Anneau believes that long term investors can only optimise their risk adjusted returns over the long term by matching the duration of their current and future liabilities with that of their assets while maintaining a margin of safety.

Nonetheless, we note that a number of long-term liabilities clients: Pension Funds, endowments, insurance schemes, retirement schemes, etc. are still heavily invested in short term asset classes across their long-term portfolios (public equities, short term duration fixed income, etc.). Official researches, statistics and publications estimate that globally less than 25% of the total global institutional investible assets are invested in long term alternatives assets (primarily private equity) while for individual investors, that allocation is estimated to be less than 5%.

Anneau is committed to helping institutional investors build alternatives portfolios (which should ideally be as part of their multi-assets strategies) in their pursuit of Alpha. 

Our institutional-quality products; from African and global REITs to co-investment opportunities in private equity address the investment, operational and organisational issues of concern for today’s alternatives investor. As we grow, we shall continually seek opportunities to enhance and expand our capabilities to meet our clients’ needs.

Alternative Liquid investments refer to those securities that can be readily converted into cash within a six (6) months period.

ANNEAU’s ALTERNATIVES INVESTMENT SOLUTIONS

Our Alternatives solutions cover the hereunder asset classes:

1.  Commodities, Currencies, REITS & Hedge Funds (LIQUID)
2. Real Estate / Property / Infrastructure (REAL ASSETS – ILLIQUID)
3. Private Equity (ILLIQUID)

1. COMMODITIES, CURRENCIES, REITS AND HEDGE FUNDS (LIQUID)

Commodities, currencies, Real Estate Investments trusts (“REITS”) and hedge funds are typically alternative assets that enhance a multi-assets portfolio’s risk returns and are an important component in Anneau’s competitive advantage with regards to its products and services offerings in Africa, including Mauritius.

Commodities can be segregated into soft commodities (agricultural grains such as wheat, corn, barley, rice, coffee, tea, cocoa etc., Agricultural spices such as sugar, saffron, vanilla, amongst others, agricultural cattle/meat products: beef, pork, chicken, etc. and also fuel commodities such as oil, gas, ethanol, etc.), hard commodities (including metals; iron, steel, aluminium, etc.) and precious metals (amongst which; Gold, Silver, Palladium, Uranium, Cobalt, etc.). They are highly volatile assets whose prices are highly correlated to macro-economics and so their supply and demand dynamics fluctuate on various macro & geo factors. While increasing the volatility of a portfolio over the short term, these commodities, also tend to add significant upside potential and so help in improving the overall multi assets portfolio’s returns. Anneau typically uses commodity ETFs, high performing and consistent external Commodity Fund Managers as well as physical and non-physical traders to gain access to these commodities. Anneau may also consider investing in commodities related credit and debt, whether privately or publicly traded and/or via private placements directly with the commodity trading firms, a securitised issue and/or warehousing receipts, especially in Africa.

Currencies refer to the local currency pairs (USD/MUR, EUR/MUR and GBP/MUR) and/or Global/African currency pairs. Currencies form a very important part of a country’s economy, credit worthiness and is a gauge of the soundness of a country’s fiscal and monetary policies. At Anneau, we believe that currency management and hedging is critical to our investment teams’ abilities to manage local, regional (African), emerging markets and global developed markets multi assets portfolios. We primarily use hedging strategies wherever applicable and may also use active currency trading to enhance the risk return dynamics (whether in the pursuit of Alpha and/or in the pursuit of risk minimisation) of our multi-assets, equities and fixed income investment solutions.

Hedge Funds are funds that employ various trading and investment strategies that produce optimal risk adjusted returns for their investors. Their main focus is achieving market leading excess returns with the lowest portfolio volatility possible. While most of the industry’s hedge fund managers have found it extremely difficult to meet these investment objectives during different market and economic cycles, some exceptional hedge fund managers have consistently delivered on these investment objectives. Anneau has the possibility to access these managers via its strong relationship with international fund platforms. As Anneau grows, it will further be able to develop its own hedge fund solutions (fund of funds, and Africa proprietary) to meet its clients’ needs as it develops the ability to access a spectrum of absolute return strategies; including multi-strategy fixed income and systematic equity. Anneau’s growth shall also allow it to structure an in-house dedicated team who will draw on Anneau’s broad global platform to provide custom hedge fund solutions as core allocations or a complement to direct investments. The firm aims to leverage its size, experience and industry position as it is growing to further negotiate favoUrable terms and structures with external hedge fund managers. Our external fund manager selection  is based on a rigorous process that places the clients’ interests above anything else.

