It is possible to yield good returns and help combat climate change in the process. Climate Fund Managers (CFM) is a joint venture between Sanlam InfraWorks and the Dutch Development Bank FMO. Its debut vehicle – Climate Investor One – invests in climate related projects in emerging markets.
Ultimately, it will serve electricity to 13 million people, avoid 2 million tons of carbon dioxide (the equivalent of half a million cars) and create 10 000 jobs. And it’s already scaled beyond its first target of $530 million.
The Climate Investor One is an example of why there’s never been a better time to be an investor. Sanlam Investments believes new times demand new ways of thinking. The asset manager is all about spotting opportunities where others don’t. It believes that a broadly diversified asset allocation will yield long-term returns and empower investors to play a role in the real economy in South Africa and Africa. Key to this is the role of alternative investing in portfolio construction.
This catalyses higher risk-adjusted returns, portfolio diversification due to low correlation with listed assets, and the ability to deliver financial – and social – returns.
Nersan Naidoo, Chief Executive of Sanlam Investments says, “There’s never been a better time to be an investor. We know it’s bold. We know it goes against the grain. And we know it’s true. The genesis of the ‘there’s never been a better time to be an investor’ idea stems from the incredible technological and human-centric advancements in Africa and globally.
Now is the time for investors to be positive about these opportunities. These go beyond the mainstream. These are opportunities to invest in things that will make a difference. How we grow food, how we drive down the price points of renewable energy, how we create affordable housing, even how we listen to music …”
These give us opportunities to invest with impact. The Global Impact Investing Network 2019 survey pinpoints the major impact investing trend as asset allocation to energy (15%), microfinance (13%), and other financial services (11%). Sanlam Investments has played its part in each of these key areas as well as across the broader impact investment spectrum.
Here are some of its alternatives:
In June 2017, Climate Fund Managers (CFM) announced the first successful close (to new investors) of Climate Investor One (CIO), a new global climate fund with a mandate to invest in clean energy projects in emerging markets. Following a successful two-year fundraising period and four previous closes, CIO has exceeded all expectations and surpassed its original target of $US530 million and reached a final close on Friday of $850 million. CFM is a joint venture between Sanlam InfraWorks and the Dutch Development Bank FMO.
CFM has also recently won the tender to manage around half of the €160 million Dutch Fund for Climate and Development and will use the funding to target water and sanitation sectors in the fight against climate change.
The South African private debt fund, which finances entrepreneurs and businesses to create jobs, supports economic growth and creates better conditions for society’s most vulnerable.
The Affordable Housing Fund, which invests in low-income housing developments to develop safe communities for those disadvantaged by the legacy of Apartheid.
The Hipgnosis (invested in through the Sanlam Real Assets Fund) makes investors money each time their favourite songs play on radio stations around the world.
The Glacier by Sanlam AI Flexible Fund of Funds uses AI to diversify away human manager risk and dynamically alter asset allocation in line with market movements.
Alternatives like these help build the crucial diversification needed for a sustainable strategy in tough times – there’s no denying we’ve been in a lower return environment for longer. They provide alternative sources of return to reward investors for risk. Naidoo says, “We know that when you blend the capabilities that we have – our active, index, and alternative capabilities, the result is a robust portfolio construction, with robust returns.”
How to successfully diversify? According to Naidoo, Sanlam Investments is doing so by:
Deliberately building out the depth and breadth of its capability beyond traditional active management. It has an active manager and index tracking manager, which facilitate cost-effective solutions as part of a diversified portfolio. Costs, whether in SA or globally, are a key consideration and Sanlam Investments runs the market leading index tracking business. Building out its alternative capability through real assets, with a focus on impact investing.
Spotting opportunities takes the right talent to maximize the opportunity in real assets. When you have managers participating in the real economy in private equity, renewable energy and unlisted property, you want managers that have shown significant skill over a long period of time. You also need rigorous governance and risk procedures for due diligence and partnership opportunities. Having these in place empowers Sanlam Investments to seek out opportunities when others don’t.
Naidoo concludes, “We want to be part of the long-term solution in South Africa. To be a key player in solving collective challenges to afford a better life for all people in this country. For us, that means empowering people to retire with dignity, providing access to financial services to underprivileged markets through affordable investment, and continuing to pursue opportunities in the real economy – especially those with a strong impact on society.
We have top-performing funds across our active, multi-management, index tracking and alternative capability that are well suited for our multi-asset strategy. Our expertise and our balance sheet allow us to think in new ways. And to live and breathe our belief that there’s never been a better time to be an investor.”