TCM Africa High Dividend Equity is a high dividend equity fund, investing in listed shares in the northern and sub-Sahara regions of Africa. Initially it will focus on Egypt, Morocco and Nigeria. In addition, it will invest in Kenya, Ghana, Botswana and Mauritius. In principle, its portfolio will have limited exposure to South Africa.
The funds investment policy will be aimed at achieving capital growth as well as dividend pay outs. In principle, the fund will pay out dividend once a year with an expected dividend yield of approximately 4% per annum.
The risk profile is high, due to investments being channelled into frontier/emerging markets in Africa. The relationship between global financial markets and African markets is low, because the latter are less sensitive to international developments.
To achieve its objective, the Fund invests 95% to 100% of its total assets through TCM Investment Funds Luxembourg in units of TCM Africa High Dividend Equity (Lux). The Fund qualifies as feeder-structure.
TCM has entered into an agreement with Sustainalytics for the screening of the portfolios of the TCM equity funds on ESG criteria (UN Global Compact and Controversial Weapons).
The Fund Manager writes
Markets in Africa were mostly negative in February, with the fund declining 7.9% and the benchmark index losing 5.2%. Typically, African markets show very low correlation to Western and Asian stock markets, but the corona virus (despite the limited number of contaminants) also impacted African stocks this time. Measured in euro, the stock market in Egypt fell 7.5%, in Nigeria 7.7% and in Morocco 7.5%. These are the countries where the fund has the largest weighting. Not all positions in the portfolio declined, there were also a number of risers, such as Standard Chartered Bank Ghana (+ 5.4%).
With an economic growth of 8.1% in 2017, 6.8% in 2018 and an expected growth of 7% for 2019, Ghana is one of the fastest growing economies in the world. The reforms that started in the West African country three years ago are now beginning to show some return. The purpose of these reforms were reducing deficits and an aggressive revision of the banking sector, reducing the number of lenders from 69 to 23. This offers opportunities for Cal bank and Ecobank Ghana, both positions in the portfolio. Cal Bank, for example, trades more than 20% below book value at a price earnings ratio of only 3.81x and a dividend yield of 4.85%. For the first 9 months of 2019 a net earnings increase of 31% on an annual basis was reported.
On the macro front there was news from Nigeria, where the purchasing manager’s index rose to 59.2. The production in the country is growing steadily and as a result also employment rises. The IMF indicates that more high-quality growth is possible, but then reforms must be implemented. This requires more investments in growth-driven sectors such as energy, agriculture, industry and telecom.
The fund currently holds positions in 29 shares in 7 different countries. The countries with the largest weightings are Egypt (26.1%), Morocco (20.3%) and Nigeria (19%). These markets currently have the most interesting high dividend shares that meet the quality requirements. The weighting of a country is therefore mainly determined by the relative attractiveness of the market compared to other countries.
No rights may be derived from this publication. You are referred to the prospectus and Key Investor Information Document for the fund's terms and conditions. These documents may be obtained from the website or the address mentioned below. The manager of the fund has obtained a licence for this fund from the Netherlands Authority for the Financial Markets in accordance with the provisions of the Financial Supervision.