Funding alternatives

respect many people in the Old Mutual Investment

Group (OMIG). I think the group is well led by Hywel George. After half an hour with this Welsh wizard, anybody would drink the Kool-aid.

But does the group stand out among the large managers? Not yet. And

George has a lot of hard work ahead if he plans to change that, especially now that he reports into the Wealth cluster, which is all about distribution — not necessarily of products created in-house by OMIG. The competing demands of product pushing and investment excellence will clash: is it in the business of quality restaurant food or cheap and cheerful canteen food?

Old Mutual Alternative Investments is another story. Boss Paul Boynton doesn’t have George’s silver-tongued talents; he’s more the meat and potatoes type. But

Old Mutual’s scale, which has a number of disadvantages in the listed investment space, is an advantage in alternatives. Ideas that don’t bring immediate returns can be incubated by the life office, as it has a very long-term liability profile.

The firm is part of the private sector — though you wouldn’t believe that if you trawled the remoter corners of its corporate office in Cape Town.

Its record is certainly superior to that of state institutions such as the Public Investment Corp, which has made some investments that would not have passed a half-decent private sector investment committee.

Through its joint venture with Macquarie, Old Mutual built up a network for its infrastructure funds across Africa. It has been one of the big supporters of renewable energy, and has a capacity of 2,000 MW. Its portfolio is almost equally split between wind and solar. Because of pre-agreed prices, it has been quite straightforward to package a commercially viable renewables portfolio for

Ithird-party clients.

Old Mutual remains one of the big players in private equity.

It tried to list glass maker Consol, but couldn’t get the right price. It will be busy this year looking for a home for Primedia, which has been in the private equity straitjacket for far too long.

The flagship business in Boynton’s Fund IV so far is Tiger Wheel & Tyre, but the fund has intriguingly invested in Old Mutual competitor 10X. This is a niche retirement-fund provider focused on a cheap and simple solution, without Old Mutual’s huge overheads. The fund has also bought into medical equipment importer Medhold, which holds the licence to GE Healthcare’s wide range.

Looking to the future

But Old Mutual Alternative Investments’ most valuable contribution to our future is in its impact funds.

Old Mutual sometimes seems like a sovereign state; it is so large it has more financial heft than many African countries. It is building 80,000 houses, many in Savanna City in Sedibeng, south of Johannesburg, as well as schools to cater for 50,000 learners. It backs operators such as Meridian, which has 14 schools, and Royal Schools, which is starting two schools in Alberton.

These are not feel-good corporate social investment projects, but investors will need to be very patient. Impact funds are only valued a couple of times a year, and there is no secondary market in which to cash the investments.

But if we ever bring back prescribed assets, then there would be a case for channelling them towards these housing and school funds.

I certainly would never recommend that prescription is brought back to force pension funds to invest in Eskom and SAA debt. It’s vital after so much waste that the right things get done.

Old Mutual sometimes seems like a sovereign state; it is so large it has more financial heft than many African countries