In developed markets as much as 20% of investments sits in some kind of alternative investment portfolio, but that’s not a trend generally reflected in South African portfolios. Private equity investments can make up a part of this and are certainly worth considering as a part of a broader portfolio. Additionally, Private Equity returns have historically been stronger than public markets, by a factor of several percentage points in developed and emerging markets.
Old Mutual Alternative Investments has recently appointed a new head of International Private Equity, Nabeel Laher. In our Q&A, Mr Laher explains the reasons investors ought to consider International Private Equity and explains how this could contribute to diversification in portfolios, which is critical in turbulent economic or political environments. Mr Laher said technical regulation changes have meant that it is now easier for South African investors to get exposure to private equity.
You’ve just been appointed as Head of International Private Equity at Old Mutual Alternative Investments - please tell us a little about the main aspects of your role.
At Old Mutual International Private Equity we allocate capital to global private equity managers where they invest in businesses around the world. This business started in 2007 which made its first investment to Carlyle’s Buyout Fund and since then the business has evolved quite quickly. We’ve rolled out our first and second global programme, which allocated capital to North America, Asia, Europe, Latin America and Australia, and we’ve also added an Africa fund to our arsenal as well, which focuses on growth capital in Africa with a young population, urbanisation and the increased democracy in Africa being key themes and drivers of that particular growth.
Tell us what’s new on the horizon.
Within my role, I’m looking after over 800 million dollars of commitments that investors have entrusted with us and so I need to look after that capital. We have to maintain, build and increase relationships with investors and with fund managers globally. But most importantly, it’s about making the right investment decisions – that’s what my role boils down to.
Should private investors consider getting involved in alternative investments and International Private Equity specifically?
Yes, and I’ll give you two points why I say that. The first is diversification. Any sensible, long-term financial plan has a diversified asset base to it, so one should be allocated across different assets, geographies, currencies, to mitigate against political cycles and economic cycles globally. I think there’s empirical and scientific evidence to back that statement up and in the long-term you should be good if you have a diversified portfolio.
The second point is performance. Over the long term private equity has outperformed the public markets globally. So if you look at Europe, the USA and Asia, over a ten year horizon if you had to invest capital ten years ago into private equity and into the public market equivalent, you’d outperform by between 3 and 9 percent in US dollars over that period, which is astounding and I think it’s a great opportunity for investors.
What sort of assets make up an alternative investment portfolio?
At Old Mutual Alternative Investments, which is the largest private alternative investment manager in Africa, we have significant experience in Private Equity (both local and international), Infrastructure Investments and have funds in the space. What has happened in South Africa is that we’ve had a change in regulation 28 which allows pension funds to invest in private equity and alternative assets, which is a landmark change. I think the industry has been a bit slow in South Africa compared against global trends. In the US, 10 to 15 or even 20 percent of assets are alternatives, whereas in South Africa it’s probably under 2 percent. I think that trend will evolve over time and there’s great opportunity there.
Source: Cambridge Associates
Old Mutual Alternative Investments is a licensed financial services provider.