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Alternative Market Briefing

Activist investing heats up in South Africa

Wednesday, January 23, 2019

Bailey McCann, Opalesque New York:

Activist investing is becoming more popular with hedge fund managers in South Africa and they are using machine learning to help diligence companies.

Delegates at the recent Opalesque South Africa Roundtable say that fragmentation in the South African economy provides new opportunities to generate alpha with constructive activist investing. Rather than seeking to take over company boards, South African activists have been successful at pressing for changes to the business and management compensation.

Some managers have also started to use machine learning to help narrow the field of potential targets.

"What we are doing is challenging boards on things like corporate governance, management incentivization and unlocking value," said Craig French of Visio Capital. "One opportunity that recently played out was the break up of Old Mutual. The spin-off of Quilter and unbundling of their one-third Nedbank bank stake created significant value for shareholders." French sees potential targets in hospitality, hotels and gaming, as the South African economy continues to mature.

Middle and lower middle market retail stores are also possible targets for local activists. The health care sector is under scrutiny as well as South African consumers have shown a willingness to pay more for health services and expect higher quality care.

Raphael Nkomo, of Ngwedi Investment Managers, adds that using by using machine learning, his firm h......................

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