2024-02-02 19:05:14
Investing in Africa offers opportunities but is highly risky
Despite the undisputed economic potential, African funds are unsuitable for investing money from pension plans.
With the Bellevue fund you have the opportunity to invest in Africa in a broadly diversified manner. However, you carry a high risk.
Photo: Argon Ufumeli (EPA)
As a married couple, we are both 60 years old and have been investing in funds every month for a year and a half, including the Bellevue Funds – African Opportunities – Active Funds Saving (CHF). In three to six years, the plan is to withdraw part of the assets as capital in connection with retirement. It is also planned to make investments in Africa and in blue chips in Switzerland. Does this make sense? CP
According to the strategy, the Bellevue Funds – African Opportunities – Active Funds Saving (CHF) you hold with ISIN number LU0433847240 invests primarily in listed companies in the emerging countries of Africa. A significant number of countries in North Africa and sub-Saharan Africa are taken into account, which, according to the fund management, benefit from increasing structural change, economic reforms, infrastructure investments and high raw material reserves and open up largely untapped investment potential. In addition, investment opportunities in other African countries are being exploited, such as South Africa.
In its investments, the fund focuses on profitable large and mid-cap companies that benefit from the region’s strong growth dynamics. Over 75 percent of the capital flows into stocks, around 20 percent into cash and the rest into bonds. The argument in favor of such an investment is that Africa has growth potential. From the perspective of investors, the continent receives little attention – unlike many emerging markets in Asia. This also has to do with the fact that Africa plays a significantly smaller role in the global economy compared to Asia.
Unsuitable for retirement planning
The fund gives you the opportunity to invest in Africa in a broadly diversified manner. However, you carry a high risk – not only because you invest mainly in stocks that are exposed to strong price fluctuations, but also because the emerging structural change and the need for reforms in many African countries not only with above-average opportunities, but also with are associated with high economic and political risks that are difficult to assess. From your information, I understand that you are sitting on considerable book losses with the fund.
As with any other fund, recovery is possible. However, you must be aware that the fund also has negative performance in the long term. The fund shows a cumulative negative development of 25.9 percent over three years, 41.73 percent over 10 years and a negative trend of minus 30.91 percent since the fund was launched on June 30, 2009. The past is never a guarantee for the future. However, the long-term negative development shows you that you are carrying very high risks with the vehicle and, even if you hold it for a long time, you have no guarantee that you will ever make a profit with the fund.
In addition, the fund is expensive. The fund has a maximum management fee of 1.6 percent per year. The analysis company Morningstar even mentions running costs of over 2 percent. These fees are charged to the fund and are deducted from your potential return. Investments in Africa can certainly offer attractive growth opportunities, but in my opinion they are only suitable for investors who are prepared to accept very high risks. Despite broad diversification, I consider an Africa fund to be simply unsuitable for investing money from retirement provision.
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