In this insightful conversation, Dino Zuccollo, Director at Westbrooke, shares his expertise on the growing importance of alternative investments for South African investors. As traditional equity and bond portfolios face increasing volatility, Zuccolo highlights how private debt offers a more stable and diversified approach to growing wealth and Westbrooke’s opportunities in this space. He also discusses the evolving global investment landscape, the potential risks of new wealth taxes, and the benefits of working with a skilled wealth advisor.
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Highlights from the interview
In this in-depth interview, Dino Zuccollo, Director at Westbrooke, discusses how South African investors can capitalise on global alternative markets to diversify and protect their portfolios. With more than 20 years of experience, Westbrooke focuses on providing “South African-connected capital” access to private markets, such as private debt, equity, hybrid capital, and real estate. Zuccollo explains that alternatives have gained popularity as traditional 60-40 equity-bond portfolios lose effectiveness, especially with the recent trend of rising correlations between equities and bonds.
He emphasises that, for many high-net-worth individuals, the shift toward alternatives is driven by the desire for better risk-adjusted returns, diversification, and reduced exposure to market volatility. With approximately R13 billion in assets under management and over 3,000 investors, Westbrooke has carved out a niche in the private markets space, providing tailored solutions to meet diverse investor needs.
Zuccollo also delves into how South African investors can participate in Westbrooke’s funds directly or through wealth advisors and institutions. He highlights the advantages of offshore investment wrappers, like endowment policies, for tax efficiency and estate planning.
Looking ahead, Zuccollo discusses the challenges of the South African tax environment, including potential wealth taxes and how careful strategic planning with a wealth advisor can help mitigate risks. With the 2025 budget around the corner, he urges investors to reflect thoughtfully on their portfolio strategies, emphasising that long-term wealth management requires more than knee-jerk reactions to short-term changes.
Edited transcript of the interview
Alec Hogg (00:06.361)
This interview is brought to you by Westbrooke.
Alec Hogg (00:15.418)
Dino Zuccollo, a director at Westbrooke, joins us now. It’s great to talk to you again. Hopefully, we can get an update on how the whole debt market in the UK is performing. Given South Africa’s place in the international community, there’ll be more interest now. But we’re not discussing politics today; we’re talking about how to make and secure money.
For those in the BizNews tribe who may not know about Westbrooke, could you briefly describe what you guys do?
Dino Zuccollo (00:50.185)
Hi Alec, and hello to everyone watching. It’s always a pleasure to chat with you, and it’s nice that we can do this more frequently now.
For those of you who haven’t come across Westbrooke, it’s a business that has been around since 2004, so we’re now more than 20 years old. The business is owned by three sets of individuals: our founder, Martin Sacks; a structure called Capricorn, which is the Enthoven family (well-known in South Africa for owning Hollard and having interests in Nando’s, Ambient Hotel Group, and other assets); and then there’s involvement from the management team.
Westbrooke’s mission is to provide South African investors, or as I call them, “South African-connected capital” (because many of our investors no longer live in South Africa and might have trust structures offshore, etc.), with access to global alternatives or private markets, as I prefer to call them.
Our head office is in Johannesburg, where I’m currently sitting, but we have a team of 40 people worldwide—25 in Johannesburg, 9 in London, and a couple in the United States.
The idea is that alternatives or private markets are arguably the investment theme of the world right now in terms of the investing ecosystem. The big names globally—Blackstone, KKR, Brookfield, Apollo, etc.—are well known, but there isn’t a firm in South Africa that focuses on providing South African-connected capital with access to global alternatives. That’s Westbrooke’s mission.
We currently manage about 13 billion in assets, with over 3,000 investors and over 100 wealth management businesses allocating capital to us. We’re excited to be at the forefront of giving South Africans access to the global world of alternatives.
Alec Hogg (02:46.437)
You are South Africans, which helps a lot. How can a member of the tribe, listening to or watching this conversation, take advantage of or participate?
Dino Zuccollo (03:02.173)
There are three main ways, Alec.
The first is that you can get hold of me or a member of the Westbrooke team, and you can invest directly with us. This is probably the least complicated approach, but if you’re investing offshore, you might want to use an endowment wrapper for certain benefits. If you invest directly, you generally invest in your capacity and directly with Westbrooke.
The second and probably most popular way is through your wealth advisor. If you use an independent financial advisor or a wealth management business (as I mentioned, many already have relationships with us), they are well set up to access our products globally. If you’re looking to invest, I would challenge my advisor to ask them if they have a relationship with Westbrooke. If they don’t, gently nudge them to reach out and start building a relationship.
Lastly, we’ve also started building relationships with institutions, like multi-managers across South Africa. If you’re invested in a retirement or living annuity fund, you may indirectly have exposure to Westbrooke’s products now through the allocations made to us by those institutions.
Alec Hogg (04:17.661)
You mentioned earlier that alternative investments are becoming increasingly popular. Anyone who has money invested in equities, particularly in US equities (where we have our business portfolio), can see that it bounces around—it’s a very turbulent place, not conducive to a good night’s sleep, especially at the moment. Is this part of why alternatives like debt products are becoming more popular?
Dino Zuccollo (04:46.953)
Yes, exactly. There are probably two or three major themes behind this.
