Category: Inside Private Equity


Innovative Co-Investments with JTOO Ventures & FWJK Developments

We’re officially announcing today an extremely exciting partnership between our firm and FWJK Developments, the largest private property developer in South Africa. FWJK Developments has, for the past two years running, been awarded the prestigious PMR Golden Arrow award in the top Diamond category for the best property developer in South Africa.

Illovo Central – Johannesburg, South Africa

Our partnership is set to bring a pipeline of incredible real estate co-development opportunities to the US investor market. And we couldn’t be more thrilled to be committing to 10 years of co-investments together with FWJK, who we consider to be one of today’s leading property developers in the world.

Over the last 10 years, FWJK has successfully developed over R4.6B of beautiful medium-to-high rise properties, yielding large returns on equity to their shareholders. FWJK’s mission is to be Innovators of Practical Development Solutions. They value beautifully designed buildings which are economically feasible yet attractive to potential investors.

35 on Main – Cape Town, South Africa

As FWJK’s exclusive US based private equity firm, we’re so delighted to offer US investors access to this in-demand and high growth market.

South Africa is currently the African continent’s second largest economy by GDP and is a gateway into many other lucrative opportunities. And with FWJK’s offices in the country’s main metropolitans: Cape Town, Johannesburg, and Durban, we are strategically positioned to leverage all of the very best opportunities that South Africa has to offer its investors.

Ridge 8 – Durban, South Africa

As a native born South African living in the US, our Founder & Managing Director, Justin Too, has personally witnessed South Africa’s rapid growth and innovations. And he believes the opportunities there are limitless to those looking for global exposure in what we believe to be the best asset class for savvy investors.

South African private equity real estate is our specialty at JTOO Ventures, and together with FWJK’s experience & expertise, we are positioned to offer the world a decade of some of the most elegant properties ever developed.

We’re so excited to co-develop and co-invest together.

And together, make history!

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Buy-and-Hold Investing: The #1 Choice for Savvy Investors

Attempting to time the market frequently leads to underperforming portfolios and disappointed investors. Yet employing buy-and-hold investment strategies, incorporating long-term alternative investments, and carefully monitoring progress against specific life goals can lead to a wealth-generating portfolio with the potential for long-term success.

Investopedia puts it this way: “If volatility and investors’ emotions were removed completely from the investment process, it is clear that passive, long-term (20 years or more) investing without any attempts to time the market would be the superior choice.”

Image credit: Betterment.

As the best gardeners know, reliable, long-term growth takes time and careful cultivation. The same is true for a successful portfolio: investors need long-term professional management that works behind the scenes, along with a diverse blend of stocks and alternative investments such as private equity real estate. At JTOO Ventures, we plant capital into fertile, high-yield opportunities so our investors can passively monitor their growth and free themselves from the stress and anxiety of trying to time the market.

The Unbearably High Cost of Market Timing

Market timing is an investment strategy in which investors attempt to predict the market’s future performance. Usually, investors make these predictions based on speculation, past performance, or mathematical assumptions. Unfortunately, studies have shown that “past performance was not an indicator of future outcomes 96.22% of the time,” hence why most mutual funds come with fine print that reads: “past performance is not an indicator of future outcomes.”

Image credit: Wake Forest University.

Still, many investors blatantly reject well-documented research and continue to predict how the market and specific industries and funds, will perform. Using those predictions, investors then make decisions about when to be in the market and when to get out. Although market timing allows for potentially higher returns, there are a number of reasons why the practice is not recommended even for professional investors.

According to Merrill Lynch, “One of the biggest costs of market timing is being out when the market unexpectedly surges upward, potentially missing some of the best-performing moments.” Essentially, if an investor misreads the market and isn’t invested during peak months, they could incur huge losses.

In addition, even the brightest minds don’t have a great track record when it comes to analyzing and predicting market trends. Data from numerous sources, including the SPIVA U.S. Scorecard from the S&P Dow Jones Indices, shows that active managers frequently underperform. During a 15-year period, “92.2 percent of large-cap managers missed their marks, while the number was 95.4 percent for mid-caps and 93.2 percent for small-caps.” In Dalbar’s 22nd Annual Quantitative Analysis of Investor Behavior, the data “shows that when investors react, they generally make the wrong decision.”

Image credit: Gensler.

Disciplined Advisors Prefer Buy-And-Hold Investing

With the well-documented pitfalls of market timing, many sophisticated investors are now demanding buy-and-hold investment strategies. As the name suggests, this long-term approach involves buying and holding investments for a long period of time, which allows the market to move through its natural cycles without negatively impacting your portfolio.

Buy-and-hold investing is an excellent complement for goal-based investors, as it requires looking toward the future instead of being fixated on outperforming the stock market today. Hugely successful investors like Warren Buffett and Peter Lynch are often remembered for their buy-and-hold investment approaches. Their strategies focus on the long-lasting, underlying value of each investment, not its day-to-day market swings.

In a CNBC interview, Buffett discussed why buy-and-hold strategies are the most successful approach. According to the billionaire and philanthropist, “The money is made in investments by investing and by owning good companies for long periods of time.”

