Farhad Sader – Managing Director of Old Mutual Wealth
The prevailing environment of high interest rates is creating opportunities for local investment firms specialising in innovative cash and liquidity solutions for institutional clients.
Lesetja Kganyago, SARB Governor, recently confirmed to Bloomberg that the central bank would maintain its tight monetary policy stance. This has resulted in increased demand from investors seeking straightforward access to financial instruments.
This new offering from Old Mutual Wealth provides institutional investors an alternative entry point to money market-type funds, which remain highly sought-after due to their risk management capabilities. These solutions offer attractive yields, same-day liquidity, and the convenience of a diversified basket of highly rated bank paper within a well-regulated environment. Traditionally, this market segment has been dominated by bank-owned unit trust management companies.
“Cash and Liquidity Solutions, a new capability within the Old Mutual Wealth portfolio, capitalises on the economic climate to provide clients with improved interest rate exposure while maintaining liquidity and minimising risk,” explains Farhad Sader, Managing Director of Old Mutual Wealth.
Old Mutual Wealth Cash and Liquidity Solutions is jointly managed by Ian Ferguson and Sean Segar, the pair are well known in the cash and liquidity area and have worked together for over 20 years previously at STANLIB and more recently at Nedgroup Investments where they built the cash assets under management to around R150bn.
“We are thrilled to join the Old Mutual team, which possesses all the essential elements for a successful liquidity business: a range of well-established funds with a strong track record, excellent operational capabilities, a renowned brand, and a team with over 178 years of financial services experience in South Africa,” says Segar.
According to Ferguson, this solution represents “a new force in the liquidity fund space,” offering cash-rich businesses the freedom to choose, diversify their investments, and access higher yields compared to traditional bank call accounts. In short, “clients get the liquidity they need with the yield they deserve.”
“Our target market is aimed at companies with surplus cash that needs to be temporarily parked,” explains Ferguson. “The Old Mutual Wealth Cash and Liquidity Solutions are designed to optimise the returns on corporate cash without being tied up in fixed deposits. This represents a significant opportunity for businesses that are building cash reserves in an uncertain economic environment.” With domestic interest rates currently at 14-year highs and offering returns that exceed inflation, “parking” cash is now considered a viable alternative for shareholders of corporates and other investors.
Cash and liquidity solutions have also resurfaced as attractive options for retirement funds Trustees, who having experienced lacklustre returns from other asset classes in recent years, are revisiting various options in the cash asset class due to the more favourable risk-adjusted returns available.
The solution is expected to attract a range of clients, including asset managers, corporations, insurers, medical schemes, and retirement funds, among others. “Institutional clients will be impressed by the interest premium offered through the diversified cash exposures in Old Mutual Wealth Cash and Liquidity Solutions and given SA’s well-regulated Collective Investments Schemes (CIS) structures enable all participants to benefit from one another’s scale and diverse cash flow cycles. The proposition is compelling” concludes Sader.