Neptune, a UK-based fund management company, has announced that it will merge its £9.6m ($13.7m) Neptune Africa Fund into the £7m ($9.99m) Neptune Emerging Markets Fund on April 29, 2016.

“The Neptune Africa Fund has failed to generate a positive return since launch and this, combined with the subdued market outlook for South Africa, as the Fund’s main allocation, and other African frontier markets raises questions as to the longevity of the Fund and its ongoing suitability for investors,” Neptune said in a letter to its shareholders.

“We believe this poor economic backdrop will provide limited opportunity to correct the Fund’s sub-par performance in the near future,” the company added.

Since emerging market equities are currently out of favor, Neptune believes “it will be a long time before there is any meaningful demand for Africa funds”.

“This is due to the likelihood that fund flows into Africa will significantly lag those into emerging markets funds because of the riskier nature of the investment.”

The Neptune Africa Fund’s assets under management halved over 2015 from its peak of £25m to around £11m with gross sales barely surpassing £1m in any given month.

“It is unlikely for the Neptune Africa Fund to be able to grow significantly over the near term,” the asset manager said.

The investment objective of Neptune Emerging Markets Fund is to generate capital growth with the potential for Income by investing predominantly in emerging market securities or securities that derive a significant proportion of their income or economic activity from emerging market, with a view to attaining top quartile performance within the appropriate peer group.

The Emerging Markets Fund retains the option to invest opportunistically in South Africa, according to the asset manager.

“We believe that this will provide Neptune with greater opportunities to generate positive returns, allowing for more efficient risk management, which should smooth and enhance investor returns over the long run,” Neptune said.

The termination costs will be covered by Neptune and not paid by the funds themselves.

Clients have been notified and have been offered a free switch into an alternative fund if they do not wish to be invested in the fund their investments are being merged into.

In addition, Neptune said that Africa Fund Manager Shelley McKeaveney has left the firm.

She joined Neptune in 2005 as a Fund Manager from Henderson Global Investors and has run the Africa fund since launch in 2010.

"Shelley leaves with Neptune’s best wishes for the future and the company’s thanks for her contribution throughout her tenure," Neptune said.