Larry Seruma has more than 19 years of experience in portfolio management, equity and derivatives trading, investment research and quantitative investment strategies. In 2004, he founded Nile Capital Management, LLC. In recent years, he has served as a Managing Director at Proxima Alfa Investments (USA) LLC, a joint venture between Banco Bilbao Vizcaya Argentaria (BBVA) and Vega Asset Management. Previously, he was a Principal at Barclays Global Investors (BGI), a division of Barclays Capital, where he worked in the Active Strategies Group there and was also a member of BGI’s Investment Process Committee. He also has experience as an Options Market Maker at the Chicago Board of Options Exchange. Mr. Seruma serves on the Board for All For Africa, a non-profit organization that focuses on providing sustainable funding to charities and community based programs in Africa. Mr. Seruma is originally from Uganda. He holds an MBA in Analytic Finance and Statistics from the Booth School of Business, The University of Chicago.LARRY SERUMA has more than 19 years of experience in portfolio management, equity and derivatives trading, investment research and quantitative investment strategies. In 2004 he founded Nile Capital Management, LLC. In recent years, he has served as a Managing Director at Proxima Alfa Investments (USA) LLC, a joint venture between Banco Bilbao Vizcaya Argentaria (BBVA) and Vega Asset Management. Previously he was a Principal at Barclays Global Investors (BGI), a division of Barclays Capital, where he worked in the Active Strategies Group and was also a member of BGI's Investment Process Committee. He also has experience as an Options Market Maker at the Chicago Board of Options Exchange. Mr. Seruma presently serves on the Board for All For Africa, a non-profit organization that focuses on providing sustainable funding to charities and community-based programs in Africa. Mr. Seruma is originally from Uganda. He holds an MBA in analytic finance and statistics from the Booth School of Business, University of Chicago.
TWST: What is Nile Capital Management, LLC, and what do you do?
Mr. Seruma: Our firm is a Registered Investment Adviser (RIA) based in New York City, and our focus is Africa. We currently advise one mutual fund, Nile Pan Africa Fund, with an objective of investing for long-term total return in the whole continent of Africa, from Cairo to Cape Town. We also have two additional mutual funds. One is a Fixed Income Fund, again focusing on Africa, and the other is the Natural Resources Fund, for more concentrated investing in leading natural resource companies in Africa. We expect those two funds to be offered to the public at some point during the next year, after we build Nile Pan Africa Fund to a targeted level of assets and participation.
TWST: For investors who still don't understand the draw of Africa, why should they consider investing there?
Mr. Seruma: There are probably a dozen reasons why some investors should put Africa on their radar screens. Let me focus on four that I consider among the most important. First, let's talk about an objective that motivates almost all investors - potential returns. Over the last five years, African markets as a whole have returned about 12% annualized. This is comparable to the return of the broader index of emerging markets (MSCI Emerging Markets), which has been about 13% annualized over the same period. So Africa has performed about as well as emerging markets on the whole. But when you compare that performance with developed markets, it looks even more attractive.
Most major developed market indices have produced flat to negative total returns over the last five years. Over a 10-year horizon, the performance gap between Africa and developed markets is even greater. Second, African markets have produced low correlation with other emerging markets as well as developed markets. This means that adding Africa to a core portfolio has the potential to increase portfolio diversification. The third reason is Africa's growth story. Increasingly, global GDP growth is being driven by emerging and frontier markets, and Africa's GDP is projected to grow by 6% annually over the next few years. This matches the average annual increase in Africa's GDP over the last decade. The fourth reason is a surge in money flows to emerging investment markets.
TWST: How do you describe your investment philosophy?
Mr. Seruma: We combine top-down macroeconomic analysis and bottom-up fundamental analysis. The first step in our investment process is to develop a macroeconomic view and a ranking of all 53 countries. Our proprietary analysis and rankings help to identify countries with sustained growth, political stability, sound governments and economic policies, and reliable frameworks for regulation and corporate governance. Our next step is to identify leading companies located in the top-ranked countries based on bottom-up fundamental analysis and valuation.
TWST: In evaluating economies and companies, do you include factors such as political stability and the potential for rebellion or violence against civilians? Aren't those realities in Africa?
Mr. Seruma: Yes, and this does make managing an African mutual fund more challenging. I'll give you a specific example. Corruption is a problem not only in Africa but in almost all emerging markets. We believe the best way to minimize the impact of corruption is by focusing on companies with strong corporate governance. For example, several companies we own have multinational corporations among their largest shareholders. We have found that the multinational corporate shareholders historically have helped to cultivate strong management teams, as well as ethics and financial controls that help to mitigate corruption. Clearly, there are additional risks in emerging markets. But we think these risks help to make these markets less efficient and give us an edge through our ability to identify and manage those risks.
The Wall Street Transcript is a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs and research analysts. This Special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online .
The Wall Street Transcript does not endorse the views of any interviewees nor does it make stock recommendations.
For Information on subscribing to The Wall Street Transcript, please call 800/246-7673
