Westbrooke now South Africa’s largest Section 12J manager
Westbrooke Alternative Asset Management is now South Africa's largest Section 12J manager, looking after almost half of the capital invested in S12J funds in the country. Westbrooke has raised approximately R885m in the last two years and according to statistics released by the South African Venture Capital Association, the size of the market is approximately R1.8 billion. There are over 60 registered S12J companies in SA.
Dino Zuccollo, fund manager at Westbrooke Alternative Asset Management says, "On account of stunted economic growth and high levels of volatility in the local and international financial markets, traditional investment strategies are not able to offer a complete investment solution. Consequently, investors have found alternative solutions such as S12J to be increasingly attractive."
Jonti Osher, fund manager at Westbrooke Alternative Asset Management adds, "S12J is an investment tax incentive which was introduced by the South African Revenue Services under Section 12J of the Income Tax Act in 2009. It wasn't until 2014, however, when SARS made a number of favourable amendments to the Section 12J legislation, that the industry began to gain traction amongst investment circles. Whilst S12J continues to grow, there is sunset clause that takes effect in 2021, at which point Treasury will review the legislation, which may or may not be extended."
The intention of S12J is to boost the South African economy by encouraging investment into a range of private companies which meet defined criteria. The incentive gives individuals, companies and trusts the ability to write off 100% of their investment against their taxable income in the year they invest. Therefore, investors can benefit from up to 45% immediate tax relief, thereby reducing the cost of the investment, providing downside protection and enhancing overall returns.
Westbrooke Alternative Asset Management seeks to generate investment returns which are uncorrelated to traditional investment markets. Investments are designed to deliver a simple, investable outcome, predictable, sustainable, risk-managed returns in an increasingly complex fiduciary and legislative environment. Westbrooke Alternative Asset Management's shareholders and executives are significantly financially invested alongside fellow investors.
Westbrooke Alternative Asset Management focuses on capital preservation, the generation of attractive risk-adjusted returns, (with target after-tax IRRs ranging between 16% and 18% per annum as well as an annual yield on certain investment offerings) and a clearly defined exit mechanism, as its core investment principles. It currently accepts R1 million as the minimum investment amount.
Available Westbrooke S12J investment strategies
There are three different investment options.
- Westbrooke Alternative Rental Income Assets (ARIA), an investment strategy which seeks to invest in a portfolio of asset-backed rental businesses with contractual revenue streams across a diverse base of South African corporate customers;
- Westbrooke Student Accommodation (STAC), an investment strategy whichaims to invest in a portfolio of property-backed student accommodation operations situated near higher learning institutions across South Africa; and
- Westbrooke Alto, an investment strategy which seeks to promote tourism by investing in a portfolio of decentralised, property-backed, apartment style hotel operations situated in South Africa's premier tourist destination; Cape Town. Guests will book the hotel properties through online booking reservation systems such as Airbnb.
The next round of funding for investment in Westbrooke's S12J funds closes on 23 February 2018.
Osher concludes, "Westbrooke Alternative Asset Management's strong working relationship with SARS and leading S12J tax advisors has allowed us to deploy a significant amount of private growth capital into SMEs across South Africa, thereby supporting the business development mandate of Section 12J."