Opalesque: All three Scipion African Opportunity Fund strategies post positive returns in January

London-based Scipion Capital, an Africa dedicated fund firm, has reported that all its three Scipion African Opportunities funds posted positive gains in January.

From Precy Dumlao, Opalesque Asia

In his report to investors, Scipion’s Chief Investment Officer Nicolas Clavel said that the first of these funds, the Class A Commodity Trade Finance (CTF) fund, that delivers integrated short term self liquidating credit solutions to institutions operating in African commodities markets, was up +0.61% last month and has generated +67.15% returns since its inception in August 2007.

He told investors, "The idiom 'don't keep all your ostrich eggs in one basket’ is the underpinning of our diversified approach to commodity trade financing, with our funding being spread from Cameroon to Tunisia to Liberia to Botswana, to name but a few countries. This element of risk mitigation is one of the main reasons that we have achieved cumulative returns in our CTF fund."

Having originally held a focus on agricultural products, the CTF fund has broadened its activities to include opportunities in metals and minerals export and/or beneficiation, and only invests in non-perishable commodities. Because of rising commodity prices, Basel 2 & 3 risk capital regulations, and the ongoing sovereign debt crisis forcing large European banks to reduce Trade Finance activity, Scipion Capital is seeing ever-increasing demand for finance from the supply chain.

The second fund, Class I - Ai40 Index Tracker, also had a good month in January with a strong +6.28% rebound after being down -33.27% at the end of 2011. The fund's two biggest components, South Africa and Egypt, were notably strong performers. The Egyptian EGX30 Index for instance hit highs not seen since 9th September, while the JSE TOP40 Index hit highs not seen since 2008.

Clavel noted, "We nonetheless remain relatively cautious, with gains in South Africa largely coming in tandem with a strengthening rand, while Egypt has been driven more by indigenous telecoms investment jockeying."

The third fund and Scipion’s newest strategy within its African Opportunities Funds, Class S - Mining & Resources, also posted a moderate +0.74% return last month. The strategy aims to combine Stock picking with Fixed Income flows from proven Trade Finance strategy, as well as Gold Bullion, to provide a balanced exposure to the African Mining sector with much lower volatility and risk of drawdown than a purely mining equity portfolio would otherwise provide.

Dr. Elena Clarici, Portfolio Manager of the Scipion Mining & Resources Fund commented, "2012 started on a rather positive note, prompting a rally in the equity markets and allowing most commodities to regain some of their 2011 losses. This resulted from a series of positive news coming out of the US, signs that Eurozone financial crisis has escaped the worst and, particularly, broad based improvements in the PMI surveys."

Clarici added that LME metals started the year with a strong rally, with the LME Index gaining 10.91% in January. Tin has seen the strongest rally in 2012, up 26%, largely because it fell the furthest last year. Copper, lead, and zinc prices have continued to move together, all making significant gains. Copper on COMEX gained 7.68% and closed at ZAR30.85/lb at the end of January. The Copper market remains particularly constrained on the supply side as a result of both production disruptions (Escondida and Quebrada Blanca) as well as smelting and refining facilities in Asia.

More importantly, Clavel attributed the firm’s due diligence for achieving good results last month. He took due diligence trips in January and visited both Congo-Brazzaville and Rwanda to analyse two exciting agricultural and mining funding possibilities.

"In Rwanda particularly, I was greatly impressed by the professionalism of the national development board, the RDB, whose efforts have seen the country rise to 8th in the world for ease of opening a business (World Bank), and 45th for overall ease of doing business - just one place after Spain! Furthermore, the state of its road infrastructure and constant availability of electricity, is something arguably unequalled in sub-Saharan Africa and shows that President Kagame's pledge to make Rwanda the African version of Singapore is not just an empty promise by a politician, but a work in progress. Its improvement from a low of 2.5/10.0 on the Transparency International Corruption Index in 2006, to 5.0/10.0 today should likewise be commended," he said.