eBusiness Weekly
Tawanda Musarurwa
The world of investment generally believes that high risks yield high returns. But Old Mutual Zimbabwe is turning this on its head, protecting its investments in its high yielding Alternative Investments by acquiring negative control in the companies constituting this portfolio.
According to Old Mutual, the Alternative Investments portfolio compromises products with high levels of both capital and income return at a high level of risk with a long-term focus.
“In general, the assets held by portfolios in this boutique are unlisted and currently, the boutique is mostly exposed to private equity assets,” the diversified investments group says.
“The boutique has capabilities for other alternative investments such as public infrastructure, quantitative products, derivatives and hedge funds.
“Most of the clients in this boutique are large funds with a capability to add some high risk to a small portion of their portfolios, with the objective of improving the overall returns and risk diversity of their portfolios.”
But the group is also cautious about protecting its investments.
Old Mutual Investment Group Zimbabwe managing director and chief investment officer Marjorie Mayida, told analysts recently the group strategically seeks to achieve negative control as well as board representation in firms they invest in under this portfolio.
Negative control is a shareholder or group of shareholders that have greater than a third or a quarter of the votes of a particular class of shares (depending on the articles), so they are able to block significant decisions.
“We are investing in the energy sector, we invested in Kupinga Hydro Energy. We also have investments in agriculture, telecommunications, financial services, light and heavy manufacturing,” she said.
“We normally target 26 percent and above. At least 26 percent gives us negative control, then we also make sure that we have board representation in most of our investments,” she added.
Matiza said that returns for the Alternative Investment portfolio have been on an upward trend.
“The return for the first six months is 20 percent, which we are very happy with, and that return was coming from both new investments and value uplift on the existing investments.”
Old Mutual Zimbabwe has said it will continue to grow this portfolio going forward.
“Our alternative investments portfolio grew due to a combination of new investment disbursements and capital appreciation of existing portfolio companies.
“Alternative investments present an opportunity for growth and we will continue with efforts to grow our portfolio,” said group chairman Johannes Gawaxab.
At the broader group level, Old Mutual Alternative Investments is one of the largest private alternative investment managers in Africa, with over R58 billion ($4,3 billion) under management in infrastructure assets, private equity and impact funding.
In the half year to June 30, 2018 Old Mutual Zimbabwe’s operating profit rose 27 percent to $34 million.
Funds under management for the asset management grew 38 percent to $2,9 billion on growth in net client cash flows and fair value gains on listed equities.
Resultantly, profit before tax for the asset management business surged 84 percent to $6,8 million from $3,7 million during the same period last year.
The group’s total assets grew to $3,4 billion from $3,1 billion during the period under review.