First, the traditional 60-40 portfolio model (60% equities, 40% bonds), which has been around for 50 years, worked well. When the markets did well, the equities delivered returns; when they didn’t, the bonds acted as shock absorbers for the portfolio.
However, the world entered a low-growth, high-inflation environment during the COVID era. This caused the correlation between equities and bonds to become very strongly positive. Now, when equities rise, bonds rise, too. When equities fall, so do bonds. This dynamic changes how the 60-40 portfolio works, as bonds can no longer act as shock absorbers.
Additionally, if you look at the JSE or the US market, the number of listed companies has halved since 1990, but the market caps have increased. This means money is concentrated in fewer stocks, which increases risk.
We’re seeing more investors turning to private markets to diversify their portfolios. When we asked our investor base late last year why they invest in alternatives, the number one reason wasn’t necessarily better returns (although you get better returns in private markets) but diversification and a lack of correlation to traditional markets.
Private markets play a key role in today’s highly correlated world, providing a diversifier in an otherwise risky market.
Alec Hogg (07:06.696)
A bit of a shock absorber, as you explained. You’ve lost the old shock absorber, so now you’re putting in a new one. Before we move on to the particulars, what kind of portfolio breakdown would you recommend today?
Dino Zuccollo (07:22.713)
I’ve done a lot of research on this, and the portfolio breakdown depends on various factors, such as the size of your investable assets. Generally, as the size of your portfolio increases, the allocation to alternatives should also increase.
Research from Goldman Sachs, JP Morgan, and Deutsche Bank suggests that family offices worldwide, or very ultra-high-net-worth individuals, allocate 40 to 60 percent of their assets to alternatives. In high-net-worth portfolios (where many in the tribe might fall), the range is typically 15 to 30 percent allocated to alternatives.
Alternatives include private debt, private equity, venture capital, hedge funds, infrastructure, etc. So while they do not comprise the entirety of your portfolio, a significant portion is allocated to alternatives, and in South Africa, that number is typically lower—less than 10 percent. We’re aiming to increase this allocation for South African investors.
Alec Hogg (07:56.15)
Wow.
Dino Zuccollo (08:18.889)
Yes, alternatives in various asset classes and geographies. For example, Westbrooke provides a holistic offering across multiple asset classes. We invest in private debt (which has become one of our flagship offerings), hybrid capital (a mix of debt and equity, such as mezzanine finance), real estate (direct real estate portfolios), and private equity in South Africa, the UK, and the US.
Westbrooke believes private lending is the most popular option in the current market. It allows you to extract the best risk-adjusted returns, essentially the highest return per unit of risk.
Alec Hogg (10:14.446)
Last time we spoke, that was the focus of our conversation, and it seemed to appeal to many people. Hard currency, almost double-digit (or getting close to double-digit) returns, essentially guaranteed because you haven’t had any losses before. I hope you can update us and reassure us that you haven’t had any capital drawdowns, as people in your industry call them.
Dino Zuccollo (10:40.477)
Let’s talk about the private debt asset class for a second. Westbrooke runs two funds accessible to South African investors: Westbrooke Income Plus (a hedge fund vehicle) and our offshore private debt fund, Westbrooke Yield Plus, which is marketed to South Africans under a CIPC-registered prospectus.
We lend money quicker, better, and more flexiblely than banks and focus on an underserved market segment. Since the 2008 financial crisis, banks in the UK have had stricter regulations, and lending has become expensive and complicated. So, while large banks like Goldman Sachs and HSBC lend above £20 million, Westbrooke focuses on smaller transactions, typically under £20 million, often for property owners in and around the UK.
What’s been nice about our strategy is that Westbrook Yield Plus has been running for over seven years, with 42 loans in its portfolio and an estimated net return of 8% to 8.5% per year. We’ve had no capital loss during this time, which we’re very proud of.
Dino Zuccollo (12:59.529)
That’s not to say there haven’t been events in the underlying portfolio—we’ve had a few, but the structure of our business model protects investors. We maintain diversification and good underwriting standards. We also ensure that our debt is collateralised, so if anything goes wrong, we have the property as a security cushion. The fund has also invested across multiple properties, minimising risk, and our team acts quickly when situations arise.
The key takeaway is that we haven’t had any capital drawdowns, which is the critical point. Investors can generally expect a very consistent income stream, and because we aren’t exposed to market fluctuations, our returns are more predictable than those of public-market investments.
Alec Hogg (14:09.211)
That’s reassuring. This is interesting. We could go on for much longer, but we’re running out of time. Before we close, could you give us a brief future teaser? What should investors be looking out for in the next six months?
Dino Zuccollo (14:29.708)
Westbrooke is actively expanding its offerings. We’re starting to offer more real estate and private equity investments in key global markets like the US and UK and emerging markets. Additionally, we’re developing some exciting new debt strategies. There’s been increased interest in infrastructure investments, particularly in sectors like energy and tech. We focus on providing opportunities with stable income streams and above-average returns.
We’re also focusing on geographic diversification to offer more opportunities, especially in regions with favourable regulatory and economic environments.
Alec Hogg (23:00.81)
So, reflect carefully and don’t react hastily. I like that. Dino Zuccollo, director at Westbrooke. I’m Alec Hogg from BizNews.com.
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