Rand Merchant Investment Holdings, which owns stakes in Discovery, MMI and Outsurance, continues to diversify beyond insurance, announcing on Tuesday the acquisition of a 30% stake in Ethos Private Equity and a small share in bitcoin exchange platform Luno.
RMI’s investment into Luno, done through its fintech investment arm, AlphaCode, was a way to get exposure to cryptocurrencies and blockchain technology, which could disrupt traditional financial services, said CEO Herman Bosman.
While sceptics have labelled bitcoin a bubble — over the digital currency’s 567% one-year price surge — pundits say cryptocurrencies, and the blockchain technology behind them, are here to stay.
RMI was considering an international fund that could deploy capital into global insurance and financial technology opportunities, said Bosman.
Through its investment in Ethos, RMI Investment Managers, which had stakes in boutique asset managers, would gain exposure to an alternative asset manager, he said.
The acquisition, the value of which was not disclosed, was completed in conjunction with Royal Investment Managers, a joint venture with Royal Bafokeng Holdings.
Traditionally a private equity player, Ethos is positioning itself as an alternative asset manager. It recently launched a R2.5bn mid-market fund and acquired Mezzanine Partners from Stanlib to raise a mezzanine fund under the Ethos umbrella. In 2016 it listed Ethos Capital on the JSE to raise capital from the listed market.
The capital raised from RMI was critical to executing Ethos’s diversification strategy, said CEO Stuart MacKenzie. Raising a fund could take anywhere from nine to 18 months, while seed capital was required to fund the team and research before going to market, he said.
A search for yield amid lacklustre returns on public exchanges has driven investors to pour money into alternative assets, including hedge funds, real estate funds and private equity. Professional services firm PwC predicts global alternative assets could grow to between $13.6-trillion and $15.3-trillion by 2020.
Ethos’s sixth buyout fund, valued at $800m and with mostly offshore investors, was nearly fully invested. It was having initial conversations with investors for buyout fund VII, for which it was targeting R8bn-R10bn. “SA will remain the engine room of deal flow. We have a promising pipeline of deals,” said MacKenzie.
While international investors were now more tentative on SA, there was considerable appetite among local investors, he said.
“We are very excited about putting capital to work [in SA] where others are afraid to,” said Ethos Capital CEO Peter Hayward-Butt.