Cape Town, July 2020 — When it comes to transformation in South African business, doing things the way they’ve always been done simply isn’t tenable. New approaches are needed. That’s what makes Thuso, a ground-breaking incubation platform in the South African asset management space, so exciting.
And with South Africa’s already strained economic and social environment facing unprecedented pressure due to the Covid-19 pandemic, there’s never been a greater need for an urgent rebalance of the South African economy and the asset management industry in particular.
Thuso is out to fundamentally transform and level the playing field in the South African private market’s asset management arena. The incubation platform is a truly ground-breaking initiative that will have a lasting impact on both industry and the economy at large.
A seasoned builder of businesses and investment capacity
A partnership between Ke Nako Capital and its black staff, Thuso Incubation Partners was founded on the principals of:
• True broad-based transformation encompassing:
- Demographic and gender diversity
- Skills Transfer and mentoring
- Cultivating and supporting independent management owned teams
• Social Responsibility through:
- Community based projects
“Having successfully positioned Ke Nako as an independent ‘bridge’ between investors and the single strategy private markets managers, we began to think about how we could have a positive impact on the transformative elements of private markets in South Africa,” says Carlo Dickson, Founder and Chief Investment Officer of Thuso. “ soon realised that as a starting point one of the most meaningful and lasting impacts I could achieve was empowering my own team. Forming Thuso was the most logical evolution that I, as an investment professional, needed to take in order to play my part in effecting a positive and lasting change within the industry. At the same time, I truly believe that Thuso is the ultimate enabler in supporting the aspirations of our incredible talent pool of black professional private market money managers”.
The people and intellectual property embodied within Thuso have a 16 year demonstrable track record of incubation,portfolio construction, strategy/capacity creation in South Africa. The track record transcends experience, having incubated teams in the direct property (unlisted), credit specialists, hedge funds (multiple strategies), mezzanine debt, listed property and long only equity portfolio managers.
In Q1 2019, Thuso launched Hodisang Fund I, which is South Africa’s first dedicated Black SA PE Manager Incubation platform. During Q4 2019, meanwhile, it launched Thuso Private Markets Fund 1: a blended fund focusing on a combination of private equity and real assets.
Thuso is a champion of black private markets talent and in particular the talent that will reside within an independent entrepreneurially driven boutique. Thuso is unique in that it has already demonstrated the ability to cultivate, create and self-generate capacity that does not yet exist in the market. Self-originated opportunities is a clear differentiator relative to our peers. It is not just an allocator of capital with a fund monitoring overlay thereafter – its Alpha is clearly visible and measurable both from a quantitative and qualitative standpoint.
Impactful return profile
Leveraging this blend of experience and track record within incubation, Thuso aims to achieve attractive returns for its institutional investors. Its model for achieving its targeted returns is predicated on targeting mid-market specialists, as opposed to large or mega cap projects or managers who allocate to this targeted opportunity-set.
Beyond financial returns, however, Thuso hopes to influence all stakeholders and partners in its programme to achieve the desired outcomes of not only its vision but also to aid in the reconstruction of the South African economy post Covid-19.Some of the measures it takes with investee companies include increasing the level of BBBEE policy implementation, improving diversity, and providing job shadow programmes and mentoring for tertiary students.
“We believe that our model is key to overcoming some of the existing misconceptions around transformation,” says Thuso CEO Olwethu Cata. “We want to show the companies we invest in that, by taking a meaningful approach to transformation, they won’t just be more diverse but will actually be better, more investable businesses.
‘We are only as strong as our partners’
According to Thuso’s leadership, the strength and the sustainability of the organisation is inextricably linked to its incubatees. These include VunaPartners, Tamela and Moshesh Partners.
“We know that we’re only as strong as our partners,” says Cata. “Thanks to the model we use and the level of detail we take with incubatees, we know we have stronger partnerships than almost anyone else in the industry”.
VunaPartners is a 100% black owned private equity manager, with a high-response investment team drawn from diverse backgrounds.
“We’re incredibly selective in our investment approach,” says Siya Nhlumayo, partner at VunaPartners. “That not only serves our investors well but also ensures that the projects we invest in get the most out of our investments.”
Moesh Partners, meanwhile, is a renewable energy and clean solution infrastructure specialist.
“We know that the Thuso team has a strong background in environmental, social and corporate governance (ESG) investment,” says Moshesh CEO Sifiso Shongwe. “That meant that they understood what we were trying to achieve both in terms of securing South Africa’s long-term energy viability and empowering its people”.
Tamela is a black owned and managed investment, corporate finance advisory (including JSE sponsor services) and fund management company, which was founded by Sydney Mhlarhi and Vusi Mahlangu in 2008. It has a long track record of success, with Mhlarhi and Mahlangu having launched South Africa’s first mezzanine fund, which also focused on empowerment funding.
“We think what Thuso is doing is really exciting,” says Mhlari, “and we’re incredibly proud to be on the transformation journey with them”.
Throughout the remainder of 2020 Thuso will introduce a further 6 teams to its platform and in turn the market. These high-quality majority black owned teams shall cover infrastructure, property and private equity.
