I haven’t written much about frontier markets for quite some time, which is a pity because its in the more exotic markets around the world that one tends to find the most interesting stories. Perhaps the most curious idea is how these disparate and far flung markets can veer between outrageous high valuations and rock bottom numbers. Take Africa. At varying times, some African markets can seem egregiously over priced but for much of the time these small, nascent markets (in SSA ex SA) represent cracking value – even if liquidity is a tad limited.

Veteran stockmarket analyst Chris Hartland Peel keeps a close eye on these markets through his excellent website at www.hartland-peel.com

He regularly tracks the Top 30 companies by market size in markets as varied as Nigeria, Kenya and Botswana. His latest note is from April and observes that those Top 30 companies have a combined market cap of just $67 billion – down 2% over the month but up 9% year to date.

This report is an update as of April 2018 and covers the Top 30 companies in Sub-Sahara Africa ex SA by market capitalisation. Zimbabwe rose 14%.

All other major markets fell, led by Kenya down 6%, the BRVM and Mauritius both falling 3%, and Botswana fell 4%. But for me the crucial numbers are in the box below – they suggest that if you are looking for the last true value stocks. Maybe you should focus on Africa (and Japan). According to Hartland Peel of those 30 companies :


·      11 companies have a ROE > 25%. ·      7 companies have a trailing P/E < 10.0 times.
·       8 companies have a dividend yield > 5%. ·      7 companies have a price/book value < 1.50 times.


Moving back to developed markets I see that Canaccord’s excellent funds’ analyst Alan Brierley has just released the latest update to his Skin in the Game analysis. This comprehensive report examines the degree to which fund directors and managers have their own skin in the game i.e stock in their own listed funds. Its hard to disagree with the core premise – if your manager and fund directors have their own money on the line, they’ll be properly incentivized. Of course, it can inadvertently end up favoring those funds that operate a bit more like a listed family office. But the general point still holds true – more direct ownership, the more motivated.

The first table below looks at managers with a personal investment of more than £1m. I’ll skate over the more obvious family holdings (RIT CP) and simply list some more surprising ‘stars’:

  • Tetragon
  • Scottish Mortgage
  • Riverstone
  • Machester and London
  • Aberforth Smaller Cos
  • Macau Property Oppos
  • Syncona
  • Capital Gearing
  • International Public Partnerships

Turning to those funds in need of some ‘improvement’ the table below lists the main candidates – the report compares the fees collected by the directors with the ownership stake as well as average tenure of the directors.

The top four really do stand out – Carador Income Fund (most obviously), Ground Rents Income, CVC Credit, and Honeycomb. In each case, there’s anything between 4 to 10 years average tenure and no effective ownership by the board.