Volatility does not always equal risk, Renasset's fund manager Sven Richter said.
Volatility does not always equal risk, Renasset’s fund manager Sven Richter said.
Renaissance Asset Managers (RAM) is assessing the possibility of launching a closed ended version of its already existing Sub-Saharan African (SSA) fund, which soft closed in February 2013.
The fund currently has $193 million in assets under management and RAM believes it will reach its $200 million limit when it will hard close.
Sven Richter, fund manager at Renasset, said the company is assessing opinion on how to continue to offer the strategy of the SSA fund.
“We are considering the possibility of launching new products in the Sub-Saharan fund. We are currently canvassing opinion on a closed-ended product among investors. However, we’re still at an early stage and the product will be eventually launched in five years’ time,” Richter said.
Talking about the growth of the African market, Richter also said that the common perception of volatility equalling risk is wrong and said he is working with investors on moving this perception. Richter said he advocates a more long term approach and asks that the fundamentals are examined, rather than the level of volatility.
Looking at GDP growth in most of African countries, Richter said RAM is not just buying GDP, which is instead a common approach to frontier markets, but he calls for the critical evaluation of companies and factor GDP growth into this examination.
Richter also assessed infrastructure and explained that Sub-Saharan Africa is leading tables on a few negative metrics, such as Value Lost Due to Power Outages, Transport as a Major Constraint and No Access to Water.
While many would consider it a problem, Richter explained how low level of infrastructure provides the opportunity for investment to improve this level, which in turn acts as an enabler of fast growth for both companies and the economy.
When asked whether liquidity will be an issue in African countries, Richter said that, although the situation has improved in recent years, liquidity remains a concern for RAM.
“For instance, liquidity in Nigeria is higher compared to one year ago, but it is still low. Other countries in the region experience the same; however liquidity remains a concern for us there too,” he said.