Asset managers muscling in on umbrella fund space

ALTHOUGH dominated by the big life companies, smaller players such as asset managers are entering the commercial umbrella fund space. Sygnia launched its Sygnia Umbrella Retirement Fund (SURF) in 2016 and Allan Gray launched its umbrella fund in May last year.

Saleem Sonday, the head of group savings and investments at Allan Gray, says, according to research done by Credit Suisse in 2016, the South African retirement industry (excluding the Government Employees Pension Fund) manages assets of about R1.8 trillion. Of this, about 49% is in non-commercial funds (which include standalone employer funds and trade union funds), 17% is in commercial umbrella funds, and about 34% is in individual retirement annuity and preservation funds. Over the four years to 2016, the market share of commercial umbrella funds increased by 70%, at the expense of standalone employer funds.

Sonday says Allan Gray sees the shift continuing, but at a slower pace, and says it is mainly confined to funds that have assets of under R1 billion. The larger standalone funds are moving over at a much slower pace, he says.

He says the entry of asset managers into the industry is providing much-needed competition and innovation. Allan Gray’s offering, he says, is backed by a strong investment team and superior administration capability. It has a simple and transparent fee structure and is able to compete on value for money and service.

SURF’s package includes group life cover, but Allan Gray’s does not – employers need to arrange separate life assurance for their employees, although Allan Gray can assist in this process. Sonday says separating the two means that members know heir contributions are used for the intended purpose: saving for retirement.