Fertile Ground: Hedge Funds Travel to Africa
Wednesday, October 11, 2006
With stocks in more-traditional emerging markets like Brazil and Russia still close to historical highs, some hedge funds are turning to resource-rich sub-Saharan Africa for investments. The push reflects both the uptick in some of the region’s economies and the growth of hedge funds — loosely regulated pools of private capital — and their search for new frontiers.
“It’s a combination of falling returns in all the traditional emerging markets, cash flowing into hedge funds, and high demands for commodities, combined with many of these countries getting their houses in order,” says Marc Pagano, head of emerging-market credit trading in London at Citigroup Inc. Citigroup is now trading securities from countries such as Kenya, Botswana, Tanzania, Uganda and Ghana for its clients. Within a few years, it has gone from trading in two countries in sub-Saharan Africa to 12.
This year, hedge-fund favorites have included buying and selling the debt and currencies of Nigeria and Zambia. A year ago, an average day’s trading in Nigeria’s currency, the naira, would be 650 million naira ($4.5 million). Now it could see as much as 10 billion naira, trading on various markets, Mr. Pagano says.
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