Why the CPF has outperformed for three decades

In a sector often characterised by short investment cycles and ‘quick-turn’ strategies, the longevity and consistency of Futuregrowth’s Community Property Fund (CPF) stands out. As the fund approaches the 30-year mark, its track record places it in rare company. “I’ll be honest,” says Smital Rambhai, Portfolio Manager of Comprop, “I don’t know of any fund in the direct property space that’s been around this long – and delivered a total return of 12.8% per annum for nearly three decades.”

That performance wasn’t created through opportunism or short-term bets. It has been shaped by the opposite: patience, reinvestment discipline and a willingness to forgo shortcuts. “We’ve seen other funds run as closed-ended vehicles where they take a seven- or 10-year view and then have to sell the assets,” Rambhai explains. “That drives short-term optimisation and a reliance on the market cycle being in your favour. We reinvest into the properties continuously, because the whole point is long-term sustainability.”

A fund with heart

While investment narratives often gravitate toward global markets, premium assets and concentrated urban hubs, the history of Futuregrowth’s CPF is different. It’s a story rooted in South Africa’s social and economic transition, built on the simple but powerful idea that well-run retail infrastructure in underserved areas can deliver both commercial returns and community upliftment. 

The fund’s origins stretch back three decades, to a moment of national optimism and structural reinvention. “If you look at when the fund was started in 1996, it was actually based on someone’s master’s thesis,” recalls Rambhai. “South Africa had just entered a new era. There was euphoria after apartheid ended, but also a realisation that there had been years of underinvestment in township and rural areas.”

Construction underway at the Bridge City Mall development in 2008, serving the INK (Inanda, Ntuzuma and KwaMashu) community northwest of Durban.

At the time, the opportunity was clear: millions of South Africans lived far from reliable access to essential goods and services. Simple errands such as buying groceries, securing banking services and paying bills required expensive travel. In many rural areas, even accessing SASSA pension payments meant travelling more than 100 kilometres, eroding a significant portion of already modest grants. The CPF thesis was elegant: bring essential retail infrastructure closer to where people actually live. 

Retailers at Alexandra Plaza in Johannesburg, part of a network of community shopping centres designed to provide essential services closer to residents and reduce the need for costly travel.

But these were not envisioned as glossy mall developments; rather, as practical community anchors designed to reduce household costs and strengthen local economies.

Closing structural gaps

While the social premise was strong, the fund was never built as a charity initiative. “Our responsibility to pension funds is that we always put commercial returns at the forefront,” Rambhai emphasises. “That’s our first assessment. Does the property generate sufficient income, is the yield sustainable and will it deliver returns over the next 20 years?”

What often gets lost is how deeply commercial outcomes and social outcomes intersect in this segment of the market. Job creation is a prime example. Construction creates immediate employment, but once a centre opens, retailers, service providers and centre management also employ long-term staff. 

Pick n Pay employees at Thulamahashe Plaza in north-eastern Mpumalanga. Located along the township’s main thoroughfare, the centre provides accessible retail and employment opportunities within the local community.

Over time, Futuregrowth realised that local employment was socially desirable and financially necessary. “When I took over the fund 13 years ago, only about 50% of staff in our centres came from the local community,” Rambhai notes. “The result was weekly shutdowns by residents who didn’t feel represented. That obviously affects rentals and operations.”

The solution was structural, deliberate and consistent. Today, more than 84% of all staff employed in CPF centres come from the immediate community. “If you support the local community, they support the shopping centre,” he says.

School children receive supplies from Heidelberg Mall, reflecting the CPF's commitment to supporting and uplifting the communities in which it operates.

Liquidity in an illiquid segment

One of CPF’s strongest and most competitive advantages has been liquidity. Unlisted property is traditionally associated with limited exit opportunities, yet CPF’s size, scale and structure have allowed it to achieve a level of liquidity unusually high for its asset class. “We did some research recently,” says Rambhai. “At R9.3bn in assets, we can offer investors better liquidity than listed property stocks outside the top 10 by market capitalisation on the JSE.” In other words, CPF’s units can regularly be traded more efficiently at net asset value than many listed property shares, due to its scale and liquid cash it generates which is an important consideration for institutional investors balancing long-term allocations with short-term liabilities.