Real Estate Investment Trusts (REIT) is a company and/or a trust that owns and in most cases operates income-producing real estate. REITs own many types of commercial real estate; ranging from offices and apartment buildings to warehouses, hospitals, shopping centres, hotels and timberlands. In most jurisdictions, to qualify as a REIT, a company must have the bulk of its assets and income connected to real estate investments and must distribute at least 90 percent of its taxable income to shareholders annually in the form of dividends. A REIT can be both publicly listed or private. For the purposes of the ‘Liquid’ categorisation, Anneau hereby implies LISTED REITS and their use in enhancing multi assets portfolios returns.

Anneau also has the possibility of structuring pure listed property investment solutions using various REITs and/or pure private property investment solutions using private REITS and/or direct equity and/or credit exposure to private real estate issuers (“private credit securities”). Our main considerations revolve around the geographical allocation, the sector allocation, the leverage adjusted IRR (“Internal Rate of Returns”) including the income generation potential (rental yields, turnovers, etc.) and exit considerations/market dynamics as well as the liquidity needs of Anneau and/or its portfolios and clients.

Alternative illiquid investments refer to those securities that cannot be readily converted into cash within a six (6) months period and/so may range from an investment period of one (1) year to ten (10) years.

2. REAL ESTATE/PROPERTY/INFRASTRUCTURE (REAL ASSETS- ILLIQUID)

Real assets, such as real estate and infrastructure, represent one of the fastest growing segments within the broader global alternatives environment. These investments can potentially deliver a range of portfolio benefits including; stable income, long-term total returns, diversification potential and inflation protection, in some cases. Africa is a continent presenting several opportunities of real assets investments. It is fully engaged in its development path and so we note exciting opportunities in the commercial real estate segment (Retail/Shopping Malls, offices, industrial buildings) but also in the residential real estate asset class catering to a significant housing deficit; amongst others including residential land, apartments, hotels, villas, mixed use developments and student housing as well as low cost housing. It is a known fact that Africa has huge infrastructural deficits which, when and if attended to, shall assist in unlocking Africa’s true economic potential. Opportunities in Energy (renewables and clean energy), transport and road infrastructure, power and social infrastructure are key focus areas that offer decent cash flow streams. While Anneau can recommend and allocate some direct investments and/or thematic private investments in infrastructure, in some cases, we may also favour investing in infrastructure bonds, as issued by sovereigns and/or development finance institutions.

Anneau aims to assist its clients in identifying and securing desirable assets and monitor deal flow for attractive opportunities both through our own investment experts and through our extensive network of relationships with select partners. Our portfolio managers have and will continue to develop access and insights from a global set of investment professionals representing both alternative and traditional asset classes.

3. PRIVATE EQUITY

Private equity is a common term for investments that are typically made in non-public (private) companies through privately negotiated transactions. Private equity investors generally seek to acquire quality assets at attractive valuations and use operational expertise to enhance value and improve the  portfolio company’s performance. Buyout funds acquire private and public companies, as well as divisions of larger companies. Private equity specialists then seek to uncover value enhancing opportunities in portfolio companies, unlock the value of the portfolio company and reposition it for sale at a multiple of invested equity.

Private equity investments may be structured using a range of financial instruments, including common and preferred equity, convertible securities, subordinated debt and warrants or other derivatives.

Private equity funds, often organised as Limited Partnerships, are the most common vehicles for making private equity investments. In such funds, Limited Partners (“LPs”, “investors”) usually commit to provide up to a certain amount of capital when requested by the fund’s manager or General Partner (“GP”). The general partner then makes private equity investments on behalf of the fund. The fund’s investments are usually realised, or “exited” after a four to seven year holding period through a private sale, an initial public offering (IPO) or a recapitalisation, amongst others. Proceeds of such exits are then distributed to the fund’s investors. The funds themselves typically have a term of ten to twelve years.

The private equity market is diverse and can be divided into several different segments. These include the type and financing stage of the investment, the geographic region in which the investment is made and the vintage year. Investments in private equity have increased significantly over the last 20 years, driven principally by large institutional investors increasingly seeking attractive returns and portfolio efficiency. It is now common for large pension funds, endowments and other institutional investors to allocate significant assets to private equity.

BUYOUTS FOCUS

In the private equity asset class, the term “financing stage” is used to describe investments (or funds that invest) in companies at a certain stage of development. The different financing stages may have distinct risk return and correlation characteristics and play different roles within a diversified private equity portfolio.

Broadly speaking, private equity investments can be broken down into four financing stages:

1. Buyout;
2. Growth Capital;
3. Special situations; and
4. Venture Capital

These categories may be further subdivided based on the investment strategies that are employed.