METTA Capital, which describes itself as a next generation Section 12J “portfolio of funds”, has launched in South Africa in a bid to provide high-quality, moderate risk opportunities for investors who are looking for alternative investments in 2018.
Brought to market by the founders of Grovest and Venture Capital Management Services (VCMS) – Jeff Miller and Malcolm Segal – METTA Capital will manage a portfolio of eight established Section 12J funds across the logistics, mining, hospitality, retail, energy and telecommunications sectors.
These are CCP Mining 12J Fund Limited, Franchise Junction Section 12 VCC Limited, Grovest Energy Limited, Mdluli Safari Lodge Limited, Rencell Limited, Sunstone Capital Limited, Westbrooke Aria Limited and Westbrooke Stac Limited.
Selected by a professional investment committee process, chaired by Dr Adrian Saville, Cannon Asset Managers founder and chief executive officer (CEO), each fund within the portfolio is managed by a different fund manager and targets a blended net internal rate of return (IRR) to investors of 16 per cent with a dividend yield of between five and eight per cent per annum from 2019.
“A portfolio of funds offers a unique model and attractive investment opportunity for investors because their risk is mitigated through the diversification of the funds selected,” Miller said.
“Three years ago, Section 12J was a relatively unknown asset class. Since then the benefits of investing in them is being realised including the extremely attractive tax rebates they offer to individuals, trusts and companies.”
The South African Revenue Service (SARS) introduced the Section 12J tax incentive in 2009 as part of the South African Income Tax Act, aimed at stimulating the growth of small to medium-sized business through venture capital investment. In 2015, revisions were made to offer more attractive incentives, which include no recoupment if the investment is held for five years, and increasing the maximum investment into qualifying companies to ZAR50 million.
The full amount invested in METTA Capital is 100 per cent deductible from an investor’s taxable income in the year in which the investment is made. This applies to all investor classes, including individuals, companies and trusts.
“Today, Section 12J companies are a recommended component of between five and 10 per cent of a well-balanced investment portfolio. An investor is not only earning a meaningful return, but also receiving a tax benefit. There is already ZAR1.8 billion invested in the existing registered Section 12J funds, which is anticipated to grow to ZAR3.8 billion in 2018,” said Miller.
METTA Capital offers a targeted entry point for investment into a new generation of entrepreneurs who will provide much-needed employment opportunities for South Africans and a revenue injection into the local economy.