Investment and fund management | TH!NK

03 SEP 2020

Investment and fund management: choosing the smart way

Investment and fund management : choosing the smart way!

Investors are looking for suitable solutions that meet the needs of diversifying their portfolios amidst numerous offerings. At MCB, our teams have looked at constant market developments in order to offer products and services that can optimise their funds. The securities department, MCB Global Markets and Treasury Management (MCB GMTM), and MCB Investment Management (MCBIM), offer holistic solutions for the needs of those choosing the smart way…

Securities Services : the focus on Environment, Social, Governance

Right now, the majority of asset managers and investors in general are finessing their responses to the ongoing Covid-19 crisis. The pandemic has given rise to a lot of self-reflection and it is likely that Environment, Social, Governance (ESG) will become an ever bigger focus for all market participants once the situation stabilises. Investment flows into ESG-focused asset managers have been increasing for several years now. According to data released in 2019 by the Global Sustainable Investment Alliance (GSIA), there has been a 34% rise in sustainable and responsible investment assets since 2016 with the total now standing at $30.7 trillion.

There are visible correlations between ESG and positive performance, and this has been evidenced in a number of meta-studies on the subject. However, there are challenges ESG data being often subjective while the data standards underpinning it are quite diverse, which is leading to potential arbitrages and client confusion.

With nearly 30 years of industry expertise, MCB is the largest provider of securities services in Mauritius, offering global custody to both local and foreign investors and access to an extensive network of more than 75 markets through our sub-custodians. We serve a wide range of clients ranging from Individuals to Banks, Corporates to Asset Owners and Financial Institutions to Asset Managers. One of the trends that we are observing is the increased ESG consciousness amongst our clients not just in their choice of investments but also in their choice of provider and hence their reason for choosing MCB as their Custodian. MCB launched its sustainability initiative – “Success Beyond Numbers” – back in 2018. The scheme is underpinned by three core pillars, namely contributing to a dynamic and sustainable local economy; valuing and safeguarding Mauritius’ cultural and environmental heritage; and acting in the interests of the country’s citizens.

MCB Global Markets and Treasury Management : global and integrated solutions

MCB Global Markets and Treasury Management (MCB GMTM) over its long-term establishment has developed best-in-class expertise and markets coverage to position itself as a trusted partner in the region delivering financial tools to help managing operations more efficiently. MCB GMTM offers a wide array of products in line with the needs of customers.

With its deep access to the International Foreign Exchange markets and being closely connected with major Global Market Participants, MCB GMTM offer Spot, Forwards & Swaps on G10 and Exotic currencies. Over the last financial year, MCB executed more than USD 170 million FX Turnover with African Tier 2 banks.

MCB GMTM also offers multi-currency deposit solutions, with direct access to negotiate and trade money market products at attractive rates and tailor-made structured deposits for yield enhancement. Through the financial year, MCB has been a preferred depositary bank vis-à-vis Tier 2 banks and secured more than USD 100 million of placements ranging over 3- 6 months as well as extended short term money market lines to its African Tier 2 banks. Together with the Wealth Management and Custodian arms, MCB GMTM also provide bespoke Structured Investment products like Principal Protected Notes and Yield Enhancement strategies.

Fixed Income Specialists of MCB GMTM having a significant HQLA book to manage, have access to tight spreads in the Bond Markets and can help customers execute their HQLA needs whilst leveraging on custodian capabilities onto clearing/exchange venues.

Moreover, MCB GMTM can offer customised, sophisticated strategies to help financial institutions achieve their Risk Management goals in terms of FX and Interest Rate hedging tools at competitive market levels.

MCB Investment Management : managing world’s first African local currency fixed income Exchange Traded Fund

MCB Investment Management (MCBIM) has been in operation since 1998 and offers multi-asset portfolio management services to its clients across the globe. Over the recent decade, MCBIM has been increasing its focus and commitment to the African bond and equity markets through unique and innovative dedicated offerings in the space.

MCBIM recently won a mandate from the African Development Bank (AfDB) to launch and manage the African Domestic Bond Fund (ADBF), the world’s first African local currency fixed income fund. ADBF was launched in September 2018, and is structured as an Exchange Trade Fund (ETF), listed and traded in USD on the Stock Exchange of Mauritius (SEM). It invests in local currency denominated African Sovereign bonds as per the benchmark which is managed by Bloomberg LLC.

Since launch the fund has outperformed its global peers generating a total return of 31.21% in USD, net of fees and pays a semi-annual dividend with an average dividend yield of 10-12%. The fund is very easy to access, has no minimum investment amount or holding period, and offers significant liquidity when entering or exiting.

African equities are trading at attractive valuation levels compared to developed market equities. For example, the average Price to Earnings ratio of equities in Egypt is currently 9.6x while US equities are trading at a P/E of 29x.

Through the MCB Africa Equity Fund, investors can access Africa’s emerging opportunities. The Fund’s focus is on businesses having a sustainable competitive advantage (e.g. superior product quality, efficient production, established brand, strong distribution channels, leading market share etc.) and above average earnings growth prospects.

In line with its preferred themes, the Fund has invested in the Food & Beverages sector, banks and insurance companies, telecom companies, technology and healthcare sectors across Africa with Egypt, Morocco, Kenya, Nigeria, South Africa, and Senegal as the main country exposures.

Read more