Of course, the buy-and-hold investment strategy still requires ongoing maintenance and professional management. Yet this long-term strategy has proven to be significantly more successful than attempting to time the market. The Dalbar study clearly finds that disciplined investors with long-term time horizons are more likely to reap the rewards that the market has to offer.

Menlyn Link – Johannesburg, South Africa

Why Long-Term Investors Choose Private Equity Real Estate

So where do buy-and-hold investors like to put their money? Actor Will Rogers puts it best: “Don’t wait to buy real estate. Buy real estate and wait.” Private equity real estate is extremely well-suited for long-term, buy-and-hold investors. Since real estate prices aren’t correlated to the cycles of stocks and bonds and are driven more by supply and demand than market speculation and timing, returns are higher compared to other alternative investments with similar expected risk.

Not only is real estate less volatile than the stock market, it’s also more predictable: many investors trade stocks speculatively, but when you invest in real estate, you are investing in a physical piece of land—a tangible building with a solid underlying value. As the world population continues to rapidly grow, so does the demand for high-quality real estate, especially in the main metropolitans of the fastest growing cities.

When exploring how the length of an investing period impacted annual returns from 1928 to 2014, Betterment clearly demonstrated: “Amongst all the edicts investors should heed, one stands out above all others: It’s time in the market that builds returns, not market timing.”

Subscribe to discover how real estate can get you valuable time in the market for your portfolio.


Real Estate: The Alternative Investment Your Portfolio Needs to Win

Menlyn Link – Johannesburg, South Africa

As humans, we tend to stick with what we know and trust. Unfortunately, this tendency can prevent us from pursuing once-in-a-lifetime opportunities, taking calculated risks, and achieving our goals. At JTOO Ventures, we frequently notice this issue when we meet with prospective investors and analyze their portfolios. Most individuals simply aren’t taking advantage of the lucrative alternative investments that are available.

Donald Calcagni, chief investment officer at Mercer Advisers, a registered investment adviser based in Santa Barbara, California, sums it up pretty well: “People stick with stocks and bonds because that’s what they see every night on the evening news.”

Just because stocks and bonds are so well known, doesn’t mean they’re providing the best return on investment, which is why investment managers around the globe are seeking alternative investments to diversify their portfolios and outpace public equities. Nearly all top financial advisors recommend alternative investments for high net worth individuals, including a mix of private equity, hedge funds, managed futures, real estate, commodities, and derivatives contracts.

Real Estate: The Shining Star of Alternative Investments

“There’s no way to outperform the stock market by investing only in the stock market,” Calcagni says. So in order to achieve higher returns and surpass the limitations of the stock markets, investors are turning to alternative investments. This trend can be seen in a variety of sectors. For example, according to the National Association of College and University Business Officers, “managers of higher-education endowments now allocate a majority of their assets to alternative investments.”

Private equity real estate is quickly becoming the alternative investment of choice for sophisticated investors worldwide. Investment managers are incorporating real estate into their portfolios for superior returns at lower volatility. In its 2018 Public Pension Study, the American Investment Council (AIC) analyzed investment returns by 163 U.S. public pension funds and found that on a dollar-weighted basis, U.S. public pension funds invest 8.1% of their portfolios in real estate, with another 8.6% of the portfolios in private equity–a combined total of $578 billion. So why all the hype surrounding private equity real estate investments?

Since real estate prices aren’t correlated to the cycles of stocks and bonds, returns are higher compared to other alternative investments with similar expected risk. Plus, property values and rents generally keep pace with inflation. Rental income is also an important factor, as it makes up about half of the returns on real estate (appreciation is also a factor). Yet according to Brian Davis, “the most interesting case for real estate lies in its risk-reward ratio.”

Numbers Don’t Lie: Real Estate Is a Great Investment

When a team of economists from the University of California, Davis, the University of Bonn, and the German central bank reviewed over 145 years of economic data from 16 countries, they found that residential real estate provided extremely high returns with low risk. In fact, when compared to equities, residential real estate, short-term treasury bills, and longer-term treasury bonds, residential real estate had the best returns, averaging over 7 percent per annum. When measuring the investment’s Sharpe ratio (essentially a risk-reward ratio), real estate averaged 250% better than treasury bonds (0.2) and 185% better than equities (0.27).

Breaking Barriers: Why More Investors Are Choosing Real Estate

Numbers don’t lie, and the numbers are all pointing to real estate as an excellent alternative investment opportunity for discerning investors who seek higher returns. So why isn’t everyone investing in private equity real estate? Traditionally, there has been a high barrier to entry, which has kept many investors out of the residential real estate space: “The minimums to get into a quality fund are often too high for most investors — usually $250,000 per fund,” says Calcagni.

So while many investment managers have been championing real estate investments for some time, many investors simply haven’t been able to play ball.

However, our goal is to provide new ways of co-investing with lower minimums for savvy investors who understand the strategy of alternative assets such as private equity real estate and want to diversify their portfolios with higher return, lower volatility assets. Keeping factors such as risk tolerance, tax situation, time horizons, and objectives in mind, we can help you position your portfolio to win with a private equity real estate investment.

Subscribe to learn more about private equity real estate.

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