Founded in January 2014, Africa Merchant Capital Management’s vision is to be the leading boutique investment manager focused on the Pan-African region, primarily outside of South Africa.
We believe through sound research, a structured investment process and local insights we can deliver attractive returns to investors while managing the associated risks. The firm currently manages a Sub-Saharan Africa ex-SA listed equity fund and offers managed/segregate accounts. The firm has ambitions to build a multi-asset class investment management business over time.
To view our latest portfolio factsheet please click here.
Key to our investing philosophy are the following principles:
Investments should be thoroughly analysed on a fundamental bottom-up basis to determine the quality and risks of the underlying assets
Investments should be purchased at a discount to their fair value with sufficient upside to warrant the underlying risk assumed
Qualitative information should be quantified in a structured objective manner which creates discipline in investment decision making and mitigates emotional biases
Risk should be quantified using the underlying risk factors rather than statistical metrics as an integral part of the investment process
The firm has a number of competitive advantages which enables it to offer market leading investment management services in Africa:
Our team has complementary African professional experience including investment management, merchant banking, corporate finance advisory and private equity investing
Part of the AMC team is based in East and Southern Africa. Our team has spent a substantial amount of time on the African continent building relationships and conducting investment due diligence
Our in-depth fundamental research feeds into a structured investment process where qualitative information is evaluated objectively and risks are quantified
A small nimble team can identify and respond quickly to market opportunities. Portfolio structures allow meaningful portfolio allocations to overlooked opportunities with potential for higher returns
With forecast growth of 5.75% in 2015 according to the IMF, Sub-Saharan Africa is set to overtake Developing Asia growth rates. This growth is supported by the following factors:
Africa’s rising middle class (34% of population, AfDB), young population and urbanisation rates are driving consumer demand
Unique mobile subscribers grew by 18% CAGR from 2007-12 reaching 253 million subscribers (GSMA)
World Bank forecasts FDI to reach $54bn in 2015 ($37bn in 2012); EMPEA2 predicts market inflows from SSA Private Equity managers
Intra-Africa FDI growth expected to continue (42% CAGR, 2007-11, fDi intelligence)
30 ruling parties or leaders have been democratically removed by voters from 1991-2011, compared to only 1 peaceful transition of power from 1960-91 (Economist)
The region is distinctly different and better positioned for growth compared to North Africa and South Africa. North Africa, often covered as part of the MENA (Middle East and North Africa) region, is experiencing ongoing political uncertainty following the Arab Spring, whilst the more mature market of South Africa is delivering weak economic growth due to structural constraints.
We believe the best way to capture the growth opportunity whilst mitigating downside risks is to invest in a portfolio of diversified public equities, including small- mid- and large-cap shares. The case for investing in SSA public equities is supported by the following factors:
We believe local African exchanges are the best route to access pure SSA economic exposure. Less than 6 JSE stocks derive >30% of revenues from the SSA ex-SA region. Offshore listings with SSA ex-SA exposure are concentrated in junior miners
Low correlation with emerging and developed markets is attractive for asset allocation
Access to stocks from >20 countries, on >10 exchanges
SSA ex-SA exchanges continue to implement liquidity improving measures, including new technology, lower fees and market making. We estimate 26 IPOs in 2014
Stock exchanges enforce higher standards of corporate governance, financial reporting and regulatory oversight than private companies are subject to
The long-only strategy seeks to invest in quality, undervalued public companies operating in Sub-Saharan Africa (ex-South Africa) which we believe are well positioned to participate in the region’s economic growth.
Click here to view our latest portfolio factsheet.
The investment process is value-driven bottom-up stock selection encapsulated in a structured framework. Africa Merchant Capital conducts in-country, in-depth fundamental company research, including assessments of markets, management and operations. This qualitative assessment feeds into a structured framework where information is evaluated objectively. The highly structured process creates discipline in investment decision making where predefined quantitative and qualitative factors are used to determine conviction and risk.
While the investment strategy does not follow a top-down approach it employs an in-house risk control process. Political, macroeconomic and micro risks are identified, assessed and managed as an integral part of the investment process. Companies selected are weighted on a risk adjusted basis.
The strategy’s planned size cap and liquidity terms allow it to include, alongside large-cap shares, smaller, under-researched companies with potential for higher returns.
The strategy will primarily invest in equities listed on African exchanges although it may invest in offshore listed companies provided they derive a significant amount of their revenue from the region.
The diagram to the right is illustrative of the concepts and processes that we employ.
Jonathan Kruger, CFA co-founded Africa Merchant Capital Management in June 2014 as a boutique investment manager focusing on the Pan-African region outside of South Africa. He has over eight years’ experience investing in public equity markets having managed portfolios investing in South Africa, developed markets and frontier African markets. The firm launched the Africa Merchant Sub-Sahara Fund in December 2014 where he is the portfolio manager. Prior to co-founding AMCM he travelled through Africa and conducted research on listed and private equity in the region. He worked at Prescient Investment Management from February 2007 to December 2012 where he pioneered the Prescient Africa Equity Fund. He holds a BBusSci Quantitative Finance degree from the University of Cape Town and is a CFA charterholder.
Cobus co-founded Africa Merchant Capital Limited in 2012 as a corporate finance advisory business specialising in Sub-Sahara Africa. Cobus was previously Principal for Africa at Templewood, a London-based private merchant bank, leading origination and distribution of transactions across Sub-Sahara Africa. His professional experience includes corporate finance advisory, merchant banking, business consulting, auditing and personal investing in Africa. Cobus qualified as a chartered accountant in South Africa with PricewaterhouseCoopers of which the last five years were in the Global Risk Management Services division. Cobus also had a successful international and professional rugby career spanning both the Northern and Southern hemispheres. Cobus holds a B.Comm(Hons) degree from the University of Stellenbosch.
Jan co-founded Africa Merchant Capital Limited in 2012 as a corporate finance advisory business specialising in Sub-Sahara Africa. Previously Jan was Senior Associate at Templewood, a London-based private merchant bank where he worked in the principal investing and advisory divisions with a core focus on African transactions. Previously Jan worked in a variety of financial roles at Barclays and Wells Fargo, both in London. Jan qualified as a chartered accountant with PricewaterhouseCoopers, South Africa, holds a B.Comm(Hons) degree from the University of Stellenbosch and is a CFA charter holder.
Michael Ashaolu joined Africa Merchant Capital Management as an Equity Analyst in November 2016. Previously, he worked at Cloud Atlas Investment (Johannesburg, SA) as Risk Officer where he contributed to the development of risk methodology and maintained the risk management process of the firm. Prior to that he spent five years at Fidelity Bank (Lagos, Nigeria) where he worked in Banking Operations, Risk Management and Control Functions. He previously worked at Interstate Securities (Lagos, Nigeria) as Head of Accounts. He holds a Master’s degree Financial & Risk Management from the University of Cape Town and is currently a Level 3 candidate in the Chartered Financial Analyst program. He is a Chartered Accountant with the Institute of Chartered Accountants of Nigeria.
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