Thabo Dloti needs to re­store con­fi­dence

Finweek English Edition - - FRONT PAGE -

THABO DLOTI KNEW he was tak­ing on a big job when he quit Old Mu­tual’s OMIGSA to run Stan­lib, the as­set man­ager owned by Stan­dard Bank-con­trolled Lib­erty. Five months into Dloti’s ten­ure and pres­sure is mount­ing on him to not only in­ject some much needed sta­bil­ity into an un­mo­ti­vated in­vest­ment team but also re­store the con­fi­dence of in­vestors and the bro­ker com­mu­nity amid mount­ing con­cern about the grow­ing work­load on ex­ist­ing staff and fall­ing ser­vice stan­dards. Some third party funds are leav­ing the busi­ness.

Says Dloti: “We’re mak­ing progress. Lib­erty wouldn’t have ap­pointed me if they didn’t want change. I’ve made sev­eral pro­pos­als to them al­ready and they haven’t re­jected any of my plans. But they’re a ques­tion­ing lead­er­ship and need com­fort that what we’re propos­ing makes sense.”

These pro­pos­als in­clude a greater cen­tral­i­sa­tion of high level de­ci­sion-mak­ing, clar­ity about the firm’s role within the broader Lib­erty Group and de­vel­op­ing an un­am­bigu­ous in­vest­ment process.

When Dloti took over, morale at Stan­lib was al­ready poor. He’s crit­i­cal of the lack of dis­ci­pline, sys­tems and pro­ce­dures he found when he took over. Where there were pro­ce­dures in place, staff had lost faith in them, be­cause the nu­mer­ous lead­er­ship changes that had be­set the firm had led to con­stant change – par­tic­u­larly over the past 18 tur­bu­lent months.

Pre­vi­ous CEO Ge­orge Brits had been of­fered a de­mo­tion. He quit in­stead, and Lib­erty – which con­trols 100% of the as­set man­ager – parachuted an in­terim man­age­ment team in while it fig­ured out what to do with the busi­ness. It in­stalled var­i­ous in­terim mea­sures and strove to get the ship back on an ac­cept­able course. Per­for­mance in 2008 had been shock­ing, with half the bot­tom 10 per­form­ing unit trusts com­ing from the Stan­lib sta­ble. A rad­i­cal over­haul was needed.

But in the in­terim, as the flow of an­a­lysts and fund man­agers leav­ing the build­ing in­creased, so did the ner­vous­ness of its third party clients. To date, the biggest sin­gle with­drawal of funds has come from the Pub­lic In­vest­ment Cor­po­ra­tion (PIC), which is be­lieved to have ex­tracted half of its in­vest­ment en­trusted to Stan­lib – around R5bn. At end-March, Stan­lib had around R330bn un­der man­age­ment: that was be­fore the PIC’s with­drawal and re­cent mar­ket pres­sure, im­ply­ing the amount of money held by the firm on be­half of clients will de­cline for the six months to end-June.

Un­like many bou­tique in­vest­ment com­pa­nies, Stan­lib has the sup­port to sur­vive its cur­rent turmoil, cour­tesy of its share­hold­ing. Around 35% of its as­sets un­der man­age­ment come from Lib­erty in the form of life and other pol­icy in­vest­ments, 40% is unit trust busi­ness, while pen­sion funds and LISPS make up the bal­ance.

“Clients do get concerned,” con­cedes Dloti. “But most of them are on board. I’ve spo­ken to them. The frus­tra­tion of this busi­ness is there are fun­da­men­tal, ba­sic prin­ci­ples about which there are un­cer­tain­ties. I have to re­solve those. The del­e­ga­tion of author­ity hasn’t been clear, de­ci­sion-mak­ing hasn’t been clear, the fees we charge haven’t been clear,” says Dloti. “Even re­mu­ner­a­tion has been un­clear and com­mu­ni­cated hap­haz­ardly. The or­gan­i­sa­tion hasn’t been dis­ci­plined about what it does.”

Those are hard-hit­ting words from the new CEO, who is start­ing from a rel­a­tively low base and has a point to prove. Af­ter a suc­cess­ful ten­ure in de­vel­op­ing OMIGSA’s bou­tique model, Dloti wants to use that ex­pe­ri­ence to re­ju­ve­nate Stan­lib.

But it was al­ways go­ing to be a tricky propo­si­tion. Stan­lib was born out of the merger of seven Stan­dard Bank and Lib­erty busi­ness units in 2003: each com­pany

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