Zimbabwe is a market that is too exotic to be top of mind for the average international investor, but not for Investec Asset Management, according to Hendrik du Toit, chief executive of the group.
Investec has been buying into Zimbabwe for some time, he says, making use of its South African roots and exploiting its advantage in the area.
It has been increasing exposure in its Africa fund and Africa Frontier private equity fund, though liquidity in the market remains an issue, says Mr du Toit.
Despite recent political turbulence following remarks by prime minister Morgan Tsvangirai that he would “disengage” from working with Robert Mugabe, Zimbabwe’s president, and his ZANU PF party, Mr du Toit remains optimistic about the long-term fundamentals for post-Mugabe Zimbabwe.
In an interview before this incident, Mr du Toit said there were a couple of triggers that had made the country a talking point for “Africa enthusiasts”. These were the positive effects from the switch to using US dollars from local currency, and the influence the government’s coalition partner, Mr Tsvangirai’s Movement for Democratic Change (MDC), is having on the economy.
Mr du Toit said before the most recent upheaval: “It is very difficult to call a bottom in a place that’s been down but we’ve seen triggers [such as the shift to using the US dollar]. There is a more palatable partner that is by and large in charge of the economy, which is a powerful signal.”
Even if the economy goes back to where it was before 1997, when Mr Mugabe’s actions started having negative effects, it should be at least 10 times larger than today, Mr du Toit adds.
Other asset managers in the region are also making tentative steps into the country. Botswana-listed Imara Asset Management is raising money for its Zimbabwe-focused private equity value fund.
Investing in areas shunned by most others is not the only advantage Investec gains from its South African origins. An international outlook is another, says Mr du Toit. The group was forced to develop such an outlook early in its life to lift its sights beyond its relatively small domestic market.
“Having started in South Africa, which is limited in size, you have to think differently from how, for example, a US [asset] management firm would think,” he says.
This stands Investec in good stead to benefit from the shifting of economic power from west to east that the financial crisis has brought in its wake, he argues.
Investec, which offers global equities, fixed income and multi-asset management, posted net sales of USD3.5bn (GBP2.1bn, EUR2.3bn) in the six months to September, a 17% gain, Mr du Toit says.
“A firm like us should be benefiting from two main trends. One is the power shift from west to east, ie new investment opportunities here. [We are also] in a position to catch the flow of the savings being mobilized in the developing world because when you invest there and you visit and understand the places, even in the frontier markets, you find some substantial pools of assets.”
Asia is a case in point. Net sales in Asia between April and September have reached $500m in the six months to September, while assets under management in the region are at a record, Mr du Toit says.
His strategy remains the same across regions, targeting a few of the largest institutional businesses and mutual fund platforms, developing those relationships over the long-term and then on top of that giving exclusive sub-advice.
As part of that strategy Mr du Toit is focusing on providing global products to the Asian institutional market. Investec is also adding to its sales team in the region.
“Over-expansion is a danger in this business, so our job over the next five to ten years is scaling up,” he says. “We’ve built our investment platforms and now the distribution is in place. All we have to do is invest in the support behind them.”
The group is also working on a long-term strategy for entering the Chinese market, where it has been “engaging” with a number of entities and potential clients.
“We’ve chosen not to do joint ventures [in China],” Mr du Toit says, adding that “life is too short” to deal with the confusion and politics of a joint board. “In China competition is very tough, but the government is serious, [so] opportunities will open up with arrangements for distribution supplying international expertise, or a system to raise money from a client base.”
Source(s): Financial Times
