MARC HASENFUSS: Reinet’s lucky pension putter

I don’t have an exact date, but I think I officially packed away my Wilson Deep Reds — and my beloved vintage Spalding 2 iron — about 15 years ago. The chaps in my regular golf four-ball emigrated en masse.

I loved our weekly hacks — especially on diabolically difficult courses such as the old King David in Mowbray (where I don’t think I ever broke 80). Sans my old (s) parring partners, my enthusiasm waned quickly. I was less inclined to deal with the stresses of playing the weekly Saturday club competitions.

I did, once, place second in the A division for a medal competition (where you count shots until your ball is in the hole) at my windswept home course, Clovelly. I carefully wielded mostly a 6 iron and a lob wedge. The game of my life. I won a bottle of Klipdrift — which really raised my hackles and probably hastened my retirement …

Maybe I was hasty? Golf, I see, is a power game. Maybe there would have been space for a golfing journalist in the recent White House junket. Certainly golf carries considerably more clout than my current pastime, tennis … unless I missed Kevin Curren or Johan Kriek standing in the wings at the Oval Office tête-à-tête.

In any event, I was mostly impressed — save for a few cringeworthy utterances — with enthusiastic golfer and billionaire Johann Rupert’s cameo. I know some of my fellow South Africans feel Rupert should never have been in that diplomatic contingent — especially not front and centre. But power and golf figure large in Donald Trump’s life … possibly in equal measure.

Just the other day he batted away questions around a generous gift with an anecdote about Sam Snead’s advice on the “gimme” putt. Statesmanship that’s completely out-of-bounds. As expected, President Cyril Ramaphosa was as measured as a 3 iron off the tee. But having a Rupert rescue club in your bag — replete with expert caddies Retief Goosen and Ernie Els — on a diabolically difficult course was probably not the worst tactic, especially if there was a scramble to save political par.

While Rupert had quite a bit to say to Trump, the Reinet chair was more reticent in his comments accompanying the investment company’s just-released year-to-end-March financial report. Reinet — where I am a shareholder — sold out of its remaining position in British American Tobacco (BAT) between December 2024 and January this year. Not insubstantial proceeds of €1.63bn were raised, pushing Reinet’s year-end cash holding north of €1.8bn.

This is equivalent to R36bn or 37.5% of Reinet’s market value on the JSE. Shareholders would no doubt be keen to know whether this chunk of change might be mobilised for a special dividend, share buybacks or acquisition plans. But Rupert is giving nothing away. He cited the potential for continued market volatility and global instability for sticking with a “measured approach to capital deployment”.

This means supporting Reinet’s current portfolio investments “while selectively exploring new opportunities and partnerships that promise long-term capital growth”. That seems to suggest a special dividend is off the table — noting also that the year-end dividend payout was hiked by a sliver.

BAT was a smouldering holding for Reinet. Since late 2008, when Reinet was formed, it has received more than €2bn in dividends and the BAT shares were offered as collateral to secure borrowings for investments over the years. Reinet points out that since March 2009, the investment in BAT generated an annualised return of 11% — not too shabby, especially considering Reinet is premised largely on “capital preservation”.

What BAT’s dividends and leverage did bring to Reinet was an inspired investment in UK financial services specialist Pension Insurance Corp (PensCorp). One reassuring aspect — aside from PensCorp’s encouraging growth trajectory — is that dividends are flowing. Late last year PensCorp paid an ordinary and special dividend that amounted to £198m in Reinet’s hands. With new business premiums increasing from £6.9bn in financial 2023 to £8.1bn in 2024, I don’t see why Penscorp’s dividends shouldn’t continue to flow strongly.

Rupert notes in his comments that “the pension risk transfer market is dynamic and presents opportunities for many years to come”. He also points out that the increase in value of PensCorp, coupled with the dividends received in the year, topped €500m — the largest driver of the increase in Reinet’s NAV this year. PensCorp now represents almost 54% of Reinet’s €6.9bn NAV.

If the cash holding is stripped out, then PensCorp looms even larger, representing more than 70% of the value of the collective investment portfolio holdings. To give further perspective, PensCorp’s annual gain alone is close to 45% of the collective value of Reinet’s quartet of next-biggest investments: Trilantic (€424m), TruArc Partners (€354m), Coatue Funds (€198m) and the Asian private equity holdings (€178m).

One could argue, diplomatically, that there is a structural imbalance — making it very difficult to now view Reinet as anything but a proxy for PensCorp. The PensCorp value plus Reinet’s cash is currently worth more than the group’s JSE market value.

I don’t think many investors will get too excited if a portion of the cash is spread into the existing investment funds. Though I do have my hopes for tech-inclined Coatue surprising on the upside … Frankly, as long as PensCorp keeps pumping, I won’t have sleepless nights fretting about structural imperfections. What will keep me awake, though, are the alarming utterances that come flying out of the Oval Office with disturbing regularity.