FUND MANAGER FRENZY

Why investors are piling into Sygnia and Anchor Capital

Older readers will remember the tech boom on the JSE in the late 1990s, a time when sentiment was so frothy that any geek with a laptop was tempted to float an “idea business” onto the JSE.

When the tech tide went out, of course, it exposed a slew of dishevelled companies sans cash flow and hard assets.

Are we witnessing a repeat now in the high-flying wealth management hub of the JSE?

That asset management sector is starting to feel dangerously exuberant. Some market ratings look surreal for a sector that has largely been soberly assessed for most of the past decade.

In the middle of September, asset manager Sygnia, run by Magda Wierzycka, listed on the JSE, sparking a mad rush for its stock.

When Sygnia offered stock to investors in the book-build before the listing at R8,40/share, the offer was oversubscribed by 20 times. That private placement of 31,2m shares aimed to raise R262m. And as soon as Wierzycka blew the horn at the JSE to signal the opening of trade, the stock roared up, gaining an astounding 80% on the day to finish at R16. (Cue “stags” doing merry jigs!)

Clearly, investors are hungry for asset management companies, thanks to the extraordinary success of Anchor Capital (up 320% from R3,50 when it listed in September 2014) and Coronation, up 500% in five years.

Wierzycka says the frenzy for Sygnia shares took her by surprise. “During our prelisting roadshows, the sentiment was lukewarm. My sense is that people came to those presentations, far more people than we expected, and left believing the story. But we never anticipated this,” she says.

No fewer than 61 institutions applied — hedge funds, asset managers and other wealth managers.

She says it’s not that Sygnia underpriced the shares. “We priced it at a price-to-earnings ratio of a shade under 15, and that seemed to be the median. We thought it was fair, and it left a bit on the table, expecting it would appreciate a bit, but not like this,” she says.

Is it just that investors have abandoned all reason in their fervour for asset management stocks?

“Well, Anchor was clearly

❛❛ Investors are hungry for asset management companies, thanks to the success of Anchor Capital and Coronation

Magda Wierzycka and her husband Simon Peile at the listing of Sygnia on the JSE.