Making alternatives more accessible

By: Sandy Welch, Acting Editor, MoneyMarketing

Westbrooke Alternative Asset Management is on a mission – to provide access to the global world of alternative investment funds to South African clients. These investors may not all live in South Africa any longer, but they are connected to the country in some way. “We’re focused on what we call South African connected capital,” says Dino Zuccollo, Head of Product Development and Distribution.

Westbrooke has a 20-year track record, having been started in 2004. “When it was first founded, the aim of Westbrooke was to work in private equity on behalf of the balance sheets of our founders and shareholders,” says Zuccollo, “and that business has been extremely successful. We’ve bought and sold north of 30 different companies around South Africa at an annualised return in excess of 40% per annum. Some of the brands that we’ve built are The Tapestry Group, which we sold to the Foschini Group two years ago, which includes Coricraft, Dial-A-Bed, Volpes, Biggie Best, Mattress Factory, and a variety of others. We also own a business called The Pool Team, which anyone with a swimming pool will know well.”

In 2012, things shifted a bit for Westbrooke when it started an alternative asset management business. The opportunity arose because the challenge for many wealth advisors is how to access alternatives because South Africa’s LISP platforms are all designed for listed, liquid assets, Zuccollo says, and you can’t generally hold alternatives as easily. With the offshore platforms, there is a little bit more flexibility. “For example, our flagship private debt fund in the UK is available on more than 30 platforms. Glacier International is one that’s been useful for us, as is Credo Capital, and more than 30 others.

“The majority of our high-net-worth clients are heavily weighted offshore,” explains Zuccollo. “The average high-net-worth individual that I see is probably invested about 80/20 – offshore 80% and 20% locally, that’s with the exception of Reg 28 money, which is forced to be more heavily invested in South Africa.”

Accessing alternatives is easier than you think

A common misconception is that alternatives are difficult to access. “I think we’re slowly changing that paradigm,” says Zuccollo. “South Africans are always a bit behind the global trend, where most client portfolios are 20%-30% allocated to alternatives on average. In SA, we are closer to 0%-10%, in my opinion.”

Zuccollo continues, “The big thing for wealth advisers to consider is how they want to allocate. Do they want to use asset swap capacity and invest in rands but then go into one of our offshore products? Or are they able to assist their clients in externalising their wealth genuinely and then investing in hard currency offshore? We see a mix of both, and one of the big missions from our perspective is to work with wealth managers to make alternatives more accessible to South African clients. That’s big on our agenda for this year.”

Alternatives can be more complex, however, and as a concept, Zuccollo says it makes sense for any client who’s looking to access the world of alternatives to do it through their wealth manager. “We often say to clients, ‘We’re an asset manager, not a wealth manager, we’re not experts in how to asset allocate. But contact your wealth manager and challenge them. Ask them if they incorporate alternatives into their portfolios. If they don’t, ask them why and get them to reach out to us, because we are always willing to have a conversation with any wealth manager looking to gain diversification as a benefit in their portfolio.’

“That’s exactly how we would work with a wealth manager,” Zuccollo explains. “They would then contact us with any queries from clients and we would be able to advise. I talk often about pushes and pulls. We pull, so we go to wealth managers and ask them to look at alternatives. But more recently, there’s been much stronger pushes, which is when clients say, ‘I’ve been reading about the global experience. Alternatives are where the trend is now.’” In a nutshell, Zuccollo says that Westbrooke is in the business of long-term relationships. “We see wealth managers as one of our key partners for growth in a mutually beneficial manner, and we’re looking to actively grow the depths and rates of those relationships.”