SA asset managers ‘slow to transform’
SOUTH Africa’s asset management industry has been slow to transform, with black asset managers handling less than 5% of industry assets, says Alexander Forbes.
Just 42 of SA’s 130 asset managers were black-owned, head of asset consultants at Alexander Forbes Rob Southey said this week..
“None of the top-10 asset managers are black-owned.”
The top-10 managers at June 2016, ranked in order of total assets under management, were: Old Mutual Investment Group, Coronation, Investec Asset Management, Allan Gray, Sanlam Investment Management, Stanlib, Investment Solutions, Prudential, Futuregrowth and Sanlam Multi-Manager International.
The top-five asset managers control 52% of the industry’s funds under management.
The bulk of these managers are subsidiaries of listed companies, which would be owned primarily by institutional shareholders, such as pension funds. The country’s largest pension fund by far is the Government Employees Pension Fund, with about R1.6-trillion in assets.
Just two black asset managers, Taquanta and Aluwani, handle funds of more than R50billion, while 12 have funds of between R5-billion and R50-billion, and 28 have assets under management of less than R5-billion.
The pace of transformation in the industry had been extremely slow, said managing director of 27four Investment Managers Fatima Vawda.
A few large players controlled industry value chains with a tight fist, she said.
“To properly penetrate that value chain is extremely difficult, as this level of scale . . . makes it impossible for small business to compete on price.”
Capital accumulated by big business pre-1994 provided a head start that could not be ignored, Vawda said.
While 68% of SA’s asset management firms held a Level 1 or 2 broad-based black economic empowerment (B-BBEE) rating, this did not equate to adequate transformation.
“Big business has successfully mobilised their machinery to achieve high B-BBEE ratings. It is unfair to compare their ratings to that of organically grown, post-apartheid black business in procurement exercises,” according to 27four’s 2016 survey on transformation in SA asset management.
Black asset managers faced a number of obstacles, including having to build a brand from scratch, Southey said.
Retirement fund trustees, who faced personal risk in allocating policyholders’ savings, preferred brand names, which were considered safer, he said.
Incubation, whereby retirement funds ring-fenced a portion of money to invest with black asset managers, had helped managers build a track record and grow, Southey said.
The Mineworkers Provident Fund, which has assets under management of R28-billion, had allocated more than R8-billion (30%) to black asset managers and hoped to increase this to 50% in the next few years, chief executive Mkuseli Mbomvu said.
The fund hoped to be a case study demonstrating the success of incubation programmes. — TMG