Most Read Contributor in British Virgin Islands, January 2017
Adding to our success atThe Lawyer and HFM Awards, Harneys was privileged to win twice at the
inaugural Africa Global Funds Awards held recently in Cape
Town. The Africa Global Funds Awards were created
specifically to honour and generate both industry and public
recognition for fund service providers focused on Africa and are
the only international awards of their kind.
We were successful both in the Best Offshore Law Firm and Best
Offshore Law Firm – Client Service categories, effectively
giving us a clean sweep of the awards designated to offshore law
firms against some well regarded and formidable competitors.
Given that I head up our Africa Practice and for the last 5 years
have had a strong focus on the funds industry in Africa, these wins
saved me from some awkward internal conversations and allowed me to
breathe a long sigh of relief.
Now that we've got these two awards under the belt, I
thought it might be of interest to readers to give my take on the
current state of play of the funds industry in Africa and what
next. This is not based off any particular research, but
rather is drawn from my own experiences through the year, as well
as conversations that I've had with other industry
participants. My bias is strongly towards the open-ended side
of things purely because this is where we see most of our Africa
focused funds work. I suppose I should also include the usual
disclaimer about this not constituting investment advice etc.,
trust me if I had any ability on the investing front I wouldn't
be plying my trade as a lawyer.
For those in the know, I'm at severe risk of stating the
obvious when I say that 2016 has been a challenging year. To
echo a good friend of mine who is an investment manager with over
20 years experience of investing in the continent, there is at best
muted investor interest in Africa focused funds at the moment with
a large number of managers just trying to stem the flow of cash
heading for the door. Basically returns through 2016 have not
been great, partly due to the downturn in commodity prices and
compounded by liquidity issues in countries such as Egypt, Nigeria
and Zimbabwe, falling currency prices against the US dollar and
This all might make for gloomy reading, but not necessarily if
you are an investment manager with a strong stomach, decent track
record and real experience of operating in Africa and navigating
the challenges and curve balls that the continent invariably throws
up. I fully subscribe to the view that what we are seeing is
cyclical and to revert back to my investment manager friend, there
are some fantastic buying opportunities out there because of
depressed asset prices. Investor flow concerns are also not
unique to Africa and are plaguing managers in other markets as
Going against the general trend seems to be the commodity trade
finance space. We are fortunate to have been involved in a
number of fund launches in this space during the course of 2016
which indicates investor interest and positive investment flows and
from where we sit, performance seems to be pretty decent as
Another trend we have picked up on is South African based
investment managers running global strategies to tap into the
increasing foreign currency remittances being made by South African
residents with the spare cash to take advantage of their annual
foreign currency allowance. This is largely a hedge by South
African residents against political risk and currency risk and
whilst the funds we have been involved with having this theme are
small in size, I expect this trend of expatriating funds outside of
South Africa to continue.
To finish off then, what do I think this all means for us? Well
in the short to medium term, I do not expect to see any great boom
in fund launches for Africa focused funds. We are fortunate
to act for some of the bigger names running Africa focused dollar
denominated funds and I expect that these funds will survive and
perhaps attract new capital as the buying opportunities and value
out there becomes apparent. Again at the risk of stating the
obvious for anyone involved in our industry, I expect the smaller
funds being run by the less established managers to be under the
most pressure in weathering the storm.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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