Hope as black asset managers multiply

This week I was fortunate to spend a morning with black asset managers at the beautiful offices of investment managers 27four, led by the effervescent and extremely bright Fatima Vawda.

The occasion was the launch of the 10th edition of their BEE.conomics “Transformation in the South African Asset Management Industry” report. In addition to inviting the president of the Association of Black Securities & Investment Professionals, the understated and hard-working Sibongiseni Mbatha, the asset manager also decided to invite the EFF’s unequivocal Floyd Shivambu, who also serves as a member of parliament’s very busy and action-packed standing committee on finance.

The script is exactly the same in almost every report measuring BEE in 2018 SA. It is predictable — the numbers show marginal progress and there are one or two interesting insights and titbits, but largely it’s the same story as last year.

Consider, for example, that in 2009 there were 14 black asset management companies which collectively managed just over R91bn. Today that number has risen to 48 firms managing a total of more than R490bn. That is a 243% growth in the number of black asset managers in just nine years, and a growth more than fivefold in assets under management.

Surely that is progress — no?

It is important to pause and appreciate that this is an R8.7-trillion industry. Let that sink in.

Black people, who account for 80% of SA’s population, control 10% of assets available for management by private sector asset managers.

To make matters worse, of the 48 black firms, the top 10 are responsible for just under 84% of the whole pool of black-controlled money, with 19-year-old Taquanta Asset Managers alone responsible for almost 30%.

Given the rate of growth in the number of black firms entering the market in the past decade, one could be forgiving of such a concentration.

Another factor that could be expected is the varying level of commercial maturity that these black firms are likely to be at, especially since the majority of them are new businesses and start-ups.

The BEE.conomics report finds that 63% of black asset managers are profitable, but only one-third show three consecutive years of positive net profit after tax.

However, in the world of asset management, whether you are black, white green or blue, what matters at the end of the day is performance.

It was beautiful to see that black firms proved to the market that they are as good as, and at times even better than, some of the big boys at managing money — delivering consistently superior returns than many with much bigger balance sheets.

The Aeon Active Equity Fund and the Balondolozi Active Equity Fund are up there with the best when one compares the returns they have delivered consistently over a three-year period against risk.

But the question remains: how can we get the management of funds to reflect the demographics of SA? How do we get more funds to allocate the management of their assets to black asset managers?

“Legislate BEE or we are doomed forever,” says Shivambu. The Economic Freedom Fighter argues that for a while now, business has shown all South Africans that it is not willing to transform, or at least not at the pace we need in order to make a meaningful impact on the lives of most South Africans.

Shivambu insists that the only lever available for policymakers to drive the desired behaviour is legislation, because the entire investment management value chain is trapped in lethargy which has resulted in no transformation, as evidenced by there still being very few black-owned and -managed asset consultants in SA.

Asset consultants are heavily relied upon by trustees of pension and provident funds in advising how to allocate their assets.

If asset consultants are largely whitecontrolled firms, what then can one expect in the allocation of assets to blacks?

As the BEE.conomics report says, “black asset management firms have walked a long way and climbed many hills in their struggle for a diversified, inclusive, high-performing and low-risk sector”.

Yes, the picture is far from being perfect. It’s clear that they are only getting started.

However, just watching how hard the black professionals in this industry have worked to get this far should be reason enough for us all as South Africans to be proud and do even more to create further access to markets and support for these daring trailblazers.

How can we get fund management to reflect the demographics of SA?