Sterling Capital to launch Sh2 billion hedge fund

Investment bank Sterling Capital will this year launch a Sh2 billion hedge fund that will raise money from institutions and high-net-worth individuals to invest in a wide range of assets and strategies.

These include the proposed introduction of derivatives on the Nairobi Securities Exchange (NSE) #ticker:NSE that will allow the fund to make bets on movements of prices of assets such as stocks.

Sterling’s chief executive David Ngaine said the fund will have greater flexibility compared to other asset managers that typically focus on medium to long-term investments in mainstream stocks and bonds.

“We are in the final stages of putting this together and are excited because there are a lot of interesting investment opportunities out there,” Mr Ngaine said in a statement.

“We have a couple of ideas. One sector is the small and medium-sized enterprises (SME) sector that is in dire need of funding solutions locally. We believe there may be ways to provide capital to SME’s that still protects our investors in the hedge fund.”

Each investor is expected to inject a minimum of Sh20 million in the fund, limiting the offer to wealthy clients who are deemed to be more cognisant of risks in the capital markets.

The funds are to be raised privately from select prospective investors and the process does not require approval from the Capital Markets Authority (CMA).

Sterling did not say whether it will receive seed capital from its minority shareholder Kuramo Capital, a private equity (PE) firm which is backing the launch of the hedge fund.

“This is a game-changer. Both local and foreign investors need more investment options in this part of the world and we can provide that through Sterling Capital,” Kuramo’s chief executive Shaka Kariuki said in a statement.

Sterling said it will benefit from Kuramo’s wealth of expertise and experience in developing alternative asset exposure to investors.

The PE firm has access to large pools of foreign capital and Sterling is expected to leverage those contacts in raising the funds.

Sterling says it expects its proprietary strategies in the hedge fund to generate relatively higher returns for investors.