broader shift away from the conventional

High-net-worth investors in SA are increasingly moving away from traditional investments in favour of alternatives, reflecting a global trend in wealth management. That’s the opinion of Dino Zuccollo, head of Investor Solutions at Westbrooke Alternative Asset Management.

The firm, which recently reached R4bn milestone in its flagship offshore fund, provides private loans to mid-sized UK businesses and real estate sponsors, rather than investing in traditional equities or bonds.

Increased uptake of alternatives signals a broader shift in how high-net-worth individuals in SA are moving away from the conventional 60/40 investment model of 60% equities, 40% bonds toward alternative asset classed, says Zuccollo.

“This shift represents more than just portfolio tweaking – it’s a wholesome abandonment of the conventional wisdom that has dominated wealth management for decades,” he says.

Many South African investors have successfully moved capital offshore but struggle with optimal portfolio allocation. UK six-month deposit accounts offer about 3.3% per annum which, after taxation, delivers about 1.8% for South Africans in the 45% tax bracket. UK inflation now sits at 3.8%.

Westbrooke’s Yield Plus secured private debt fund generated 6.2% post-tax over the corresponding period, demonstrating the potential performance differential between traditional cash investments and alternative strategies in similar markets.

Market concentration has increased significantly across major indices. The JSE Top 40 shows heightened concentration among fewer companies, while in the US the 10 largest companies now represent 33% of the S&P 500’s market value. At the same time, the stock/bond correlation has turned sharply positive owing to persistently high inflation. The impact is bonds are no longer able to act as the “shock absorbers” of these increasingly concentrated equity portfolios.

A client survey conducted by Westbrooke identifies diversification as the primary motivation for choosing alternative investments, ahead of higher returns. Industry observers note an emerging portfolio allocation model of 40% listed equities, 30% bonds and 30% alternatives, representing a structural shift from traditional investment approaches.

Westbrooke focuses on loans under £20m (about R480m), targeting a market segment where UK banks struggle to be competitive due to the high cost of regulation. “We aim to address many of the limitations that have prevented South African investors from participating in global alternative investment funds, which typically have high minimum investment requirements or geographic restrictions, says Zuccollo.

To learn more about the strategies mentioned in this article, please click on the links below:

Westbrooke Yield Plus

Westbrooke Dynamic Opportunities UK

Source: Business Day Print Media