(October 11, 2010) – Upwards of nine emerging and frontier market governments, enjoying some of the highest growth rates in the world following the unraveling of the global economy, are looking to set up sovereign wealth funds in order to more effectively manage surplus revenues and slash corruption.
According to Reuters, governments from at least nine frontier markets in countries in Africa, the Middle East, and Asia are looking inte the possibility of establishing such funds. “It’s a great idea, it implies a certain discipline,” Plamen Monovski, chief investment officer of Renaissance Asset Managers, which has launched two new Africa-focused funds, told the news agency. Monovski highlighted the example of Russia, which was successful in using its sovereign wealth capital – based on its petroleum wealth – to aid domestic companies during the financial crisis.
Government investment pools won’t be the only institutional investors looking to take advantage of the much spoken of ‘decoupling’ of the developing and developed world economies. As evidence of the increased attraction of frontier markets, investment in Africa has been championed by investment consultancy Rogerscasey, which favors debt, private equity, infrastructure, agriculture, and timber as African investment sectors. In a recent interview with aiCIO, Adam Tosh, managing director of investment solutions at Rogerscasey and the former chief investment officer of the Kentucky Retirement System, called Africa “the next frontier” and says that over the next five years, exposure to Africa should make up 1-2% of a total investment portfolio.
Cynthia Steer, Rogerscasey’s managing director and researcher of a new study on the topic, added that improving economic and political conditions in Africa has made investments more accommodating. “Promising political revolution is essential in improving the lives of the people who live there, as well as creating a stable environment for investors,” Steer commented in a statement. “Africa’s GDP growth has outpaced World aggregate GDP growth since 2001.” According to Steer, investors can find diversification while facilitating economic progress in what has been labeled as a troubled continent.
<p>To contact the ai5000 editors of this story: Kristopher McDaniel at <a href="mailto:kmcdaniel@assetinternational.com">kmcdaniel@assetinternational.com</a> and Paula Vasan at <a href="mailto:pvasan@assetinternational.com">pvasan@assetinternational.com</a></p>