Alternative returns knock JSE
INVESTMENT: 12J AND STRUCTURED FINANCE PRODUCTS OFFER INTERNAL RATES OF UP TO 25%
Swarm of firms now pouring money into SMEs.
Given the flaccid returns from JSE stocks over the last decade, it’s little wonder that yield-hungry investors are scouting an incredibly rich landscape of alternative investments yielding 20% or more a year.
There were some astonishing products on display at the Alternative Investment Conference last week. They included private equity, hedge funds, cryptos, structured products, venture capital and 12J investment funds.
One of the problems with traditional private equity – investing in the non-listed space – is lack of liquidity. Investors only get a return once the investment is exited after five or seven years.
Sasfin’s new venture Scott Street One has solved this by creating a secondary market for pre-existing private equity investments and is currently raising R750 million with a target return of more than 15%.
Developments like this could unlock huge amounts of capital for otherwise neglected though promising companies.
There has been some criticism of 12J investment funds for delivering below-par returns, but that’s not the case for Infinity Anchor Fund, whose Infinity Performance Fund was the top performing fund in its class for the last year with an annual return of 15%.
“We invest in asset rental businesses that have asset backing and regular rentals. The risk is low and this allows a clear exit strategy,” said Gaurav Nair, the company’s CEO.
Reka Borole and Ross Tasker of Khulisa Investment Partners pointed to the yield-rich opportunities lurking in 12J and structured finance products offering internal rates of return of up to 25%.
It is returns like these that that are capturing the attention of serious
investors around the world.
“SMEs [small and mediumenterprises] in SA lag those in Europe due to lack of funding, and the effect is to lower employment and contribution to GDP,” said Tasker. “With strategic advice, the economy can have an entirely different trajectory.”
There’s a swarm of companies now pouring money into SMEs, perhaps the most neglected segment of the SA economy.
“SMEs are the engine room of the economy and generate the most GDP, but only thrive when investors make liquidity available,” said Stephen Greenwood of Valloop Management.
Valloop has solved the SME funding drought by providing a single portal for the types of debt typically required to grow a business: asset finance, working capital, private equity and vanilla debt.
Traditional sources of funding can cripple an SME with interest costs. They may pay 10% on private debt, 7.5% on asset finance, and 6.5% on real estate finance. Valloop starts generating a return on its various financing products as soon as the deal is concluded. This means it earns fi xed annual income of about 3.5% and annual capital growth on about 16% – a total annual return of close to 20%.