| LONDON, April 6
LONDON, April 6 Fund manager Duet has bought up
troubled manager New Star's "Heart of Africa" fund, one of the
highest profile to track the boom in African frontier markets
which closed amid the global financial crisis.
New Star, being brought up by rival Henderson (HGGH.L),
suspended the then roughly $40 million fund in December citing
difficulties in honouring redemptions before announcing in
February it was winding it up completely and selling it off.
Duet, which would not say how much it paid for the assets,
already runs an African index fund simply tracking sub-Saharan
markets outside South Africa and will run its new purchase as
part of a just-launched Africa opportunities fund under active
management. It will not say how large the fund is.
"We will be rebalancing it," said Duet fund manager Ayo
Salami, adding that he bought the stocks at the "good" discount.
"It has some very good stocks in it but some of the stakes are
simply too big."
He said the fund had roughly 40 percent of its assets in
Malawi and Ghana, both fledgeling exchanges with very little in
the way of liquidity, making it very difficult for New Star to
sell their positions when investors wanted their money back.
He said Duet would aim to very slowly sell off some of those
positions to move to a more liquid fund, but was in no
particular hurry to do so.
"We are not going to be forced sellers," he said.
A sudden sell-off of New Star's African assets would have
put further pressure on small African stock markets which have
already suffered from falling commodity and oil prices and
diminishing foreign investment as the global downturn hit the
As the global financial crisis hammered markets last year,
liquidity in small African stock exchanges such as Ghana,
Tanzania and Zambia all but dried up.
Fellow fund managers say New Star's Africa fund, which
offered a daily redemptions, found it particularly hard. Most
other frontier funds only offer weekly or monthly redemptions --
and often also hold established African markets such as Egypt
and South Africa, which are more liquid.
Global emerging stockmarkets .MSCIEF are enjoying
something of a rebound, up some 30 percent in a month on hopes
of a bottom in the global economic crisis, while the frontier
markets including Africa are seen generally lagging.
With investors still risk averse after the events of the
last year, they are seen generally much less enthusiastic about
putting money into markets from which it might not be possible
to withdraw swiftly -- with worries over investment or capital
controls also heightening caution.
Salami said Duet's Africa index fund was still down some 40
percent from last year's peaks, with a modest recovery of some 4
percent in March.
But he said he expected frontier markets such as Africa to
outperform in the medium to longer term, supported by Africa's
healthiest demographics -- more young people -- as well as
recent shifts towards democratisation and better economic
He said Duet's success in attracting new funds to set up its
Africa opportunity fund -- which will also include other new
purchases outside from those taken over from New Star -- showed
some investor appetite for the continent was returning.
"Africa is still a good investment story," he said. "All
the reasons we were talking about for investing in Africa last
year are still there."
(Editing by Mike Nesbit)