Bold steps needed to cat­a­pult BEE man­agers into the spot­light

• Sur­vey on black funds cites promi­nence of con­sul­tants and lack of ad­ver­tis­ing as ob­sta­cles

Business Day - - THE BOTTOM LINE - STEPHEN CRANSTON

There was a pre­dictable re­ac­tion to the launch of the 27four an­nual black as­set man­age­ment sur­vey last week: change has been too lim­ited, and trustees and con­sul­tants are to blame.

In fact, there have been some achieve­ments. It might not seem much that 9% of in­dus­try as­sets to­talling R416bn is man­aged by black firms. But in the 1990s wave of new black man­agers, the share peaked at about 2.5%.

There is al­ways a high at­tri­tion rate among bou­tique man­agers, black or white. The trustees’ duty is to get max­i­mum re­turn at ap­pro­pri­ate risk for mem­bers. Fidu­ciary du­ties do not ex­tend to sup­port­ing al­ready well-paid fund man­agers.

At the sur­vey launch, a speaker sug­gested it was time for most trustees to be re­placed with more rad­i­cal types. But the real en­emy is apa­thy: not a sin­gle black per­son or any women stood for a trus­tee po­si­tion at our pen­sion fund.

Some busi­nesses have still grown to what might be con­sid­ered crit­i­cal mass. Taquanta, one of the few sur­vivors of the 1990s boom, has R122bn un­der man­age­ment. The fund has taken a prag­matic ap­proach as its mar­quee-name in­vest­ment pro­fes­sion­als are two whites schooled in the de­spised main­stream as­set man­age­ment in­dus­try, Stephen Roberts and Stephen Rogers.

Kag­iso has been around al­most as long, although it started as a “ban­tus­tan” ven­ture set up by Corona­tion specif­i­cally to at­tract state and paras­tatal clients. Thys du Toit and his team at Corona­tion de­cided that Kag­iso could not com­pete with the mother ship, so it was re­stricted to index man­dates.

Iron­i­cally, the Pub­lic In­vest­ment Cor­po­ra­tion, the main tar­get, did not give out index funds to black man­agers as ex­pected: some years later, it gave quite ag­gres­sive man­dates.

It took a while for Kag­iso to shake off its im­age as an index, or at least quants, man­ager but the busi­ness is cer­tainly com­pet­i­tive and ar­guably al­ready part of the main­stream.

Mazi, with R42bn, has Malun­gelo Zil­im­bola, for­merly with In­vestec, RMB and later, a dis­ci­ple of enig­matic in­vestor Pa­trice Moyal at Vi­sio.

Aluwani is an in­ter­est­ing case, as it was started by Mo­men­tum once it had de­cided to wind down its fun­da­men­tal ac­tive eq­uity busi­ness. With Mo­men­tum as a 40% share­holder, it has been able to land some in­sti­tu­tional bal­anced and eq­uity man­dates.

Af­ter nearly 13 years, Ar­gon and Mergence, with about R25bn each, look as though they will sur­vive to the next gen­er­a­tion. They play a lively part in de­bates about in­vest­ment and the econ­omy.

Vu­nani, once known as Pere­grine Quant, also has crit­i­cal mass with about R18bn.

But, there is still a long tail of man­agers who must be eat­ing into their seed cap­i­tal to sur­vive. The cast of char­ac­ters keeps chang­ing like a Broad­way show: some well-known names such as Cachalia Cap­i­tal, JM Busha and Ses­fik­ile were ex­cluded. New­com­ers in­cluded Cloud At­las, Id­wala, Nisela and Value Cap­i­tal Part­ners.

There are a few fallen an­gels. Afena Cap­i­tal, once one of the lead­ers, has fallen to R3.8bn.

Many of the com­pa­nies with al­most no as­sets are al­ter­na­tive as­set man­agers, some of which al­ready have cred­i­ble names in the in­sti­tu­tional mar­ket, such as Fulu Mak­wetla and John Oliphant at Third Way. But you must wonder, for ex­am­ple, why Ser­iti As­set Man­age­ment has no as­sets at all af­ter three years.

The stock an­swer is that the con­sul­tants are block­ing the road. As­set con­sult­ing is dom­i­nated by two par­ties, Wil­lis Tow­ers Wat­son and Alexan­der Forbes, and a com­bined San­lam and Absa con­sul­tants will be a re­spectable third.

Con­sult­ing is con­ser­va­tive, given that it is dom­i­nated by ac­tu­ar­ies, but even in this closed shop, black-con­trolled Selekane has emerged and de­serves more sup­port.

I hope con­sul­tants go back to their role of ad­vis­ing, leav­ing trustees to make the de­ci­sions.

27four boss Fa­tima Vawda says most black eco­nomic em­pow­er­ment (BEE) man­agers rely on con­sul­tants or di­rect re­la­tion­ships with clients for dis­tri­bu­tion. Some are very ac­com­plished, such as Sibu­siso Mabuza at Aluwani and Mothobi Se­seli at Ar­gon. But old-school schmooz­ing won’t be enough — even with good in­vest­ment per­for­mance. Vawda says firms need to de­velop more mun­dane dis­tri­bu­tion chan­nels such as um­brella funds, linked in­vest­ment ser­vice providers and even fi­nan­cial ad­vis­ers. Not that fi­nan­cial ad­vis­ers have been much help: it is the least trans­formed in­dus­try in the coun­try.

But some­one has to take the first step. Out of the 45 firms in the sur­vey, just 21 have reg­is­tered unit trusts. It ap­pears that cul­ti­vat­ing global in­sti­tu­tional in­vestors is a lot eas­ier, as 22% of the firms now have global clients. There is no com­mit­ment to build re­tail brands at the BEE firms, with less than 1% of rev­enue spent on ad­ver­tis­ing. Al­lan Gray and Corona­tion re­alised more than a decade ago that they had to build up na­tional brands. Oth­er­wise they would bat­tle for recog­ni­tion against big spenders such as Old Mu­tual and San­lam.

It will take a brave BEE firm to start. Now 90% of BEE re­tail as­sets are held by Taquanta. But al­most all this money has been gath­ered by Ned­group, Ned­bank’s unit trust arm, which uses Taquanta to man­age most of its fixed in­come man­dates. Taquanta is cer­tainly not a house­hold name.

The ad­ver­tis­ing from BEE firms seems to be hit and miss. It is also, as Vawda points out, old­fash­ioned — 81% use print, while just a third use so­cial me­dia and less than 19% use ra­dio. Just 11% use Face­book or Twit­ter to com­mu­ni­cate with in­vestors. Many still con­sider this too friv­o­lous, but even se­ri­ous we­bi­nars are used by only 2% of firms.

AF­TER NEARLY 13 YEARS, AR­GON AND MERGENCE, WITH ABOUT R25BN EACH, LOOK AS THOUGH THEY WILL SUR­VIVE TO THE NEXT GEN­ER­A­TION

/Hetty Zant­man

Fund guys: Taquanta is prag­matic, with staffers Stephen Rogers, left, and Stephen Roberts schooled in the main­stream as­set man­age­ment in­dus­try.

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