With its empowerment credentials, it was no surprise that MetAM was one of the first managers to introduce a socially responsible investment (SRI) portfolio.
And it has also proved that going the SRI route does not mean sacrificing returns. Over five years, the Metropolitan African Wealth Creator has returned 27,3%/year, beating the 27% from Metropolitan Managed, its domestic balanced fund.
WHAT IT MEANS
 Over a period of five years, the African Wealth Creator has returned 27,3%/year
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African Wealth Creator portfolio manager Godfrey Albertyn says that to meet client demand, SRI investments are now available in the component parts, such as equities or bonds.
The universe of equities is chosen largely from the JSE SRI index and not necessarily driven by BEE or infrastructure considerations - it is a modified version of the house view equities. The bond portfolio focuses on infrastructure bonds, on issuers such as Telkom, Eskom, Landbank, Acsa and DBSA.
Pension funds that want to invest entirely in SRI can invest through the Metropolitan SRI Fund - run by Sisa Rafuza - which has attracted R175m.
But the big seller is the African Wealth Creator (originally called Futurebuilder) with R1,4bn. This invests significantly in both listed and unlisted equity, property, bonds and cash. The bond portfolio is not actively traded and there are no conventional government bonds.
Its infrastructure investments include the SA Infrastructure and African Infrastructure funds, Siza Water Co, and TRAC (the N4 toll road to Maputo.)
Sisa Rafuza and Godfrey Albertyn
Albertyn says these investments have yielded strong returns because of lower long-term interest rates in recent years as well as consistently good operating results.
Cash flows have also been good, which has allowed the projects to refinance their operations. There is also some scarcity value as there are few infrastructure investments around, particularly in the equity space.
These projects certainly make their contribution to wealth creation: the R25bn Gautrain project, for example, has created 60 000 jobs. And government, which is often the contracting party, stipulates that the contractors contribute to transformation by insisting that they employ local labour and further the development of SMMEs.
The SA Infrastructure Fund, the second-largest holding in the fund, comes to the end of its life in 2012 but the process of winding down its investments will carry on until 2030 and beyond and these investments will continue to spin off cash.
It can take a while to negotiate before investing in a new infrastructure project so sometimes funds have to wait in cash for a year or two.
MTN used to be by far the biggest investment in the fund, but it has fallen from more than 25% (on a see through basis including the special purpose vehicles it funded into investments at the time such as Johnnic and M-Cell) to 7,3%. Ipsa, the electricity supplier, is now the largest holding. AWC invested R119m into the share last year.
As the investment funds a BEE partner's acquisition of the stake in Ipsa, the investment meets the twin objectives of the fund to support transformation and invest in infrastructure assets.
African Wealth Creator recently made a R28m investment through a private placing in oil exploration company Samroc, in which empowerment group Encha recently took control. Encha has access to oil concessions in the Democratic Republic of Congo and reversed these into Samroc in exchange for shares.
The fund has invested R15m into Phatisa, a private equity fund management business for a 30% stake.
It has also bought 5% of Protech Khuthele, a listed SA construction company. These shares are being warehoused for Lidonga, a broad-based women's empowerment company.
MetAM is considering investing in more water utilities as well as into public-private partnerships, which will be long-term investments, some of which will include a lock-in of up to 10 years.
It is already a substantial investor in Brait and Ethos private equity funds. Ethos V makes up 2,9% of the fund and as a shareholder it pushes the transformation agenda hard.
"The global private equity environment is tough, and that will have an effect on larger private equity deals, but the medium and smaller deals should not be as affected by international credit woes," says Albertyn.
Another investment has been into high yield debt mezzanine funds such as Vantage Mezzanine.
He says that there have been numerous inquiries from consultants to invest in African Wealth Creator but he believes that institutions can make a much greater commitment to SRI. If they do not, there is the possibility of a return to prescribed assets.
"They still equate SRI with taking risk, which we have proved is not true," says Albertyn.
