What differentiates Southchester
For years, Southchester Investment Managers has had to answer a deceptively simple question: what exactly do you do? The answer reflects a business model that sits outside the conventional asset management mould. Southchester is a specialist fixed-income asset manager with capabilities in alternative fixed income and hedge funds, and it also offers note programmes that other asset managers and institutional investors can use within their own portfolios.
From the start, that combination created some confusion. “People have been asking, ‘What do you guys actually do?’ Usually when you’re an asset manager you only manage funds,’” says Andra Greyling (co-founder).
The distinction matters because the note programmes are part of how Southchester applies its investment expertise. Issuing notes gives the business a way to structure specialist fixed-income strategies for investors that may already be working within defined institutional mandates. That has allowed Southchester to build solutions that other asset managers can use within their own portfolios.
Why Southchester chose a different route
Most traditional South African asset managers operate predominantly in the long-only space. In simple terms, a long-only manager can either buy an asset or choose not to buy it, while strategies and techniques employed by Southchester sit outside that conventional approach. Much of the capital in the local asset management market comes from pension and retirement funds, which also means managers are operating within specific investment rules. By combining two or three asset classes you can potentially create an attractive risk reward offering to such investors.
Southchester chose to focus on specialist strategies rather than enter an already crowded long-only market. As CIO Jeleze Hattingh explains, “We don’t want to compete with the long- only managers. We want to give them something that they can use in their portfolios.” That changes the relationship with other asset managers, because those managers can become investors in Southchester’ s note programmes.
Jeleze describes the idea as “taking a strategy that we’re good at and packaging it in such a way that other funds/investors can benefit from it”. That packaging matters because institutional investors need instruments that fit within their own mandates and operational frameworks. The note structure gives Southchester a practical way to make specialist strategies available in a form those investors can hold.
Southchester (RF) was designed for institutional liquidity
The first note programme was Southchester (RF) Limited. Institutional investors and long-only asset managers often have a portion of their portfolios that needs to remain highly liquid, and that cash may traditionally be placed on call with a bank. Call money is exactly what the name suggests: money that can be called back when the investor needs it.
When Southchester began issuing notes, it saw an opportunity to improve the return available on that highly liquid portion of an institutional portfolio while retaining a conservative risk profile. Andra mentions that large institutional investors typically earn around repo minus five or ten basis points from banks, while Southchester aims to offer repo plus. That means a potential improvement of around 15 to 20 basis points, which helps explain the original commercial logic.
Jeleze experienced the proposition from the investor side before joining Southchester. At a previous asset manager, her investment company was among the early investors in Southchester call bonds. “When a portfolio has cash, it must be liquid, it must be of a high quality, and I can’t take a risk that I’m not going to get it back. If I can get a margin above traditional call money of about 0.2% or better, I’m winning,” she says, describing why her previous employer chose Southchester.
There are also mandate constraints to consider. Some institutional investors are only permitted to place call money with specified large banks, so Southchester (RF) will not be available to every investor. Its role is more specific: it provides an option for investors whose mandates allow them to hold this type of commercial paper.
What sits behind Southchester (RF)
Southchester (RF) Limited is a ring-fenced, insolvency-remote public company. It issues commercial paper and invests the proceeds in a managed fixed-income portfolio, with Southchester Investment Managers acting as portfolio manager. On 31 July 2026, Southchester (RF) had R4.7 billion in assets under management. Its current form of issuance is senior secured commercial paper with a minimum investment of R1 million. This will soon change to a minimum of R12.5 million as a result of new legislation. To provide further protection to investors, Southchester (RF) must always maintain a first loss capital buffer of at least R100 million
The current mandate is deliberately narrow. The portfolio focuses on high-quality, liquid fixed-income instruments and applies stringent credit criteria alongside low interest-rate duration and low sensitivity to spread risk. Jeleze describes the result as intentionally conservative.
The first question an investor asks is always, “How can I lose my money?”, she says. “You lose your money if the credit counterparty goes belly up and defaults. That’s why we invest in the SA government and SA banks.” Jeleze adds that the current Southchester (RF) mandate avoids foreign-currency exposure and only invests in rand-denominated assets.
The mandate has also become more restrictive over time. GCR noted in its 2025 assessment that the investment universe had been tightened from May 2024 and had become comparable with peer money market funds. That gives useful context to Jeleze’s description of the portfolio as deliberately conservative.
