Editorial: Finding the tipping point

In some familiar cases, it has already done so. The Royal County of Berkshire Pension Fund, led by its manager Nick Greenwood, is an obvious example of a scheme investor that already sees the benefit of investing on the world's second-largest continent.

As we reported in September, the fund already has investments in around 15 of the continent’s 55 states, and revealed plans to increase that level. There are, though, limiting factors the scheme perceives, such as the legal structure of some central African countries.

This week, emerging markets specialist Ashmore’s Jan Dehn makes the argument for the continent’s opportunities in listed and private equity, private lending and structured credit, pointing to the major steps forward its countries have made over the past 10 years, and the greater share it is taking of global indices.

"The scramble for Africa is on once more," wrote the FT's senior investment columnist John Authers last week, but warned investors to be aware of the risks. Stock markets are volatile and have liquidity issues, while realising gains from private equity investments can be tricky, he explained.

Consultancy group EY's Africa Attractiveness Survey 2014 ranked the continent second in its table of attractive investment destinations. This is up from fifth place in 2013 and 2012 and eighth in 2011.

Illustration by Ben Jennings

Work to improve governance in African states include Tony Blair’s Africa Governance Initiative, while the Bill & Melinda Gates Foundation has co-sponsored a social impact fund to finance the development of drugs and vaccines. 

Social impact investment has risen up the radar among schemes, with Waltham Forest Pension Fund a leading example of an institutional investor seeking to encourage the development of healthcare, education and financial inclusion in the UK.

Schemes must put the beneficiary before beneficence. But it will be interesting to see whether they can profit from Africa’s governance improvements and subsequent investment opportunities, while avoiding becoming snared by the continent’s stickier points.

Ian Smith is editor of Pensions Expert. You can follow him on Twitter @iankmsmith and the team @pensions_expert.