2 years ago

Blue Chip Issue 81

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Blue Chip is a quarterly journal for the financial planning industry and is the official publication of the Financial Planning Institute of Southern Africa NPC (FPI), effective from the January 2020 edition. Blue Chip publishes contributions from FPI and other leading industry figures, covering all aspects of the financial planning industry. Blue Chip takes this opportunity to wish the FPI a happy 40th anniversary. Congratulations!


FOREX RESPONSIBLE CONTROL INVESTMENT Investing with purpose: going beyond financial returns An integrated approach to any investing is critical, if you are to invest responsibly, explains Mike Adsetts, deputy chief investment officer at Momentum Investments. “What that means is that we disaggregate environmental, social and governance factors, and we think about every single type of investment we make from multiple perspectives. “You need to be mindful of what the implications are for employees if you decommission a fire station or close down a These portfolios are not only setting the bar, but they are beating it and exceeding even our own expectations. coal mine, for example. What are the alternative career paths in the new renewable energy place that you can put them into? That’s an example of what we consider from the environmental and social sides.” Broadly, Momentum Investments’ impact investment portfolios focus on three areas – alternative energy, social infrastructure and diversified infrastructure. “Sometimes this means investing in the unlisted space, which can be disconcerting to more traditional investors, but we believe there is real value to be found there.” Importantly for Adsetts, these investments are closely linked to very specific United Nations sustainable development goals, to which Momentum Investments subscribes. “This is a level of commitment we think is unique – not only in how we’re investing, but in how we’re matching these investments specifically with common, international goals for a better, more inclusive world.” In practice: responsible investing, with great returns Leading the charge on this is Motlatsi Mutlanyane, head of alternative investments at Momentum Investments. Mutlanyane has the complex responsibility of identifying these purposeful investments, while being sure they are not only right from a responsibility perspective, but that they will generate good returns on investors’ money. “Finding purposeful investments may not be as hard as it used to be but finding ones that will also generate a strong return becomes more complex,” explains Mutlanyane. “This kind of strategic, goal-orientated investing means that our investors can hold us accountable at the end of the day. I believe it makes for better decision-making, and better-quality conversations with our investors.” So far, Momentum Investments has constructed four local portfolios, which are all generating strong returns, despite the Covid-19 pandemic that has negatively affected many other investments: • Momentum Alternative Energy Fund. The portfolio is predominantly invested in unlisted equity instruments but can also hold unlisted debt instruments of sustainable energy companies and projects. Equity positions can only be minority positions. Finance is provided to alternative energy initiatives, renewable energy and energy-efficient projects in South Africa. • Momentum Diversified Infrastructure Fund. The portfolio is invested in unlisted debt-like and equity instruments. It is predominantly invested in South African as well as Southern African Development Community opportunities with positive social and environmental delivery objectives. Underlying assets have stable and predictable cash flows as well as strong environmental, social and governance features. • Momentum Social Infrastructure Fund. The portfolio is invested in debt and equity instruments related to social infrastructure. Social infrastructure refers to student accommodation, quality affordable housing and non-urban shopping centres. • Momentum Impact Fund. This is a multi-asset-class portfolio with an impact focus. The portfolio gains its exposure through the Momentum Alternative Energy Fund, the Momentum Social Infrastructure Fund and the Momentum Diversified Infrastructure Fund. Like the underlying portfolios, the portfolio targets underlying assets that have a positive societal impact through addressing social and environmental challenges. “These portfolios are not only setting the bar, but they are beating it and exceeding even our own expectations,” explains Mutlanyane. “The lack of infrastructure development in South Africa specifically – due to long-standing inequality – is in dire need of investment. Investing in such economic infrastructure certainly makes sense, because we’re able to see significant ripple effects, their job creation at scale. That’s good for our investors, and good for South Africans in areas where these developments are. 36

Finding purposeful investments may not be as hard as it used to be. “Government seems to want to work with the private sector to fund this kind of development. They’ve identified about 276 projects that they’re trying to get to a stage where they are bankable, and can be converted into projects that the private sector would be able to invest in. We’re already involved in this – and we’re actually hoping that more of our competitors will also get involved, so we can leverage this for everyone.” The role of the individual investor While the positioning of many of these investments does come across as institutional in nature, individual investors may believe that infrastructure investments are of less concern to them. However, this is not the case, as there is a myriad of ways in which individual investors can influence and gain exposure to these types of investments. Below are three: Firstly, it is important to raise the profile and intent with responsible investments. As advocacy grows, the extent of integration and availability of responsible-based investments will grow. Secondly, individuals can exercise choice in the case of retirement funds with member choice and also engage with trustees to bring these issues on the agenda as well as influence which investments the principal officers and trustees of retirement funds choose. Thirdly, there is a wealth of investment types available that can have exposure to less liquid investments, which include preservation funds, endowment policies and retirement annuities – areas where retail investors can exercise their own discretion. As the trend and demand for responsible investments grow and expand, the availability of the types of portfolios that can be invested in will expand. This is something that Momentum Investments is excited by and an area in which the company will actively expand into as investment managers. Motlatsi Mutlanyane, Head of Alternative Investments, Momentum Investments Momentum Investments is part of Momentum Metropolitan Life Limited, an authorised financial services and registered credit provider (FSP 6406). 37

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