How the risk structure works
Risk management starts with the quality and liquidity of the underlying assets. GCR describes the vehicle as investing in high-quality, liquid and rated money-market instruments, with current income, capital preservation and liquidity central to its objective. The current factsheet also shows that the portfolio is focused on South African government and major bank exposure.
The aforementioned R100 million capitalisation provides an additional layer of protection. Gregg Bayly, Southchester’s co-founder, describes the capital behind the structure as a first-loss buffer. Under the programme documentation, equity absorbs losses before senior debt.
Operational separation is another important part of the structure. The current factsheet identifies Absa Bank as custodian and Peresec Fund Platform as administrator. Gregg and Andra explain that the investor’s cash and securities move through the formal settlement and custody infrastructure, with Southchester Investment Managers focused on managing the portfolio.
The securities are held electronically and settle through Strate. Gregg describes this as an important safeguard because the settlement system ensures that the payment and the security being purchased are exchanged through the formal market infrastructure. Andra explains the same process from the investor’s perspective: the electronic asset is delivered into the custody account, while the corresponding cash payment moves through secure settlement, within a dematerialised system.
In June 2025, GCR affirmed Southchester (RF)’s national-scale fund rating at AA(ZA)(f), with a Stable Outlook. The July 2026 factsheet classifies the product’s risk profile as low. GCR notes that its fund rating addresses credit risk and does not cover all investment risks, including liquidity, market value and price volatility.
Northchester (RF) extends the model
Southchester’s second note programme, Northchester (RF) Limited, applies the same structural capability to a different fixed-income opportunity. Northchester (RF) issues one- to five-year floating-rate notes and invests the proceeds in a broader portfolio of high-quality fixed-income assets.
Its objective is to earn a reasonable spread above the spread at which it issues commercial paper to clients, while complying with stringent credit and term criteria and maintaining low duration and low sensitivity to spread risk. Investors hold senior commercial paper and receive daily disclosure of the portfolio’s credit exposure.
The investment universe includes sovereign exposure, major South African and international banks, as well as qualifying corporates. This gives Northchester (RF) a different role from the call and short-dated Southchester (RF) proposition, because it operates further along the investment horizon and allows Southchester to apply its specialist fixed-income expertise across a broader set of assets.
On 31 July 2026, Northchester (RF) had R2.5 billion in assets under management. Certain of the issuance is listed on the Integrated Securities Exchange (I-Ex) and all issuances, listed or unlisted, are dematerialised and settled through Strate. The maturity profile also reflects its longer-term issuance role.
Andra describes Northchester (RF) as an evolution of the original offering, blending Southchester’s hedge fund expertise with the note-issuing capability. Northchester (RF) remains a specialist fixed-income commercial-paper programme, giving Southchester another way to apply its investment expertise to a different institutional need. That provides the business with an alternative way to use the same issuing capability for a different investor need. It also shows how the model has developed beyond the original call proposition.
Why issue notes at all?
Financial services are highly regulated, and issuing commercial paper requires a specific legal and regulatory framework. As Gregg explains, a company cannot simply start accepting money from the public in the way a bank does. Both Southchester (RF) and Northchester (RF) operate within the relevant Banks Act framework for issuing commercial paper. That framework shapes the form in which the notes can be issued.
That framework also explains why terminology matters. Economically similar debt instruments may be treated differently under different pieces of legislation because their legal definitions differ. Southchester has built its note programmes to operate within those requirements.
For Southchester, that structuring capability sits alongside the investment-management capability. Therefore, one capability determines what the portfolio is trying to achieve and how risk is managed, while the other determines how investors gain access to it. Both are part of the same proposition.
What this says about Southchester
Southchester’s model makes more sense once the note programme is viewed as the vehicle through which the investment strategy reaches the investor. The underlying capability comes from the asset manager’s understanding of fixed income, credit and portfolio construction, while the note structure allows that expertise to be packaged in a form that other institutions can use within their own portfolios.
Southchester (RF) began with a need for call money and short-term liquidity, while Northchester (RF)extended the model into a broader, longer-term specialist fixed-income opportunity. In both cases, the starting point was a specific investor need that Southchester could address through its asset-management and structuring expertise.