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Growth in frontier African markets lure SWFs

         Date: 2012-04-19

           Tag: African, markets

Summary: Against this backdrop, Norway’s sovereign wealth fund, Europe’s largest institutional investor in equities, has earmarked Africa for increased investment, according to the country’s Finance Minis…

The $600 billion (94.8 trillion) Norway oil fund announced it is trimming its European exposure and increasing its allocations to Africa, Latin America and the Asia-Pacific region, after suffering a $15 billion (N2.37 trillion) loss in 2011 as European stock prices fell over uncertain growth prospects amid the debt crisis.

Behind the negative headlines about Europe’s debt problems, frontier-market equities and bonds in Africa are catching the eye of global investment managers, including Sovereign Wealth Funds (SWFs), looking for yield, stability and sustainable growth.

Against this backdrop, Norway’s sovereign wealth fund, Europe’s largest institutional investor in equities, has earmarked Africa for increased investment, according to the country’s Finance Minister.

The Minister said the fund’s European investments will be gradually reduced to 41 percent from 51 percent in bonds, while the fund’s emerging markets allocation will rise to 10 percent of the total portfolio from 6 percent.
Within this allocation, Africa and Latam exposure will rise to 40 percent from 35 percent.

The move, according to analysts, could signal a similar investment strategy change among some of the world’s wealthiest state-owned funds.

Also, Singapore’s central bank and Temasek, one of the country’s wealth funds, are to begin diversifying into developing-world assets.

With assets under management of $5 trillion (N790 trillion), the value of SWFs more than doubles the value of the global hedge fund industry, which stands at $2 trillion (316 trillion).

Already, the Public Investment Commission, a South African government pension fund with assets of $156 billion (N24.6 trillion), has started diversifying its investments into the rest of Africa.


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