Enko Hedge Fund Sees Africa Risks Rising After Dollar-Linked Gains
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Enko Partners, the Africa-focused hedge fund, cautioned investors about rising risks across the continent in 2026 following a banner year fueled by dollar appreciation against local currencies. The Mauritius-based firm delivered 28.7% returns in 2025 through its flagship Africa Debt Fund, beating emerging market peers as the dollar's strength amplified gains on local debt holdings. Enko now flags currency volatility and debt restructuring challenges as key threats after many African nations saw improved access to dollar funding in 2025.
The fund benefited from dollar-linked positions in local currency bonds and loans, where depreciation boosted dollar returns even as local yields compressed. Enko's strategy targets high-conviction debt across sub-Saharan Africa, including sovereigns, corporates, and banks. Portfolio manager Nathan Clegg noted that 2025's dollar rally—reaching multi-decade highs against currencies like the naira and rand—created "asymmetric upside" but left local borrowers more vulnerable to reversal.
Africa's debt landscape shifted in 2025 with successful Eurobond issuances and bilateral deals easing immediate liquidity pressures for countries like Nigeria, Egypt, and Ivory Coast. Enko participated selectively in these markets while maintaining exposure to shorter-duration instruments. Clegg highlighted that while default risks receded, the cost of dollar funding remains elevated, with spreads widening on longer maturities.
Currency pressures pose the largest near-term risk, according to Enko, as central banks face reserve depletion and inflation pass-through from imported goods. The fund expects selective volatility in Nigeria, South Africa, and Egypt, where policy tightening collides with slowing growth. Debt sustainability metrics have improved for some issuers but remain fragile amid commodity price swings and geopolitical tensions.
For investors, Enko recommends positioning for "dollar normalization" scenarios where local currencies stabilize, potentially compressing yields further but introducing volatility. The firm maintains overweight allocations to Nigeria and Egypt sovereigns while trimming frontier exposure. Clegg emphasized that 2026 returns will hinge on navigating policy pivots rather than chasing yield in a maturing African debt cycle.
