5 Top Performing Middle East and Africa Funds

African nations are among the fastest growing economies in the world, spurring on global growth. Tap into the boom with these funds

Emma Wall 14 June, 2018 | 8:07AM

This article is part of Your Guide to Emerging Markets. All this week, we are focusing on emerging markets, sharing their potential pitfalls – and where you can make a pretty penny.

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BPI Global Investment Fund

This four-star performance rated fund has 2.6% year to date, and five-year annualised returns of 3.5%. The bulk of the fund is invested in South Africa, taking up 40% of the portfolio, a large overweight compared to the benchmark allocation of 19%.

The second largest country allocation is Egypt with 27%. Nigerian stocks make up 13% of the fund, while Kenyan companies add an additional 19.8%. Morocco and Senegal make up around 3% a piece.

The largest sector allocation is commercial banks, with 18.9%, compared to the benchmark allocation of 25.2%. The second largest allocation is food products with 11.3% of the fund, compared to a much smaller benchmark allocation of 3.3%.

Egyptian bank Commercial International  Bank is the largest holding in the fund, a strong performer, up 12.3% year to date. Sidi Kerir Petrochemicals is the second largest holding, up 9.5% year to date. There is a sizable amount of cash in the portfolio, at 10.6% of the fund.

JP Morgan Africa Equity

This four-star fund is only just in positive territory year to date, but boasts an impressive 5.6% annualised return over the last decade. In a sector that can be notoriously volatile, it has delivered on a three, five and 10-year view.

South African stocks make up 39.2% of the portfolio, Nigeria makes up 13.1%, and Kenya makes up 11.6%. Morocco and Egypt make up 7% a piece and there are small allocations to Zimbabwe, Tanzania and Mauritius.

More than half the portfolio is invested in medium sized businesses, with the largest allocation towards commercial banks, in line with the benchmark. Mining companies make up 9% of the portfolio, as do media stocks.

The largest holding is South African internet company Naspers, a position fund managers Pandora Omaset and Oleg Biryulyov  added to in April. Naspers was in the news this week earnings predictions look very positive. It owns 31% of Chinese megatech company Tencent.

Russell - Old Mutual African Frontiers

This five-star performance rated fund has delivered an impressive 10.5% year to date and has a three-year annualised return of 8.9%, and a longer term five-year annualised return of 6.1%.

Unlike a typical fund invested across the Middle East and Africa, the largest country allocation is not South Africa, where the fund managers have no stocks, preferring the up-and-coming countries of Kenya, Nigeria and Botswana. Egypt is the largest country allocation with 27%. It is the geographically diverse of the funds featured here, taking big off-benchmark bets.

As a result, the sector breakdown is quite different – commercial banks are still the highest allocation, but is a whopping 40.8% of the portfolio, clearly a leveraged play on the growing middle classes and monetisation trends across the continent.

Sanlam African Frontier Markets

This fund earns a four-star performance rating, with a three-year annualised return of 8.6%. The largest country allocation is Nigeria, with 33.2%, followed by Egypt with 22.9%. South Africa has a small allocation of 5.3%, Kenyan stocks make up 9.4% and Zimbabwe makes up 6.7%.

As we have seen across the sector, commercial banks are the largest allocation with 27.4%, followed by beverage companies with 19%.

Nigerian Breweries is the largest stock holding, at 5.4%., Nigerian Breweries, which has lost value year to date, down 12.4%. NB is Nigeria’s largest brewing firm, founded in 1946 with the launch of Star lager. It is majority owned by Heineken and distributes the brand alongside 23 other lagers, ales and ciders.

T. Rowe Price Middle East & Africa Equity

This fund earns a four-star performance rating. It has a five-year annualised return of 9.9%, and a 10-year annualised return of 2.8%. The largest country allocation is South Africa at 41.6%, followed by Saudi Arabia at 21.2% and the UAE at 10%. Financial stocks make up 43% of the fund, consumer staples 11%.

The largest holding is also Naspers, followed by FirstRand bank. The rest of the top 10 heavily feature commercial banks.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article
Security NamePriceChange (%)Morningstar
Rating
BPI GIF Africa I EUR9.29 EUR-3.52
JPM Africa Equity A perf (acc) USD10.06 USD2.12
Old Mutual African Frontiers B Hybrid11.28 USD-2.93
Sanlam African Frontier Markets D USD1.09 USD-1.22
T. Rowe Price Middle East & Afr Eq I USD11.89 USD0.00
About Author Emma Wall

Emma Wall  is Senior International Editor for Morningstar