A data-led approach
Thuso uses its extensive data sets in unlisted investments to corroborate its investment thesis. This information is not readily available in the public domain and can only be gathered by being a trusted partner for a number of years.
Thuso has rapidly positioned itself as a scaled up new entrant within the black asset management sector. We have been blessed and are humbled by the support that the pension fund community has bestowed upon us.
While Thuso has already made massive strides since its launch, it views these wins as just the start.
“There is an incredible amount of work to be done when it comes to transforming private markets industry in South Africa, but we hope that our model shows what’s possible,” says Cata. “While we know we can’t do it all, we want to be at the forefront of this kind of multi-level transformation and empowerment for a long time to come”.
“There is a lot of black talent in South Africa that deserves exposure and investment. And with the right approach, it could accelerate major societal shifts that will benefit all the country’s citizens,” he concludes.
Demand for central London office space sinks as thousands of staff work from home
Demand for office space in central London sank in the third quarter as staff at major occupiers such as banks, insurers and asset managers continued to work from home as a result of the coronavirus pandemic.
A survey from the Royal Institution of Chartered Surveyors showed that 77% of surveyors reported a drop in demand for London office space.
The survey comes as banks such as HSBC confirm they are looking at a hybrid model of remote working and office working that could lead to a steep drop in the amount of prime office space needed by financial-services firms.
Availability for London’s office space grew for the eighteenth successive quarter, the survey showed, with availability growing at the strongest pace since 2009.
Over the next year, prime office rents in the capital are expected to fall by 6.8% as demand shrinks.
Tarrant Parsons, RICS economist, said: “Occupier demand across the office sector remains in decline and may continue to come under pressure going forward as businesses reassess their office-space requirements following the increased prevalence of remote working.”
Deutsche Bank and HSBC are among lenders that have announced that they will embrace the model of workers who opt to spend some days in the office and some days out.
The announcements come as a Morgan Stanley survey found that some 63% of office workers said they believe their employers will allow one or two days working from home in the future.
About one in five, or 18%, in the bank’s survey said they think their bosses will allow even more days than that. More than 90% of London office workers have been working from home during the pandemic — the most of any major European city.
Surveyors who commented on the RICS survey predicted that the coronavirus pandemic could lead to long-lasting changes in the way that companies use offices.
David Apperly of Apperly Estates said: “The biggest impact of coronavirus will probably be long term for office demand; rental growth is likely to be subdued for 10+ years.”
Gregory McGonigal of Ashdown Phillips said: “We are highly unlikely to return to anything like we were all experiencing in 2019 for at least five years and certain sectors will be changed permanently. The pandemic has caused, and will continue to create, a seismic shift in the UK property sector.”
Simon Wood of Downing Intervention simply said: “Winter is coming.”
To contact the author of this story with feedback or news, email James Booth
BlackRock wants global standards for sustainability reporting
Previous demand for firms to follow with existing standards led to a 400% increase in compliance
BlackRock, the world’s largest asset manager, has called for the creation of a single global sustainability standard, claiming existing frameworks are making it difficult to compare companies and leading to confusion for investors.
“BlackRock is calling for convergence of the different private-sector reporting frameworks and standards to establish a globally recognised and adopted approach to sustainability reporting,” the $7.8tn New York-headquartered group said on 29 October.
BlackRock claimed the proliferation of existing disclosure initiatives, many of which are overlapping, has meant companies are reporting the same information more than once and that there is a lack of consistent and comparable data.
“We believe that this could be resolved by aligning and converging to establish a globally recognised sustainability reporting framework and set of standards,” BlackRock said.
“Ideally, these would be developed by those with domain expertise in the private sector and supported by public policymakers as they move to require more comprehensive corporate reporting.”
The call from BlackRock comes after it asked companies in January to publish their climate-related disclosures in line with the Sustainability Accounting Standards Board standards and the Task Force on Climate-related Financial Disclosures framework — two of the world’s major reporting standards.
BlackRock said it would consider voting against company management where sufficient progress had not been made.
Companies appear to have heeded BlackRock’s warning. According to a report by the fund manager’s investment stewardship team, by the end of September, there had been a 400% increase in companies reporting under the SASB standards.
“The uptick is encouraging,” BlackRock said. “However, one of the top challenges to greater adoption we hear from the directors and leadership teams is the confusion caused by the various frameworks or standards.”
Efforts are already under way to develop a common approach for sustainability disclosure.
The IFRS Foundation published a consultation in September to assess demand for global sustainability standards. The IFRS said it would assess to what extent it could help develop such standards if demand proved strong.
Also in September, a group of five sustainability-reporting organisations — the SASB, the Global Reporting Initiative, the International Integrated Reporting Council, the CDP and the Carbon Disclosure Standards Board — said they planned to work together to develop “a comprehensive global corporate reporting system”.
BlackRock has singled out an approach proposed by the IFRS Foundation as the “most practicable and likely to succeed”.
“Progress may take some time,” it said. “BlackRock will continue to advocate for TCFD and SASB-aligned reporting until a global standard is established.”
