Socially Responsible Investments high on Trustees' agendas

Government's intention to tackle capacity constraints as a top priority, reflected by its budget framework, is a cue to the retirement industry that it could make a major contribution to the country's infrastructural growth plan - while at the same time affording members an opportunity to capitalise on this growth.

While there's no official data, it's estimated that the retirement industry invests only about R20bn – or less than 1% of the retirement industry's assets under management - in Socially Responsible Investment (SRI) vehicles.

It appears that trustees and asset consultants in the retirement industry have been reticent to support SRI's, as there is a perception that firstly, SRI Fund Performance can be unpredictable and secondly, that it's often difficult to decipher a good fund from a poor fund.

Variety of avenues

It's important to note that an important objective of SRIs is to uplift previously disadvantaged sectors of the broader community while targeting performance. A variety of different methods are used to achieve these goals ranging from investing in grassroots private equity and infrastructure to investing in listed BEE companies, irrespective of these companies' wider social impact.

A few SRI funds have been very successful producing consistent benchmarks, like the All Share Index and top-performing balanced portfolios over a ten-year period.

Track records are key

Godfrey Albertyn, Fund Manager for Metropolitan's African Wealth Creator Fund, believes that the most important piece of advice in this regard is to go for a solid track record.

Although this is true for all investments, it's particularly important for SRIs due to the long-term nature of infrastructure investments. SRI funds that have been around for a while are more than likely already invested in projects generating a positive cash flow.

While capacity is and remains a prime issue in South Africa, trustees are slowly warming to the idea of SRIs and its inevitable that the hunt for the most resilient and sustainable investments will intensify.

Sooner rather than later

This will stimulate growth of the entire SRI environment. We expect that the flight to quality will result in insufficient quality investments to go around in the short-term. Trustees deciding to address the SRI investment issue sooner rather than later can expect to buy into portfolios that have a capacity for growth.

Our advice to trustees is to place SRI high on their agendas. Proper research and investigation must be done to find a product or asset manager with a proven track record and the ability to sustain its performance into the foreseeable future, as well as to commit a percentage of their assets to SRIs.