FUND FOCUS: The Enko Africa Debt Fund B-Class
Every month we select a fund manager, active in the African continent, to share his thoughts on the performance of African listed markets (equities or bonds). If you want to be featured in this section, get in touch via editor “at” africaglobalfunds.com
By Enko Capital
EADF-B generated a net return of +3.38% in July. This follows a strong Q2, during which the Fund produced its 2nd (+10.3% in May) and 3rd (+7.8% in June) best monthly returns since inception. July’s return pushed the YTD number to +10.67%, elevated the 12-month return to over 41%, and generated a new all-time high on a cumulative return basis. African hard currency credit (EMBI SSA) continued to rally in July gaining 4.19% on the month. The index now has a YTD return of 13.79%. Local currency African debt (S&P Africa x SA) rebounded, with a return of 1.17%. However, the dismal start to 2023 and the impact of the Nigerian Naira and its 40% deprecation in Q2, have left the index down by -11.33% for the year. Global hard currency EM debt (EMBI) gained 1.61% on the month, bringing the 2023 return to 5.48%. The Fund's July result lifted the annualised return since inception to just under 13.9%. Cumulatively, the Fund has generated over 142% since inception, putting the Fund ahead of the EMBI SSA and the S&P Africa ex SA by 115% and 147%, respectively. The Fund’s Sharpe ratio remains positive (1.80) on a 12-month basis and is over 1.1 since inception. The Fund also remains uncorrelated to local currency debt and moderately correlated to hard currency debt. Persistent inflation in Africa continues to keep pressure on central banks to maintain a hawkish monetary policy stance, albeit at a tempered pace. In a still uncertain global risk environment, FX liquidity pressures and the ensuing currency weakness continued to increase inflation expectations in most countries. Barring Uganda and Zambia, where policy rates may remain accommodative, Monetary Policy Committees in Kenya, Nigeria, Egypt, and Angola should tighten further in coming months (Ghana and Nigeria central banks hiked by 50bps and 25bps, respectively in July). Except for Zambia where we have recently seen a wave of foreign participation, local market activity has remained lackluster in Nigeria, Egypt, Ghana, and Kenya.