PERE: Can you tell us a little about the history of the FSDEA?
JFS: It is a relatively new institution. The fund was first conceived in 2008 and was officially ratified four years later in 2012. We were given an initial endorsement of $5 billion from the Angolan government, also in 2012.
PERE: What is the overall strategy of the fund?
JFS: Our key aims are to maximize the fund by pursuing long-term and sustainable financial returns. The fund will promote Angola’s social and economic development through the generation of wealth for the Angolan people. We strive to achieve transparency, accountability, integrity and a commitment to the Angolan people.
PERE: Where have you traditionally invested capital?
JSF: We hold an internationally diversified portfolio allocated to fixed income assets, variable income assets, financial derivatives and cash. We have recently diversified the portfolio from our traditional strategies and are now investing in private equity, mainly because commodity prices, such as oil, are down. We have focused on sub-Saharan Africa because we feel there are more opportunities as the region is less industrialized.
PERE: What is the total value of the FSDEA?
JSF: At present the net asset value of the fund’s portfolio is $4.7 billion. The FSDEA is investing its capital in different industries through its asset manager Quantum Global, based in Zurich. We have seven private equity funds which have been deploying capital since 2014, through these we invest in real estate, infrastructure, healthcare, mining, timber, agriculture and structured equity.
PERE: What proportion of the fund is allocated to private equity and in particular, real estate?
JSF: At the moment 58 percent of the fund is allocated to private equity, which equates to almost $3 billion. Of this amount, the FSDEA has allocated $500 million of equity capital to a Hotel Fund for Africa, which aims to fulfil the significant undersupply of international standard hotel management capacity in the continent. This vehicle will be in a position to take up debt up to 50 percent, potentially doubling its total investment capability. So far 23 percent of the $500 million real estate allocation has been committed to hotel investments in Angola and Zambia. The remainder of the capital will be invested in hotel opportunities across the Sub-Saharan region in the coming years.
PERE: What strategy will this hotel-focused vehicle employ?
JFS: The capitalization of this vehicle is in line with the FSDEA’s policy to invest in sectors that remain shielded from global market volatility and provide sustainable high yield returns on investments. We are looking to invest specifically in business hotels, along the whole spectrum from construction to development and expansion, mainly in Angola and Zambia, but also focusing on the whole region. We have defined the strategy of the vehicle, so will be carrying out the whole process until exit.
PERE: What sort of return are you aiming at?
JFS: Investing in Africa is difficult, the risks are higher. The type of returns we are looking for and aiming at are similar to what in Europe you would call opportunistic.
PERE: What is the ethical approach of the FSDEA?
JFS: We have a general awareness that sovereign wealth funds should focus on more than just financial gain. We have to aspire to a higher standard ethically and environmentally. It makes our job a little harder, but as I have said we are committed to transparency and accountability. We are evaluated by more than just our finances.
PERE: Have you considered investing in Europe?
JFS: We have invested in shares and bonds in Europe, but not yet in private equity. The FSDEA is considering potential investments in real estate in Europe and other developed markets as we believe these markets to be quite stable compared to those in the region and would counter the volatility there.