Sup­port­ing trans­for­ma­tion ‘doesn’t mean com­pro­mis­ing on re­turns’

Saturday Star - - SPORT - LAURA DU PREEZ

Re­tire­ment fund trustees can play a role in trans­form­ing the as­set man­age­ment in­dus­try with­out com­pro­mis­ing on in­vest­ment re­turns for mem­bers of their funds, trustees and con­sul­tants at­tend­ing Alexan­der Forbes’ lat­est Hot Topics sem­i­nars heard this week.

The as­set man­age­ment in­dus­try was de­scribed as the least trans­formed sec­tor of the fi­nan­cial ser­vices in­dus­try by Na­tional Trea­sury’s deputy direc­tor gen­eral Is­mail Momo­niat dur­ing hear­ings into trans­for­ma­tion in the in­dus­try in par­lia­ment last week.

Trans­for­ma­tion of the as­set man­age­ment in­dus­try will lead to greater com­pe­ti­tion and, with that, lower fees for you, as a re­tire­ment fund mem­ber and in­vestor.

Among the 100 as­set man­agers that of­fer their ser­vices to in­sti­tu­tional in­vestors, such as pen­sion and prov­i­dent funds, 40 are more than 51-per­cent black owned, ac­cord­ing to Alexan­der Forbes.

But 50 per­cent of the as­sets are man­aged by the five largest as­set man­agers, none of which are black-owned: Old Mu­tual In­vest­ment Group, Corona­tion Fund Man­agers, In­vestec As­set Man­age­ment, Al­lan Gray and San­lam In­vest­ment Man­age­ment, ac­cord­ing to Alexan­der Forbes’s lat­est Man­ager Watch Sur­vey.

None of the next five biggest fund man­agers are black-owned ei­ther, but the top 10 all have level two or level three black eco­nomic em­pow­er­ment scores.

The biggest black-owned as­set man­ager is Taquanta, which spe­cialises in money mar­ket in­vest­ments.

The sec­ond largest, Aluwani, was es­tab­lished late in 2015 af­ter se­nior staff bought out the third­party in­sti­tu­tional busi­ness in Mo­men­tum As­set Man­age­ment.

The amount in­vested with black­owned as­set man­agers, how­ever, re­mains “stub­bornly low”, ac­cord­ing to the Man­ager Watch Sur­vey.

Ac­cord­ing to the 27Four BEE­co­nomics An­nual Sur­vey 2016, black-owned as­set man­agers man­age 4.6 per­cent of the in­dus­try’s as­sets.

Rob Southey, an in­de­pen­dent con­sul­tant at Alexan­der Forbes, says some of the rea­sons black fund man­agers find it dif­fi­cult to find their way into port­fo­lios are:

They tend to man­age port­fo­lios to spe­cial­ist man­dates so the op­por­tu­nity set is limited; Few have unit trust funds; As­set con­sul­tants find it dif­fi­cult to re­search the full man­ager uni­verse;

Trustees tend to prefer larger well-known brand man­agers;

Most black man­agers are small and have short per­for­mance track records.

Southey says in­cu­ba­tion pro­grammes are used in­ter­na­tion­ally to fos­ter small man­agers and are one way re­tire­ment funds can as­sist in trans­for­ma­tion.

These pro­grammes have been used by the Eskom Pen­sion and Prov­i­dent Funds, the Telkom Re­tire­ment Fund, the Pub­lic In­vest­ment Cor­po­ra­tion, the Mineworker’s Prov­i­dent Fund and one is be­ing im­ple­mented by the Alexan­der Forbes Re­tire­ment Fund (an um­brella fund for mul­ti­ple em­ploy­ers’ fund mem­bers).

Southey says in­cu­ba­tion pro­grammes are not the same as pro­vid­ing seed cap­i­tal to a new man­ager, but are de­signed to en­sure that a man­ager is sup­ported while it is still small and is free to man­age as­sets.

Many start-up black-owned as­set man­agers are sea­soned in­vest­ment pro­fes­sion­als who can hold their own against larger man­agers, but it is not easy to start an as­set man­age­ment busi­ness, par­tic­u­larly if you do not have a track record.

This is why funds can play a help­ful role as in­cu­ba­tors of new man­agers, he says.

The sur­vey notes that sup­port­ing new man­agers does not mean in­vestors have to com­pro­mise on re­turns.

Re­search has shown that small bou­tique man­agers are able to ex­ploit in­vest­ment op­por­tu­ni­ties in which larger man­agers can­not in­vest, Southey says.

Small man­agers’ in­ter­ests are more aligned with those of in­vestors; they have more in­vest­ment op­por­tu­ni­ties, as they can in­vest in smaller shares that large man­agers can­not in­vest in with­out own­ing a sig­nif­i­cant stake of the busi­ness; and they have the abil­ity to trade in and out of po­si­tions quickly with­out af­fect­ing the mar­ket.

Trustees of funds that want to in­cu­bate a man­ager need to de­velop a clear pol­icy to sup­port the strat­egy and to get stake­hold­ers to sup­port the pro­gramme.

The pol­icy should state how much will be in­vested with these man­agers, what type of man­ager will be sup­ported, and it should set out how decisions will be made and re­viewed, Southey says.

Trustees can im­ple­ment their own in­cu­ba­tion strate­gies through an in­vest­ment con­sul­tant or they can use a so­lu­tion provider, such as a multi-man­ager.

This graph shows how five man­agers used in in­cu­ba­tion pro­grammes by the Eskom Pen­sion and Prov­i­dent Funds grew their clients and as­sets un­der man­age­ment from the time they were ap­pointed un­til De­cem­ber last year.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.