[INTERVIEW] Interview: African Alliance introduces products for local and international investors
This week Africa Business Communities brings you this interview with Ms. Lilian Kagame Uwera, Portfolio Manager and Doreen Mugisha, Head of Client Servicing, which touches on new developments at African Alliance Uganda (AA), a leading provider of asset management, stock broking and corporate advisory services and what the future holds. In addition, Mr. Per Munk-Nielsen, Head of Business Development explains in more depth the characteristics of the East Africa Debt Fund.
What are the major milestones African Alliance Uganda has registered since inception?
Uwera: "African Alliance Uganda was licensed in 1997 but began operations in 2005 following the enactment of the Collective Investment Schemes Act in 2004. African Alliance Uganda is a wholly owned subsidiary of African Alliance Limited, an investment banking group with operations including asset management, advisory services and stock broking covering 16 African markets.
The group in turn is owned by management and staff. This is a particularly effective model for asset managers as it aligns the interests of our staff with that of our clients and not external shareholders. African Alliance is totally staff and African owned, a fact we are extremely proud of."
African Alliance was behind Uganda’s first Unit trusts which were started in 2004 but suspended in December 2011. We have learned that there are plans to reintroduce unit trusts. What makes you think they will work this time?
Mugisha: "First of all it is important to understand the principle behind unit trusts. A unit trust fund is a form of collective investment for investors of similar objectives that pool funds which are then invested by a fund manager.
Unit trusts enable small scale individual investors to invest and gain exposure to different asset classes such as bonds, shares and offshore investments, which they would otherwise have not managed if they did it as individuals since it is would be costly.
The scheme was suspended in December 2011 for different reasons, but following a reappraisal of the model we had then, we have submitted an application to the relevant regulatory authorities and are awaiting feedback.
But this time round, we are re-launching a modified product called the Uganda Shilling Yield Fund and a Balanced Fund to capture assets in the Retirement Benefits space. The re-launch of the Balanced Fund is based on the growing interest from both individual and corporate investors.
With the Uganda Retirement Benefits Authority (URBA) now established and the liberalization of the retirement benefits sector on a steady course, we anticipate more retirement benefit schemes to be set and these will require external asset management solutions and hence our decision to provide a balanced Fund, aimed at providing the small to medium sized funds the same level of service and returns the larger funds would get.
We will be seeking to build on our vast experience in managing retirement benefit schemes across Africa under the unit trust structure.
In Kenya for example, African Alliance manages four unit trusts. The Ugandan Shilling Yield Fund on the other hand will invest in money markets; treasury bills, government bonds, corporate bonds and fixed investments, which are typically less risky investment classes.
These Funds are targeted at all investors and the minimum investment size will reflect this."
Apart from relaunching unit trusts, what other new products are you introducing?
Nielsen: "Encouraged by the significant investment flows into the continent, the East African division of African Alliance, with offices in Uganda, Kenya and Rwanda, is developing a number of products for international investors such as: the East Africa Debt Fund and the Africa Pioneer Fund.
The East African Debt Fund will be a portfolio denominated in local currency seeking high yield by investing in a diversified portfolio of East African fixed income securities, corporate debt securities, loan instruments and cash deposits in mainly Uganda, Kenya and Rwanda.
The fund will be offered to local as well as international investors with the international segment in particular already showing strong interest. This is mainly being driven by the powerful structural drivers that together inform the very bright outlook for the East Africa region.
We have also witnessed improving macroeconomic stability and the recent oil and gas discoveries, the rapidly growing middle class and generally higher levels of expenditure on consumer products and services, the improving infrastructure and increased building and construction activity.
The East Africa Debt Fund invests in fixed income securities and debt in the East Africa region, the Africa Pioneer Fund on the other hand invests in shares of companies across all of Sub-Saharan Africa. Pan-African equity markets are increasingly attracting institutional investor capital, from both within and outside the African continent."
"They provide a unique and time limited opportunity to capture both the future economic growth of the continent and the value created by the difference between the positive economic reality on the continent and the low valuation levels on listed markets.
The Africa Pioneer fund is structured to give investors access to these markets whilst managing the specific associated risks. The fund’s investment process has stood the test of the crisis years, and is positioned to reap the rewards of the rise of the last frontier equity market."
The liberalization of the retirement benefits sector is steadily on course, starting with the creation of the Retirement Benefits Authority- the sector regulator. How will this impact on the sector?
Uwera: "The RBA has the primary aim of protecting the investors in Retirement Benefit schemes. It will implement strict investment policy guidelines aimed at ensuring scheme members’ funds are managed prudently and professionally.
For example, African Alliance will be required to regularly report to RBA, who will ensure that we are compliant with the investment regulations.
We believe that the increased competition which will evolve given the liberalization of the sector will be beneficial to all stake holders. In the long term, it should also help drive the development of the domestic equity and debt markets.
Amongst the RBA mandates is creating public awareness on the need for savings, which we believe will increase the catchment base.
We are looking forward to collaborating with them on their planned investor education campaigns. We also believe, the liberalization of the sector will also drive the growth of umbrella schemes that will in turn enable small companies with pension schemes to enjoy the economies of scale which are achieved by pooling assets in a single Fund.
These savings are gained from the sharing of asset management costs, custodial and trustee costs by all investors in the fund."