appeal to institutional investors seeking returns that are less correlated with the performance of other global and emerging market assets,” says Marnewick.
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