By Majaha Nkonyane | 2017-09-13
ALTERNATIVE investments are important, especially in a developing economy and can also help in shaping the industry. This is according to Head of Investor Relations at Metier Investment and Advisory Services J-P Fourie. “Alternative investments present an attractive risk adjusted returns which are relative to listed equities. it is also through alternative investment that there is portfolio diversification which improves risk and volatility characteristics of a pension fund. Investors also get exposure to smaller and medium sized companies,” he said. Through alternative, investments are underpinned by the private equity fund manager’s ability to influence company management and track record of value enhancement through strategy implementation. “There is corporate management and enhanced corporate governance; this can also be a source of finance and patient capital and alignment of incentives and risk. There is also no risk of misalignment returns with value created for investors into funds as private equity managers are only rewarded after investors realise their return,” he said. Fourie said investors should also look into private equity considerations or pension fund and highlighted the important aspects to consider with each. These include looking for the best ways to invest member funds, asset allocation, manager selection and monitoring commitments. “When looking into asset allocation, investors should ask the questions, does the private equity fit into the strategy and is there access to impactful deals,” he said. “When choosing managers, investors should look into style, growth, and capital, entrepreneur partnering and strong focus on transformation. There is also an issue of mandate compliance with a detailed reporting and compliance. Investors also need to look into historic performance and risks,” he said. Private equity in an economy is a force which drives good corporate governance and is valued for its strategic guidance. PE also supports expansion plans and innovative, it is also a driver of local broad based empowerment and has notable employment gains during the private equity partnership.
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