Fairtree Capital have recently launched the Fairtree Capital Hospitality Fund, a South African investment vehicle which enables investors to participate in the fast growing hospitality sector whilst enjoying legislated tax breaks.
The tax deductions, which could be significant on this fund, could make it an extremely attractive investment proposition, according to Portfolio Manager, Joe Bester.
The tax incentivized Venture Capital Company (VCC) was implemented to give small and medium-sized enterprises access to equity finance.
“Taxpayers who invest in a registered VCC are entitled to a 100% tax deduction on monies invested as the entire amount invested in the Fund is deductible from the investor’s taxable income in the year that it is made. As long as the investment is held for five years, this will result in a potential tax saving of up to 45% for individuals, 45% for trusts, and 28% for companies (being the reduction in marginal taxes payable) on their investment,” said Bester.
The fund plans to buy hotels that are positioned to benefit from the growth of local and international tourism and the fund will develop its investments into efficiently structured hotels which will operate at optimum capacity.
“The Fund uses its expertise, in association with its hotel management partners, Providence Hospitality, to re-position and restructure hotels for growth and to capitalise on the changing accommodation market,” he said.
“We see this as a real opportunity to identify properties that will benefit from Fairtree Capital’s investment and operational expertise whilst potentially delivering a good alternative return to investors,” added Bester.
With a minimum investment of R500 000, Fairtree Capital investors will acquire an equity share in a private limited company, benefiting from one of the lowest management fees of all listed 12J structures.
“We are targeting Fund growth of CPI + 5-10% per annum, which together with the Fund’s low correlation with traditional asset classes, we believe will be an attractive proposition to investors.” said Bester.