An Africa equity-focused fund manager believes that it pays to bet on Africa’s earnings growth.
Steyn Capital Management , an African and frontier markets-focussed equities investor located in the Winelands surrounding Cape Town, South Africa, has been investing in African markets since 2009. It manages more than US$700m in a South African long/short fund, as well as pan-African and global frontier markets long-only funds.
The Steyn Capital Africa Fund, a value-oriented long-only fund that invests in Africa (ex. SA) equities, returned 34% in 2021 and 90% since inception in September 2011. Almost all of the portfolio performance was driven by earnings growth that year.
The Steyn Capital SNN QI Hedge Fund, a value-orientated long/short portfolio investing in South African equities that follows a bottom-up stock selection approach, returned 51% in 2021. It has annualised 17% since its May 2009 inception.
CEO André Steyn tells Opalesque about opportunities in Africa, his outlook, and changes in investor sentiment.
Opalesque: How did African equities fare in 2021? How has your portfolio developed?
André Steyn: African equity markets had a respectable year in 2021, with the average of three pan-African indices that we track advancing by 11.3%. Our own Africa fund returned 34.17% for 2021, handily beating the indices.
We observed a resumption of earnings growth from African businesses, with the weighted average operating earnings of the companies in our portfolio advancing by 29% during the year. This earnings increase drove almost all of our fund’s performance during the period, meaning that our portfolio is still valued at only 5.4 times operating earnings, which is close to a decade-low valuation. Opalesque: What opportunities are you currently targeting? André Steyn: We are seeing most opportunity in consumer stocks, which have been out of favour but are obvious beneficiaries of Africa’s youthful demographics and rapid urbanization, which we believe will result in strong demand growth for many years to come. We are also finding interesting investments in telecoms with continued growth in voice and data, as well as unrecognized mobile money franchises. Across Africa, a number of telecoms have been compelled by local regulators to list their businesses on a local exchange, sometimes leading to very interesting investment opportunities. Opalesque: What is your macro-economic outlook for the region? André Steyn: Higher resource and agriculture prices and […]