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Alternative Market Briefing

Governance, corporate balance sheets, not political risk driving investment choices in South Africa

Tuesday, January 21, 2014

Bailey McCann, Opalesque New York:

South Africa is rapidly emerging as a leading market to invest in. The country has institutional players, established hedge funds and a steadily improving stock market. Still, as investors consider Africa political risks are often front of mind. 2013 saw consistent unrest in the Arab Spring countries, along with the continuation of the Sudanese genocide and assorted flare ups throughout the continent. So what are managers in South Africa saying?

"Over long periods of time, we found that by and large the politics don’t matter that much. To the contrary, political events often lead to knee jerk reactions, and if we are able to allocate capital as a response to some of the market's knee jerk reactions, it’s actually beneficial to our returns," explains Andre Steyn, Founder and Portfolio Manager, Steyn Capital Management at the recent Opalesque South Africa Roundtable.

Steyn focuses on long/short equities in country. "For example, we more than doubled our exposure to Zimbabwe when the stock market declined 22% in the month after the election. The election result essentially meant a continuation of the status quo, and our increased allocation at a substantially lower price has helped our return since then," he says. Early on he was a focused short seller looking for companies in South Africa that were frauds, he says today, that the country is ......................

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