To contact the author of this story with feedback or news, email David Ricketts
Comment: Don’t overestimate the coronavirus recovery
At this point in the Covid-19 crisis, governments have only one good option: further aggressive fiscal stimulus complemented by coherent virus-containment strategies
The world economy has risen from the depths of the initial Covid-19 plunge. But the recovery has been tepid, uneven and fragile – and is likely to remain so for the foreseeable future.
Start with the good news. World merchandise trade has rebounded strongly, consistent with indications of a revival in household demand for goods in many economies, even as public-health restrictions and consumer concerns continue to hobble demand for services.
Moreover, financial markets have held up surprisingly well, with stock markets in many countries regaining or even exceeding pre-pandemic levels. Despite near-zero interest rates, banking and financial systems seem largely stable. And consumer and industrial demand has buoyed commodity prices, with even oil prices having recovered somewhat.
But as the latest Brookings-Financial Times Tracking Indexes for the Global Economic Recovery update shows, many economies are experiencing essentially no growth, or are even contracting. With private sector confidence depleted, and the struggle to contain the virus far from over, the risks of substantial and long-lasting economic scarring are on the rise.
This is true even in the economies that have returned to growth, such as the United States. In some ways, the US seems to have turned the corner. Industrial activity and the labour market have regained some lost ground. The unemployment rate is falling, and employment levels are up.
But unemployment remains significantly higher, and employment significantly lower, than before the pandemic. The increase in long-term unemployment, together with ongoing service sector disruptions, portends a difficult path to a more robust and sustained recovery.
It doesn’t help that fiscal stimulus measures have largely lapsed, and negotiations on a new relief package have repeatedly broken down. As household disposable income has declined, private consumption growth has weakened. Similarly, business investment continues to contract – a trend that does not augur well for sustained growth.
Even stock markets, which experienced a sharp rebound earlier in the year, seem to be taking a breather. This may reflect concerns about the virus-containment strategy (or lack of) being pursued by US president Donald Trump’s administration. In any case, as next month’s presidential election approaches, heightened political and policy uncertainty is likely to keep consumer and business confidence muted.
The eurozone is in even worse shape. Not only has the pandemic decimated short-term growth; deflation is now setting in, raising the risk of a deep and prolonged contraction. While manufacturing in Germany and elsewhere has rebounded, the positive effects are more than offset by the enduring services slump, reinforced by ongoing public health restrictions.
The United Kingdom’s services sector, by contrast, has experienced a revival. Yet the combination of erratic lockdown policies and far-reaching uncertainties surrounding Brexit are contributing to a continued economic contraction. Meanwhile, on the other side of the world, Japan is also in serious economic peril, though it has so far avoided sliding back into deflation.
Most emerging market economies have not fared well, either. India is experiencing a sharp slowdown in economic activity, which could be exacerbated by a devastating acceleration in Covid-19 cases, fuelled by the easing of lockdown measures. The government has pushed through some agricultural and labour market reforms, but a banking system hobbled by bad loans remains a powerful constraint on growth.
Brazil and Russia have fared little better. Both have experienced substantial economic contractions, and have few policy levers available to revive growth.
The one country experiencing a strong recovery is China, where, thanks largely to the country’s apparent success in bringing the virus under control, both industrial production and services have rebounded. Retail sales and manufacturing sector investment have also bounced back. By many indicators, the country’s economic performance is now even stronger than it was before the pandemic.
Yet, unlike in the wake of the 2008 global financial crisis, China’s strong performance is not likely to do much to buttress the rest of the world economy, not least because of the growing push towards deglobalisation. China’s recently unveiled “dual-circulation strategy” – whereby the country will increasingly depend on the domestic cycle of production, distribution, and consumption for its long-term development – will reinforce this trend.
Making matters worse, central banks now have far less firepower than they did after the 2008 crisis. To be sure, the major central banks have pulled out all the policy stops since the Covid-19 crisis began, pursuing unprecedented monetary expansion in order to support economic activity and, in some cases, to fend off deflation. Some – most notably, the US Federal Reserve – have even adjusted their policy frameworks to signal tolerance of higher inflation. The central banks of some smaller advanced economies, such as Australia and New Zealand, and emerging economies, such as India, have also resorted to unconventional measures.
But the limits of monetary policy for boosting growth are becoming increasingly apparent. Meanwhile, large-scale purchases of corporate and government bonds, together with the direct financing of firms, are generating serious risks – not least to central-bank independence.
Against this background, governments have only one good option: further aggressive fiscal stimulus, ideally in the form of well-targeted government expenditure that could spur private investment. Whatever risks the increase in public debt may generate, they do not compare – especially in today’s low-interest-rate environment – to the long-term economic pain that countries will face without such stimulus.
To be effective, however, fiscal measures must be complemented by coherent virus containment strategies, which credibly enable safe economic reopening. Without such strategies, demand and confidence will remain subdued, and global growth will continue to falter well into the future.
Eswar Prasad is a professor of trade policy at Cornell University’s Dyson School of Applied Economics and Management and a senior fellow at the Brookings Institution. Darren Chang and Ethan Wu, undergraduate students at Cornell, assisted in the writing of this commentary.
Copyright: Project Syndicate
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