Black-owned asset managers earn their seats at the top table

The release of the draft report on transformation in the financial services sector by Parliament’s standing committee on finance comes at a time when the rumblings in the black-owned asset management sector are growing louder.

The report’s completion dovetails with the release of the annual BEE.conomics survey compiled by 27four Investment Managers. This ninth iteration of the survey found that growth in assets managed by black-owned fund managers increased by a lacklustre 1.7% year on year, to R415.5bn in 2017.

To say that there is dissatisfaction about the lack of transformation in the sector is to put it mildly. More importantly, this figure is unfathomable.

It is impossible to digest because there are at least 13 black-owned asset management companies in SA that have been around for more than 10 years, some of which show all the attributes of cutting-edge entrepreneurial activity and have diversified into areas other than traditional equity.

For these companies to have bagged less than 10% of the R4.6-trillion managed by the private sector is hunky dory for establishment companies, but for us it is simply insulting and totally counterintuitive.

The asset management industry is a vital contributor to the real economy. If the country is to flourish, it is a no-brainer that asset managers need to reflect the South African demographic.

Unfortunately, the numbers speak to the racial polarisation of asset allocation. We would have preferred things not to have reached this stage — where on earth is the country where asset managers are simply that, with no reference to their colour?

Asset consultants have not helped. The situation is due in no small part to their gate-keeping tendencies and reluctance to advise fund allocations anywhere else but to the large established players — the old boys’ club. This is so last century.

Something else puzzles me. Many black asset managers have established track records with strong performance metrics.

The house I represent has ranked in the top quartile of general equity unit trusts over periods of three and five years, and in the top 10 general equity unit trusts over five years.

Mergence co-founder Izak Petersen and I have built the business from the ground up, with initial capital from personal loans. We have grown assets under management to R34bn.

We have had no big daddy with deep pockets and great contacts, unlike some established players whose parent companies are insurers or banks that decided to form an asset management arm.

All we had was blood, sweat and tears – and a commitment to training young black graduates entering the sector.

Our vision is to grow a world-class diversified financial services group. We are well on our way. We are one of the few managers in the country to specialise in both listed and unlisted investments.

We have been pioneers in the impact investing space; we are pushing investment into infrastructure where long-term, steady returns give pension funds a chance not only to match their liabilities, but also to create functioning communities into which pension fund members will retire.

We were the first asset manager to set up a debt fund in the renewable energy sector.

FAR FROM BEING PETULANT PLAYERS LEFT ON THE SIDE OF THE FIELD, WE WILL BE ENGAGING WITH THE GOVERNMENT AND MPs

Recently, Mergence bought the largest independent agrifinance business in SA to bring much-needed investment products into the agricultural sector.

We are about to launch a private equity fund in the technology sector with digital partners from Sweden and Israel.

There are other black managers with similar success stories.

We believe that the current climate calls for the urgent formation of a united front of black asset management companies. Several of us have been in initial talks towards this end and interest is high.

In the coming six months, we will be announcing the formation of this grouping.

Far from being petulant players left on the side of the field, we will be engaging with the government and MPs tasked with transforming the financial sector. Where there is a need for technical expertise and sector input, we will assist them.

We plan to play a powerful and constructive role in transformation – and, in the process, to demonstrate what we have to offer and why we should be key players in the game.

These are the rumblings of the young lions who are determined to take their rightful place in the market.

Magerman is the MD of Mergence Investment Managers.