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
The markets in Africa were mainly positive in September, with the fund adding 0.51% and the benchmark index rising 0.8%. Kenya had a positive month, where the Nairobi All Share Index rose by 3.40%. During the month, we took part of the profit on the KNCB Group in Kenya with the aim of keeping the banking sector below the 40% limit from a risk management perspective. Banks in Nigeria also performed strongly in September. For example, within the portfolio Access Bank in Nigeria rose by more than 24%. Still the stock trades at only 3 times expected earnings with a dividend yield of 6.7%.
Egypt has the largest weighting in its portfolio (27.3%) and was in the news this month due to unrest in the country. As a result the stock markets came under temporary pressure, with the EGX30 index falling by more than 12% in a few days. In various cities in Egypt protests were made against the regime of President Abdel Fatah al-Sisi. Demonstrations have been rare since General al-Sisi's seizure of power in 2013. At the time of writing, the market has recovered a large part of the loss. Furthermore, Egypt's central bank lowered interest rates for the third time this year. This is possible due to falling inflation. In line with expectations, the deposit rate was reduced by 100 basis points to 13.25%. The base rate was also reduced to 14.25%. The lower interest rate must give a boost to the economy.
In Nigeria, the central bank announced that it would only lower interest rates if inflation falls below 9%. The expectation is that this will not happen before next year. Inflation is hovering around 11% in recent months. The base interest rate will therefore be maintained at 13.5% for the time being. Other September news from Nigeria; the economy grew by 1.94% in the second quarter, mainly due to growth in oil exports.
The fund currently holds positions in 31 stocks in 7 different countries. The countries with the largest weightings are Egypt (27.3%), Nigeria (22.9%), and Morocco (17.8%). 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. Consequently, the composition of the fund can differ significantly from the benchmark index.
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.