Founded in 1845, Old Mutual is the largest life assurer in southern Africa, with a total investment portfolio of around R 200bn ($68bn). The allocation to property fluctuates at between 5% and 6%, with the current portfolio valued at R 10bn.
Old Mutual Properties claims to be “the most significant property owner, developer and administrator in Southern Africa”.
The fund has property investments in South Africa, Zimbabwe, Malawi, Namibia, Kenya and the UK. The largest portion of its investments – 40% – is in offices, with retail accounting for 35% to 40%, and industrial at 20% to 25%.
“The portfolio is being repositioned,” says Ian Watt, assistant general manager of Old Mutual Properties. “We our lightening our exposure to industrial and offices and moving more into retail. It has been a continual process. Six or seven years ago we had 50% of our funds in offices.”
As in European markets, the debate about property’s place in the institutional investment portfolio is raging. Old Mutuals’ 5% allocation is typical for South African funds; a decade ago 12% to 15% was more usual, while some funds had up to 20% of funds invested in real estate.
Watt believes that property will continue to have a place, “as long as property can be made to perform at the required premium [to gilts and equities]”. In order to achieve this, institutional investors need to be active and entrepreneurial portfolio managers, as well as developers.
“What we are basically doing is providing the ability to trade property; we are continually buying and selling,” says Watt. He estimates that Old Mutual churns around 5% to 7% of its investment portfolio annually. It also invests indirectly in a range of quoted property funds in order to increase liquidity and flexibility.
In the UK, it has a portfolio valued at around £30m, “mostly small retail and office investments in the south east of England”. The portfolio is managed from Old Mutual’s offices in Hook, Hampshire. There is currently little enthusiasm within the fund to increase the size of the UK portfolio, or to expand into continental Europe.
The performance figures reflect South Africa’s growing economy, and the beginning of recovery in the property market. The global return from property investment last year was around 17%, ahead of gilts but trailing equities.
Development plays an important role in Old Mutual’s activities. The South Africa development programme is valued at R 700m, while in Zimbabwe, the fund has a developments underway valued at Z$ 400m. The majority of this money is being invested in shopping centres.
The flagship project is the R 150m refurbishment of Cape Town’s Cavendish Square shopping centre, which is being carried out in phases. In Durban, the fund has recently completed the R 180m development of Old Mutual Centre, an office tower in the city centre.
Old Mutual Properties
Mutual Terrace
Cor. Forest and Howard Drives
Pinelands
Cape Town 7405
tel +27 21 531 1231
fax +27 21 531 1667
