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31 May 2024
It’s time to reframe your thinking about alternative investments BY SANDY WELCH Editor MoneyMarketing
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estbrooke Alternative Asset Management has had a good start to the year, says Dino Zuccollo, Investor Solutions Head. “It’s incredible to see how alternative assets are becoming increasingly mainstream in South Africa and how the wider investment market is beginning to recognise the need for the inclusion of these assets in their portfolios.” He says the change in attitude was apparent at the recent Alternatives Investments Forum 2024, where it was interesting to see how the dialogue had changed compared to a few years ago. “Less than five years ago, when I sat with clients, a lot of this was new and foreign to them. Suddenly, it’s becoming accepted.” He says that the closing panel was indicative of how things have changed. “Representatives from the Motor Industries Retirement Funds, the Eskom Pension Fund and others were all talking about the potential inclusion of alternative assets in their portfolios. They don’t necessarily see alternative assets as an industry on its own, but rather as a diversifier within their existing model portfolio allocations. It was the first time seeing those types of industries having that kind of understanding and showing interest. I think it speaks to the increase in understanding and adoption of the asset class, that it's becoming more mainstream.”
What are the major trends in alternatives? According to Zuccollo, private credit was definitely the main theme of this year’s MoneyMarket_ Africa Bond UCITS.pdf 4 2024/04/23 15:46:54
conference. “I spoke on it, Goldman Sachs spoke on it, there were at least two panel discussions on the asset class – so it’s definitely where allocators are seeing the best risk adjusted returns at the moment. This is in line with what we're seeing in the market globally," says Zuccollo. “At Westbrooke, we focus on four things: private debt, hybrid capital, real estate and private equity. Our experience over the course of the last 24 months is that the private debt pillars of our business have really taken off.” He explains that the focus of Westbrooke is to deliver clients attractive, compounding riskadjusted returns (i.e. trying to achieve the best units of return for clients per unit of risk taking) and capital preservation. Prior to the conference, Zuccollo put out a survey to their investor base with a few simple questions, the intention being to get an understanding of their thoughts on private debt. “We received a lot of responses that I thought were reflective. We asked clients how many of them allocate to private debt. 70% said yes, only 40% said no. The ones that said no, we asked why. They cited predominantly lack of understanding as the reason, which is interesting to me. So it’s education that needs to happen.”
things and functions in specific niches of the offshore and local markets where there is an element of asymmetry, is more difficult.” “For me, alternatives are broadly defined as anything that's not listed, liquid and therefore accessed through the traditional mechanisms,” he explains. “As an example, clients buy bonds all the time – private credit is simply the unlisted, private version of that, and in my opinion it is not necessarily riskier. There are different risks, which are generally centred around liquidity and the skill and integrity of your investment manager.
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Dino Zuccollo
How do you define alternatives anyway? It's very easy to explain a balanced equity fund to clients, says Zuccollo. “Investors are used to interacting with these types of investment products. To go to a client and explain to them what a private credit fund is, that it does clever
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