SA's ultra-high net worth individuals and families are increasingly looking to equity-like returns with lower risk as a means to mitigate against volatile public markets.
Westbrooke Alternative Asset Management and Rand Merchant Bank (RMB) say they are witnessing SA investors with deep pockets shift billions to alternative investments “for diversification and risk-adjusted returns in a volatile macroeconomic environment”.
Westbrooke’s new UK fund in partnership with RMB has an arsenal of about £155m (nearly R3.8bn) at its disposal to plough hybrid capital transactions across the UK lower-middle market, the two companies said.
Dino Zuccollo, head of investor solutions at Westbrooke, said the popularity of the offering reflects a broader trend among SA ultra-high net worth individuals and families who are seeking alternatives that offer diversification.
“The traditional 60/40 (equities and bonds) portfolio allocation is simply not fit for purpose any more,” said Zuccollo.
“The correlation between stocks and bonds is strongly positive when global inflation exceeds around 2.5% per annum which is where we are today. This means that portfolios are increasingly moving in the same direction and are not protected like they used to be.”
Zuccollo said the shift in the market comes as SA investors look to turn a new page from years of market volatility driven by political uncertainty, among others.
“It isn’t portfolio theory alone which has driven the rapid recent adoption of alternatives,” Zuccollo said.
“South Africans have traditionally lagged in alternative investments compared to international markets, but we’re seeing noticeably higher uptake.”
Rob Leon, co-head of RMB’s investment banking division, said the fund remains open for additional investment through a second close later in the year.
“Westbrooke’s expertise in the UK lower-middle market, proven track record and innovative approach make them an ideal partner for RMB, while allowing Westbrooke to continue to support UK businesses with flexible capital solutions,” Leon said.
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