The alternative investment industry has been boosted with the launch of two new funds offering local as well as global investment opportunities. A joint venture between LionPride Investment Holdings and Newtown Partners has resulted in the launch of the LionPride Agility VCC (venture capital company) Fund – a single technology fund with a choice of two share classes that is open to retail investors.
South African Venture Capital Association (Savca) chief executive Tanya van Lill says impact investing is gaining popularity and momentum, and industries that are ‘popular’ typically relate to infrastructure such as roads, healthcare, education and renewable energy.
Set up to capitalise on Section 12J – which allows individual and corporate taxpayers as well as trusts to deduct 100% of their investment from their taxable incomes in the tax year in which the investments are made – the LionPride Agility Fund requires a minimum investment of R250 000 and will be open for investment for another two years.
“To capitalise on the tax incentive in the current tax year, you would have to invest before the end of February,” says LionPride CEO Deven Govender. “But of course the fund will be open to investors beyond that.”
Van Lill says Section 12J has contributed to an increase in funds raised by venture capital managers, with Savca seeing more than R1 billion invested in the venture capital sector in 2018, the first time such a figure has been achieved.
The LionPride Agility Fund is a single technology fund, focused on investment in South African start-up companies, with a choice of two share classes – impact investing and emerging technologies.
The impact investing share class targets small and medium-sized enterprises (SMEs) with largely stable, predictable free cash flows and is suited to investors with a lower risk profile while emerging technologies is better suited to investors with a higher risk profile.
“In terms of companies to invest in, we have identified a number of potential SMEs, which are now going through a shortlisting process,” says Govender. “We expect about five start-up companies to be identified for investment out of the pipeline of 15.”
Innovation and disruption
One of the key requirements when looking at start-ups to invest in is innovation. Govender says he looks for companies that are either creating a product for an entirely new market segment or disrupting an established market in the way Airbnb disrupted the hospitality industry.
He highlights one of the start-ups currently in the pipeline, a Cape Town-based company in the tertiary e-learning space, as an example. “There is nothing new about tertiary online education but this company is linking the applicants to future employers,” he says. “Their software will allow employers to have a 360-degree view of the student from initial registration to final qualification. So instead of just making an employment decision based on annual marks, the employer will be able to view the level of interaction with other students and lecturers, how many projects were completed, whether the projects were started and completed on time. All of this information gives the potential employer a snapshot of how this student is likely to interact and cope in a workplace environment.”
Vinny Lingham, general partner of Newtown Partners, and a successful entrepreneur in his own right says the fund has enormous potential to build globally successful technology businesses from South Africa. “We’re also excited about the opportunity to positively impact economic empowerment in South Africa, and the LionPride Agility fund is an important tool to achieve that,” he says.
Institutional investors and high net worth individuals looking for something offshore can invest in the Partners Group Global Value Fund recently launched by Helical Capital Partners. Sponsored by the latter and managed by global private markets investment manager Partners Group, the Guernsey-domiciled fund will identify and invest into the international private equity market on a relative value basis over its investment period. The fund has a primary geographical focus on North America and Western Europe and a secondary focus on Asia-Pacific and the rest of the world. The fund aims to consistently provide higher returns relative to the MSCI World Index and the minimum initial investment is US$10 million.