Alain Nkontchou, managing partner of Enko Capital talks to African Review about the launch of the Enko Capital Debt Fund with US$200mn dollar assets under management.
Enko Capital is an asset management company focused on investing in opportunities across Africa through three distinct platforms: private equity; listed equity and fixed income.
Tell us about the new Enko Capital Debt Fund (EADF). What’s the rationale behind it and what are your hopes for it?
The rationale of the fund is to provide investors with high returns available in Africa debt markets. The fund is predicated on the pillars of debt sustainability, value investing and active risk management. It is one of the few funds that exist globally which provides direct access to the African debt market, including both hard and local currency opportunities.
We expect the African debt market to continue to expand over time and believe that our expertise and knowledge of the market will lead to creating alpha for our investors. We believe there is capacity to scale up the fund to US$1bn.
Where will the new fund be investing: any core areas, countries or sectors that will be targeted? Have investments already been made?
Core areas include government bonds as well as corporate debt, both in hard or local currency. In terms of sectors, we are agnostic in general but we anticipate being active in the major sectors including financial services, telecoms, and consumer goods. We have invested 80 per cent of the fund since inception. We are currently invested in 10 countries across Africa. In the corporate sector, we have invested 14 per cent of the fund in financial services, and 30 per cent
in African corporates.
How does the new fund fit with the rest of Enko’s portfolio and what does it offer that’s new to investors?
It is a natural addition to the Enko investment platform and complements our product offering. We already offer an equity fund, EOGF, and a private equity fund, EAPEF, hence this fits in with the firm’s long-term strategy of becoming a pan-African asset manager. For investors, it offers an opportunity to gain direct exposure to African debt markets, with an absolute return approach.
Any other forward plans for Enko or upcoming developments that you can share with us right now (including any prospect of further funds, or new office locations)?
We are now making plans to move to new offices as the launch of the new fund is driving increased staffing requirements. There may be additional funds launched in the future, in real estate in particular. However, the focus in the short term is to concentrate fully on the three existing funds.
Enko’s ambition is to become the leading pan-African asset manager: how are you making inroads and progress towards this?
The launch of the new fund is a critical part of achieving this target as it broadens the firm’s product offering to include a new asset class: debt. This helps the fund to distinguish itself from other firms and also provides investors with a diversification choice when approaching the African market.
What’s the current state of play with regard to Africa’s investment climate: is it maturing, and do you feel we are in a time of growth and potential? Any key
markets to watch?
We believe that the environment is still in its infancy as there is structurally little credit available for the private sector (private credit/GDP is below eight per cent) when compared to other markets. Similarly, there are fewer asset managers that are solely dedicated to the continent. Hence, we believe that as local economies grow, so will the growth in pension funds and insurance businesses. This will naturally lead to the increase in demand for investment products and the expansion of asset management business across Africa.
Hence, the sector has grown strongly over the last decade, particularly in the private equity space and there is still room for future growth. Key markets to
monitor include Egypt, Ghana, Kenya, Nigeria, South Africa, and Zambia.
Going forward, what’s the longer term potential for asset management in Africa and what are the key things to look for in how that unfolds or grows?
The prospects for asset management in Africa are excellent due to the combination of growing desire from international investors to gain exposure to the African continent and as stated above, the expected strong increase in demand for investment products from African pension funds and investment companies. The key things to monitor include economic growth, pension reforms, growth of the insurance sector, growth of market cap over GDP and private savings.