The year ahead for Section 12J – as the next wave of adoption fast approaches

Posted : 17 May 2019

As we approach another financial year of investing, most individuals have certainly heard about Section 12J – most commonly through a late February, poorly drafted email pitch, with the subject line“100% tax-deduction opportunity available.”

During this rush period, what is supposed to be a fascinating and impactful asset class – is now reduced to the same email inbox as a certain political party’s constant dreary communications.

However, the lifting of the veil behind these poor marketing strategies reveals a hidden gem of an asset class with the potential to make a meaningful impact on this country; its growth and within your investment portfolio.

The facts behind the asset class is starting to paint a picture of successful government policy, three words not often used in one sentence. With over R5.5 billion invested by its first wave of retail investment adoption, the impact on the ground is starting to be felt.

So, now with the first wave of adoption secured, the fly-by-nights slowly disappearing and tangible results starting to manifest on the ground. We as MeTTa Capital are excited around the asset class’s next evolution already starting with two overarching trends starting to develop:

  • Increasing interest being shown by larger wealth practices, institutions and a greater amount of retail investors within these institutions;
  • A growing group of financial advisors and wealth managers taking cognisance of the tax efficiency and uncorrelation benefits the asset class provides to their client’s existing investment portfolios

The natural evolution is here…

As now seen within traditional asset classes, the shift towards aggregated and investor- friendly offerings such as Units trusts, ETF’s and mutual funds is been proven to be the next evolutionary step…

This is where, through 2 years of innovation, MeTTA Capital has positioned itself to be at the forefront of larger scale adoption from the institutional wealth advisory platforms, private banking divisions and corporate investors.

MeTTa Capital has innovated South Africa’s 1st Portfolio of 12J Funds investment vehicle, allowing investors the most investor-friendly entry into the Section 12J asset class. An Investor now has a single entry point into a diversified portfolio of market-leading Section 12J investment strategies, compiled and weighted by an expert investment committee, at no additional fees.

MeTTa Capital is fortunate to partner with select wealth management companies and organisations who focus on servicing, growing and retaining clients that align with our investor base. It is in this pursuit, that we look to further partner with a variety of trusted wealth management companies.

Now with over 152 Section 12J companies in the market, we understand first-hand the complexities and time these institutions need in order to conduct effective due-diligences to approve even just one of these offerings, nevermind a portfolio of offerings in order to provide their investor base with a diversified set of investment strategies.

Through our progressive discussions with South Africa’s largest and most trusted wealth managers, we have developed an investment mandate suited to their client’s investment needs and apply this within our stringent investment processes.

MeTTa Capital aims to assist these institutions to bring forth the most comprehensive Section 12J offering in the market, which enables the next wave of investment within the asset class. Institutional product approval teams now have a single due-diligence point in MeTTa Capital and the institution’s clients have an all-encompassing post-investment monitoring and reporting service that reports to them each quarter on the performance of their investment.

This comprehensive pre and post investment solution is quickly making MeTTa Capital the Section 12j vehicle of choice amongst leading South African Wealth Managers and in solving the hurdles faced by these companies in the approval of these offerings for their client, leading the next wave of adoption in South Africa’s fastest growing alternative asset class.

The possibilities….

I attended the official launch of a hotel from one of our underlying Section 12J investments, Lucid Ventures’ (A Section 12J Hospitality Fund) in Rosebank last night and witnessed firsthand the impact Section 12J is having on the ground. As I gazed around this magnificent hotel (HomeSuite Hotel, Bristol Road) developed solely from the funding obtained from this Section 12J initiative, I noticed around 20 staff who had the warmest smiles in the room. I noticed how their manager took the time to train them at the event on the soft hospitality skills they’ll need going forward within their new career and it was at that very moment that it hit me like a ton of bricks…
This one development has created employment for over 20 households, it is upskilling and training at least 20 staff with a skill that they can utilise in the labor market and is providing these staff members with a safe and secure place to work, develop and upskill themselves.

There are countless other opportunities available that will make a meaningful impact on people’s lives and our vision aims at facilitating the next wave of capital into this space so that more and more business owners and entrepreneurs may effectively scale their operations, to create the demand for resources which will enable us to start winning the war on unemployment, and go some way in igniting economic activity and growth within South Africa.

Darryn Faulds
MeTTa Capital Fund Manager