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Veteran emerging markets investor Mark Mobius has moved on to new territories – now he is encouraging investors to get into Africa. The 75-year-old American was one of the first mainstream fund managers to talk up emerging markets and is now heading up a new Africa fund for giant US fund manager Templeton Asset Management.
Speaking to Investors Chronicle, Mobius admits that investing in Africa isn’t easy - but claims the pros outweigh the cons. “Africa is growing very fast – in the last decade, six of the ten fastest growing countries were in Africa. The continent is starting from a much lower base and admittedly there are more difficulties, but the growth possibilities are very high."
The sector with the most potential, says Mobius, is banking – ironically enough, given the state of the West’s banks. “Banking in Africa is growing at a torrential pace and provides an opportunity to get exposure to the consumer sector.” He is also keen on natural resources and telecoms.
Thanks to his vaguely sinister-sounding full title – Dr Mobius – the bald, dapper investor has been jokingly likened to a Bond villain. And, like any self-respecting evil mastermind, he has a cunning plan. "We want to get exposure before the multinationals come in – in the more developed emerging markets, you will notice that multinationals have already come in and grabbed a large market share, gobbling up smaller local companies."
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He’s certainly not the first to have the idea. As we noted recently, plenty have tried and failed to unlock the potential of sub-Saharan Africa.
The most-recent failure was New Star’s Heart of Africa fund. It was wound up in 2009 when the credit crunch caused investors to flee frontier markets. It was further hampered by illiquidity in Africa’s small stock markets, and was unable to sell its holdings easily.
But, as Mobius points out, illiquidity works both ways. "If you're careful with your stock selection you can benefit from the fact that a lot of liquidity is not reflected in the statistics of stock markets. There is a lot of off-market trading – very often we will get strong positions in companies we like and hold them until such time as other investors get interested and then sell at a premium."
In other words, when you’re the only one holding the stock and other buyers get interested, you can do very well.
Moreover Mobius, who first started investing in emerging markets more than 25 years ago, thinks that Africa won’t remain illiquid forever. “There is enough in there – in Africa – for us to get exposure to… It's changing every day with more and more companies coming to the market."
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