Barak’s core investment pinpoints sub-Saharan Africa and is related primarily to the soft agricultural commodities and food product-related sectors. The Barak investment approach is based upon the principles of discipline, diversification, collateralisation and downside-case scenario valuation. The company acknowledges that African investments encompass a certain degree of risk given the nature of investing in a continent whose primary markets are influenced by a multitude of volatile factors. Each investment is thus approached with a stringent on-boarding process
– using both desktop and on-the-ground due-diligence processes
– in order to determine the viability of a potential project’s funding.
As for our fund, The Barak Structured Trade Finance Fund came into inception in February 2009, with approximately USD 500,000 AUM of the Fund Manager’s own money. This is now currently in excess of USD 250m AUM, and up from 160m at the start of 2015. As a result of its success, the fund has won numerous awards over the last few years, with the most recent being the winner of the Global Trade Review Best Alternate Financier in sub-Saharan Africa, which was also won in 2014.
In terms of personnel, there are two fund managers on the fund, as well as four deal originators based in South Africa and two in other parts of Africa. We currently have in excess of 80 counterparties on the book who we provide short-term trade finance to, and operate currently in 15 countries in the SSA region. The fund predominately looks at soft-agricultural commodities to invest, with the most popular commodities currently being fertiliser, FMCG, pulses, equipment, minerals and rice. The majority of the investors are located in the UK and Europe, as well as increasing popularity in the US. To date, the fund has produced highly consistent returns since inception with no negative months to date in its 7-year life, and has a goal of 10% annual returns.
In terms of our strategy, the fund will seek to invest in the full value of trade finance assets or the first loss portion required by all trade financing banks. A particular emphasis will be placed on commodities with a high physical liquidity, and commodities can be of an export, import or regional nature.
Furthermore, transactions always contain an off-take agreement, although typically less emphasis is placed on the credit quality of the off-taker and investment decisions are weighted heavier on trading principles and track record rather than debt principles. Investments are entered into with counterparties well known to the fund managers and track records of counterparties are placed high on the list when investment decisions are made. Investments are short-term and cyclical with most investments made during harvesting season when markets are typically at their lowest. The intention is always to maintain a book with the majority of deals averaging between 100 to 120 days, and this ensures that the deals are not overly short term and that that new deals are permitted as old deals roll-off. Furthermore, it reflects repayment trends by clients, which is very important to the fund managers.
Additionally, the strategy also focuses heavily on global and African commodity prices, and thus takes on transactions that are not heavily reliant on volatile prices, i.e. portfolio exposure will focus on FMCG when commodity markets are as volatile as they currently are.
Although we work in a highly competitive industry, the Barak Structured Trade Finance Fund is arguably the only alternative investment fund focusing purely on African agricultural commodities and trade finance, by providing up to 100% debt to clients. Another important factor is that we have an on-the-ground presence in Africa with the ability to fly out to all of our clients in the matter of a few hours. At the same time a competitor may appear to have an impressive setup in Europe for example, but will be without the capability of an on-the-ground ever-presence in the sub-Saharan African region.
Furthermore, our on-the-ground Origination Team ensures that we are always ahead of the curve in terms of the changing industry, and we have members of this team in all the countries in which we operate as least once a week. The due diligence that is constantly conducted in these countries extensively covers all the possibilities of new opportunities, and we do not rely merely on research papers or what the news is saying or what current news is speculating may be unfolding in the regions.” The bottom line is that Barak’s deal-makers prefer to get a first-hand view before actively pursuing a potential deal.
Looking further into 2016 and beyond, the future holds many exciting ventures, with a strong pipeline of deals and continued strong investor sentiment to fulfil the funding required for these deals. Furthermore, Barak is going to be launching three new funds in the first quarter of 2016 (a longer-term Impact finance fund, a structured credit fund, and an FX fund), which will provide the company even more opportunities to be the leading alternative financier in sub-Saharan Africa, and arguably the whole continent. Watch this space!
Company: Barak Fund Management
Email: [email protected]
Web Address: www.barakfund.com
Address: 14 Marbella Road, Pellegrin,
Trianon, Quatre-Bornes, Mauritius
Telephone: +230 698 0397