Section 12J – The “fund”amentals of Section 12J
“fund”amentals | Section

Section 12J – The “fund”amentals of Section 12J

*This content is brought to you by Jaltech Fund Management 

By Jonty Sacks*

Over the past 5 years, Section 12J funds have become an increasingly popular tax shielding mechanism for investors, allowing them to significantly reduce their capital gains or income tax liabilities. However, the attractiveness of a Section 12J investment is largely dependent on the investment fundamentals, such as historic performance and the nature of the underlying investments.

Jonty Sacks

In the earlier years, many Section 12J funds were associated with numerous drawbacks such as unreasonable performance fees or an inadequate pipeline of investments. As a result, these funds found themselves losing significant market share due to competing funds outperforming their returns.

To ensure that an investor’s next Section 12J investment has the basic fundamentals in place to generate positive returns, investors may want to compare the following investment fundamentals which are inherent in the Infinity Anchor Fund before investing.


Exiting the investment at the end of the 5-year term is potentially amongst the biggest risks to investors. Investors should therefore be mindful of the exit strategy that the Section 12J fund has in place, so that the risk and likelihood of exiting soon after the 5-year term, is clearly understood.

Infinity Anchor Fund’s exit strategy is aligned with its underlying investee company’s strategy, in that the underlying asset rental contracts within the investee companies can easily be sold to financial institutions, thereby unlocking liquidity within the investment.

Track record of performance

Section 12J funds have historically been guilty of promoting the tax benefit as opposed to the performance of the underlying investments. Make sure you understand how the investment has performed historically.

Infinity Anchor Fund is one of the few Section 12J funds with a positive and proven track record, which is supported by historic returns. Infinity Anchor Fund’s diverse portfolio has generated impressive returns and is on track to achieve a return of approximately 15% p.a. (inclusive of the tax benefit), for its 2018, 2019 and 2020 investors.


Performance fees charged at the end of the investment term can significantly erode investors’ returns. Investors would benefit by seeking to understand the performance fees and by avoiding investments that charge a performance fee on the growth of the investment and on the tax benefit. This is commonly referred to as net investment performance fees.

Infinity Anchor Fund charges a performance fee of 20% on the growth of the investment only and this fee is only paid once the investor exits the investment.

Risk profile

It’s critical that investors understand the risk profile of the investment and that the risk profile makes sense in relation to the investor’s current portfolio of investments.

Infinity Anchor Fund is of the view that its risk profile is on the lower end of the risk spectrum. This is largely due to the fact that Infinity Anchor Fund invests in businesses that are backed by movable assets that generate stable revenue either through the rental of these assets (such as water metering rental companies, industrial washing machines etc.) or through long term contracts (such as an investment in solar or fibre infrastructure). 

Dividend income

Section 12J funds are permitted to distribute dividends to investors during the investment term. For investors who are looking to generate income during the investment term, Infinity Anchor Fund has a track record of paying semi-annual dividends of 5.1% p.a. since inception.

Investor funding

Given that many taxpayers aren’t in a financial position to make a tax-deductible investment in June, Infinity Anchor Fund 2021 has arranged the support of a financial institution to provide low-interest rate loans to investors who are looking to invest in Infinity Anchor Fund 2021, before the end of June.

Taxpayers can now access funding of up to 95% of the investment amount at an initial interest rate of 4% p.a.

Capital protection measures

Infinity Anchor Fund has a number of risk mitigation measures in place to protect investors’ capital. As an example, in an investment, Infinity Anchor Fund requires that with capital deployed in investee companies, the co-shareholders invest alongside Infinity Anchor Fund to provide a loss protection buffer. In all cases, where co-shareholders invest alongside Infinity Anchor Fund, their capital will be at risk before investors’ capital. Alternatively, co-shareholders or third parties are required/sought to provide a guarantee, to yield a certain minimum return to Infinity Anchor Fund each year.

Investment/deployment rate

It is unlikely that investors will achieve the advertised targeted return if their capital is not invested within a reasonable period. Failure to do so results in a “cash drag” and consequently, low returns with a potentially longer than expected investment term.

Infinity Anchor Fund has invested 100% of capital for its 2018 and 2019 investors and anticipates to be 100% invested for its 2020 investors by the end of June.

The above sense checks will place an investor in a far better position to make an informed investment decision. Surprisingly, a large number of Section 12J funds lack these characteristics. Given the wide variety of Section 12J funds in the market, investors can easily filter their choices when considering their next Section 12J investment, by requesting a fund fact sheet and by requesting information needed to determine whether the above fundamentals are present.

Infinity Anchor Fund 2021 will be raising capital during June, with a minimum investment of R100 000. Should investors be looking to fund their investment, Infinity Anchor Fund 2021, can facilitate funding of up to 95% of the investor’s investment amount.

  • Jonty Sacks – Partner at Jaltech Fund Managers. 

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