A track record of industry leading performance

For three consecutive years – 2017, 2018 and 2019 – the fund was recognised as South Africa’s best-performing specialist property fund, based on MSCI’s direct property returns. The awards were discontinued during Covid, much to the team’s disappointment. “It gave us a unique benchmark that would enable us to gauge if we were better than our competitors or how far behind we were,” Rambhai says. Beyond the numbers, CPF has helped reshape the township retail market itself. Early developments were often basic strip malls with minimal finishes. Over the past decade, the fund has deliberately upgraded design standards across its portfolio. “Our shoppers shouldn’t have a different experience depending on where they live,” Rambhai notes. 

Children in the play area at Boitekong Mall, Rustenburg - part of CPF’s drive to deliver consistent, high-quality retail environments across its portfolio.

Navigating crisis through deep market understanding

The unrest in KwaZulu-Natal in July 2021 saw one of CPF’s flagship centres in KwaMashu, Bridge City Shopping Centre, valued at approximately R800m, completely destroyed during the riots. “We were left with a shell,” Rambhai recalls. “Just a roof and walls.”

But the fund’s response revealed both its resilience and its understanding of township dynamics. Well before the riots, CPF’s audit and risk committee had already flagged civil unrest as a key exposure, especially following the economic shocks of Covid-19. Unlike many property owners, they fully insured the entire portfolio for riot-related damage and loss of income. “Our risk assessment process informed us that the communities in which we operate were most vulnerable. People living hand-to-mouth can’t simply stop working and still get paid. When desperation rises, unrest becomes more likely.”

The decision – costing about R260 000 in premiums at the time – proved transformative. When the centre was destroyed, CPF recovered both the physical damage and the R160m in lost rental income. “Our financials weren’t hit. We carried on as if nothing had happened financially due to the cover we had in place,” he says. But what truly defined the moment was the decision to rebuild. “Investors asked whether we were serious about returning,” Rambhai says. “My answer was simple: this community needs the mall. Thousands of innocent people just want to work and support their families, as well as have access to affordable goods and services. Getting the retailer trading again was critical and we could not have done this without our partners, Capital Land, who provide the fund with property management services.”

At the reopening of Bridge City Mall in 2023, Smital Rambhai and centre managers mark the recovery of CPF’s flagship centre following the unrest.

The partner behind Comprop's success

Behind every successful shopping centre is a property manager who knows the business inside out, and for Futuregrowth that partner has been Capital Land for just over the past decade. Running township and rural shopping centres takes local knowledge, strong relationships with both national retailers and small traders, and a real commitment to the communities these centres serve. Capital Land’s hands-on approach on the ground has kept the centres well-tenanted, and well-maintained, which has supported the strong returns Comprop has delivered to its pension fund investors. Their highly skilled team has ensured the delivery of solar, battery and sustainable water solutions to the centres in the fund.

Aerial view of Alexandra Plaza, with rooftop solar installations supporting operations and reducing reliance on the national grid.

Opportunities and new markets

As township retail becomes more competitive, new entrants are driving up prices. “Everyone has seen the returns and now they’re flocking into the market,” Rambhai says. “But some are overpaying for assets. If you overpay, you risk capital loss and recovering that in property is extremely difficult.” CPF is responding with two strategic pivots:

• Development partnerships
  Rather than competing for overpriced existing centres, CPF is increasingly working with development partners who manage on-the-ground construction risk. 

• Launching a new fund
  Futuregrowth is preparing to introduce another property strategy focused on emerging real-asset themes: data centres, fibre networks, urbanisation-driven storage solutions
  and more. 

Rambhai has also spent the last two years advocating for tax neutrality with National Treasury for unlisted property funds, which would mean parity with listed REITs. “We currently pay capital gains tax when we sell properties,” he explains. “If we had the same treatment as listed REITs, we could unlock a whole new pool of pension fund capital.”

Even under the current rules, CPF has outperformed many listed peers over the past decade. “If not for capital gains tax, our long-term returns could be closer to 14% or 15%,” he says. “And we’ve still outperformed the listed property sector despite paying tax they don’t.”

This article was originally published in the May issue of Money Marketing SA.