Move over, China and India: Private equity and hedge fund managers looking for the next big thing are heading to Africa. Cayman Islands-based Africa Opportunities Partners is the latest alternatives firm trying to strike it rich in the unstable, but abundant continent.
The firm’s $125 million Africa Opportunities Fund in July was admitted to trading on the Alternative Investments Market of the London Stock Exchange. The closed-ended fund will invest in value, arbitrage and special-situation plays in Africa, focusing on companies and industries rather than specific regions, according to the firm’s marketing materials.
The fund will invest opportunistically across asset classes with no pre-determined allocations or benchmarks. Its portfolio investments will include equity, debt and other interests in both listed and unlisted companies. The portfolio managers, Francis Daniels and Robert Knapp, will seek to exploit Africa’s status as home of the largest number of turnaround countries by investing in companies located in states involved in secular political reforms, such as South Africa, and the Democratic Republic of the Congo, the former Zaire, which held its first democratic elections in almost a half-century last year.
The new vehicle will also exploit natural resource reserves available at substantial discounts to world market prices. According to the BP Energy Report 2006, Africa had the second highest natural gas reserve growth in the world, increasing over 134% since 1985. The continent also boasts the highest crude oil reserve growth in the world, increasing over 100% since 1985.
Daniels and Knapp are no strangers to emerging markets. Daniels has 12 years of experience in Africa and has spent the last nine years in Johannesburg, South Africa. Knapp is a specialist in emering markets, natural resources and debt and spent the last 10 years with Millenium Partners, a $9 billion hedge fund.
The fund charges a management fee of 2% and incentive fees of 20%.