Michael Spencer, founder of inter-dealer broker Icap, is ploughing tens of millions of dollars into a new hedge fund to profit from frontier markets in Africa and the Middle East amid a rush of money into the region.

IPGL, Mr Spencer’s family investment vehicle, is teaming up with a US financial consultant to put $125m of seed capital into Insparo Asset Management’s first fund, which will launch this month.

The seed investors – which include Exotix, the emerging market broker controlled by IPGL – will receive a stake in Insparo.

The launch is the latest Africa-focused hedge fund created as markets develop across the region and the political situation remains relatively stable. High commodity prices also have underpinned many economies.

Francis Beddington, Insparo co-founder and head of research, said: “There’s an embedded political stability and a lot of it comes from the growth of the middle classes.

“It is growth but this time it is sustainable.”

Mr Beddington and Mohammed Hanif, co-founder and chief investment officer, said the rapid development of financial markets was making it much easier to access Africa and the Persian Gulf.

Mr Hanif has been running a sample $15m portfolio for IPGL for nine months, including investments in Zimbabwe, where he argues that whatever the outcome of the contested election, the dysfunctional economy can hardly worsen.

In the first three months of this year, when many emerging market funds stumbled, the portfolio rose 17 per cent after fees, Insparo said.

Insparo is a big launch among Africa hedge fund area because of its seed investors, with few funds running much more than $100m.

Tutu Agyare, a former board member of UBS’s investment bank, is in the final stages of fundraising for two new hedge funds expected by people involved to pull in $200m-$300m, while others are expanding. The biggest fund focused on the region is London’s Blakeney Management, which runs $1.5bn.

Mr Hanif was previously responsible for emerging market distressed debt and special situations at Bluebay Asset Management, the London emerging market group, while Mr Beddington was head of emerging Europe, Africa and Middle Eastern research at Standard Bank.

The fund will be free to invest across listed shares, private equity, corporate and government bonds and bank loans, including issues in local currencies.

It expects to have about 35-40 per cent of its holdings in illiquid, or hard to sell, investments. It will not invest in South Africa, which Mr Beddington said was too correlated with mainstream emerging economies.