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Futuregrowth Infrastructure & Development Bond Fund hits R10bn

SINCE launching in 1995, the total composite assets of the Futuregrowth Infrastructure & Development Bond Fund (IBF) have grown to over R10bn.

The IBF facilitates infrastructural, social, environmental, and economic developmental investments in southern Africa.  Over 15 years, the fund on average has outperformed the JSE All Bond Index (the industry standard benchmark for bond funds) by more than 2%.

The fund invests in both listed and unlisted assets: State-owned enterprises (SOEs) raise some of their funding in the form of listed bonds on the JSE, while more complex project specific funding is usually funded in the unlisted space by the banks as well as specialist asset managers where a higher degree of analysis has to be applied in order to assess and quantify the risks involved.

Government through its National Infrastructure Plan has created ambitious targets for Infrastructure spend over the next few decades which needs private sector involvement.  

Portfolio Manager Jason Lightfoot said that Government recognised it could not fund infrastructure initiatives entirely by itself and that the idea was to bring the private sector on board. “The challenge is that you have to make the offering attractive to the private sector both through risk mitigation and adequate compensation for the risk taken,” said Lightfoot.

According to PricewaterhouseCooper, annual infrastructure spend in sub-Saharan Africa is expected to reach US$180-billion by 2025.  Infrastructure spend is an important driver of economic development and growth as well as job creation especially for emerging economies which benefit the most and in a relatively short space of time.

The IBF has played an integral part in infrastructure funding since its launch by providing pension funds with access to a sustainable vehicle to fund these initiatives in the infrastructure and development sectors such as power, transport-corridors, healthcare, transport, education, and housing.

The success of the partnership with the Housing Investment Partners (HiP) and the National Housing Finance Corporation (NHFC) to provide loans to low- to mid-income earners is a perfect fit for the fund’s mandate.

“This sector of the market typically cannot afford the monthly straight amortising installments of traditional banking products nor make the required upfront deposit,” said Lightfoot. “The collaboration addresses the housing backlog and also creates real, tangible assets.”

Lightfoot points out that home ownership is a significant driver of prosperity and provides a solid framework within which to address the socio-economic issues in the country. The benefits to Futuregrowth’s clients are clear: good risk adjusted returns with sound credit enhancement.

The Trust for Urban Housing Finance (TUHF) is another example of how the fund has assisted emerging entrepreneurs with access to finance to purchase and refurbish derelict properties for the rental market.  This on-the-ground initiative has enabled them to own a sustainable business, which in turn contributes to the social upliftment, restoration and development of communities and individuals.

The fund has also played a significant role in South Africa’s Renewable Energy Independent Power Producer Programme (REIPPPP) through the funding that it has provided to various independent power producers.  This is an important and successful governmental initiative to source renewable sources of energy and a perfect example of how private public partnerships should work.

The above examples illustrate what can be achieved in this space and that pension funds can earn long-term, stable risk-adjusted outperformance while delivering returns that have tangible social impact.

DISCLAIMER: FAIS: Futuregrowth Asset Management (Pty) Ltd (“Futuregrowth”) is a licensed discretionary financial services provider, FSP 520, approved by the Registrar of the Financial Services Board to provide intermediary services and advice in terms of the Financial Advisory and Intermediary Services Act 37 of 2002. Investment portfolios are market linked. Pooled products are either policy based or unitised in collective investment schemes. Investor’s rights and obligations are set out in the relevant investor agreements and/or mandates. Market fluctuations and changes in exchange rates may have an impact on fund values, prices and income and these are therefore not guaranteed. Past performance is not necessarily a guide to future performance. Futuregrowth has comprehensive crime and professional indemnity insurance in place. Performance figures are sourced from Futuregrowth and I-Net Bridge (Pty) Ltd. Personal trading by staff is restricted to ensure that there is no conflict of interest. All employees of Futuregrowth are remunerated with salaries and standard short and long-term incentives. No commission or incentives are paid by Futuregrowth to any persons. All inter-group transactions are done on an arm’s length basis. GIPS: Futuregrowth Asset Management (Pty) Limited (“Futuregrowth), a subsidiary of Old Mutual Investment Group Holdings (Pty) Limited is a specialist investment company which manages the full range of interest bearing and developmental investments in an ethical and sustainable way. Futuregrowth claims compliance with the Global Investment Performance Standards (GIPS®). Contact Futuregrowth at +27 21 659 5300 to obtain a list of composite descriptions and/or a presentation that complies with the GIPS® standards. The investment returns reflected are supplemental information as they are not calendar year returns and are gross-of-fees. Currency: ZAR 

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