Investing in Africa is the financial equivalent of poet Robert Frost’s road less traveled: It’s the least researched area in the world for investments.

But that is making all the difference in the mind of Larry Seruma, the chief investment officer of Nile Capital Management and portfolio manager of its new Nile Pan Africa Fund.

African economies and markets have been showing attractive growth in recent years, he said.  The sub-Saharan markets have seen 11% returns over the past five years, far surpassing the U.S market over that time and staying almost even with emerging markets’ performance of 13%. And the broader picture looks even better: 6% annual growth in those economies over the past 10 years, Seruma said.

But the benefits of having an African fund in your client’s portfolio, as opposed to just buying an emerging markets funds, is the fact that these products have a low correlation with both developed and emerging market investments, Seruma said.

His three main investment themes in Africa are: consumer investments, infrastructure plays and commodities.

The consumer investments are based largely on the fact that the population is urbanizing and consequently demanding new services like banking. Africa is hugely “underbanked,” he said, with just 5% to 10% of the people with banking accounts.

Indeed, as these economies grow stronger, they will inherently need a stronger banking industry, said Jeff Tjornehoj, an analyst at Lipper. And recent history backs that up, as financials increased 54% over the past 12 months, and 14% over the past five years, according to Thomson Reuters African Financial Index.

Seruma’s infrastructure focus concentrates on telecommunications and cable networks that are going to be needed. It also includes traditional infrastructure items like power generation. And the commodities sector (the area that often comes to mind first for African investments) is dominated by oil and natural gas.

If your clients are interested in investing in Africa, it’s not easy. With a dearth of research, investments are hard to find. Seruma said he and his team would spend part of their time visiting companies and talking to management teams. He is looking to have a concentrated find, with just 25 to 40 companies, mostly small and mid-caps.

The fund launched late last month and so far it is on the Pershing platform, but Nile Capital is working on getting it on other platforms as well.

While Nile Capital is the newest Africa-focused fund, the biggest and oldest fund in this category is iShares Africa Fund. It was launched in early 2003 and currently has $514 million in assets, according to Lipper’s data. Its year-to-date return is 5.6%

And by the way, if you are among those who rarely consider African investments, there’s a reason for that. Tjornehoj said that the African economies constitute a very small portion of total global output. And it will likely be decades before it’s on investors’ radar screens and a routine part of portfolios. The corruption in many of the governments is a major hurdle. “You don’t just approach a country like that with a handful of cash and say, ‘What can you do for me,’” he said.

But if, like Seruma, you’re willing to take the road less traveled, you might find some nice investments for your clients.

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