Cape Town-based Allan Gray’s Africa bond fund has managed to outdo
its peers this year and protect itself against the sell-off buffeting
emerging markets, largely by buying local debt in Nigeria, Egypt and
Ghana.
The $430m Africa, excluding-South Africa, bond fund, the biggest with a focus
solely on the continent,
returned 2.8% throughout the first three
quarters of the year. This compares with an 8.2% loss for JP Morgan’s
government bond index — emerging markets (GBI-EM) diversified index,
against which the fund is benchmarked.
Allan Gray began the year by cutting its exposure to African sovereign
eurobonds, the thinking being that yields had fallen too low given the
build-up of external debt by governments. That strategy worked, with
spreads widening about 200 basis points to 550 over US treasuries from
the beginning of the year.
Instead, it focused on local-currency bonds, particularly those in
Egypt, Nigeria and Ghana, where it could get yields of above 15%. Bonds
denominated in nairas, cedis and Egyptian pounds accounted for 43% of
the portfolio at the end of September.
More recently, Allan Gray’s money managers have increased their
exposure to eurobonds again as yields have become more attractive. It
also bought MTN’s dollar notes after they sold off following a
multi-billion-dollar dispute with Nigerian authorities over taxes and
dividend transfers out the country.
It “now appears to be headed
for an amicable resolution”, money managers Nick Ndiritu and Mark
Dunley-Owen said in a fund report for investors. “We took advantage of
the uncertainty to increase our holdings to just more than 5% of the
fund at about 7% yields.”
Bloomberg
No comments:
Post a Comment