The winners and losers in Alexander Forbes roundup
• Investment Solutions is the top dog in ‘Global Best Investment View’
It is not just black-owned fund managers that are finding it tough to break into the de facto fund management cartel in SA. The “Alexander Forbes Global Best Investment View” looks at the size of the portfolios that follow a traditional balanced mandate.
The largest by far is the R144bn Investment Solutions Performer, and the lion’s share of this is invested with managers that have large segregated portfolios in their own right: Ninety One (R67.7bn), Allan Gray (R49.6bn) and Coronation (R19bn). The other large managers are both independents: Foord with R30bn and Prudential with R9bn.
Emerging managers who complain that they get just a small slice would be surprised to see how few many of the financial service brand names have attracted.
About 20 years ago, before it fragmented into a whole battalion of boutiques, Old Mutual Asset Managers had a sizeable share of the third-party market. It still has R12bn between its balanced fund and its more aggressive Edge28 product.
This is far more than the R1.1bn in Sanlam Global Unique — though it isn’t called that because it only has one client. Stanlib is not doing much better with R1.2bn in balanced mandates. Even Ashburton, with the might of the FirstRand group behind it, has attracted less than R450m.
With this backdrop, the R1.5bn from Kagiso Balanced is quite respectable. Though, as I have said in previous columns, it deserves substantially more as a true black champion.
The ebb and flow of performance gives every manager a place in the sun. Absa Asset Management (Abam), the worst performer over 10 years, was the best performer in June 2020 with a 3.9% return. It has a good equity team under Stephen
Arthur and a good bond team under James Turp. And it has experienced leadership through Armien Tyer, who ran Sanlam Investment Management, and Ann Leepile, once a key player at Forbes’s Investment Solutions. She helped build up Investment Solutions Performer into the juggernaut it is today.
But there needs to be a sustained change of performance, for the better or the worse, to justify moving. There also needs to be a stability of ownership and there remains uncertainty about the future of Abam, which needs to be resolved.
The business needs an empowerment shareholder and if that is deep-pocketed African Rainbow Capital it might well lead to a merger with Sanlam Investments, brokered by Tyer, and the probable closure of the Abam Sandton office, giving the team the option of relocating to the bright lights of Tyger Valley. But it is common knowledge that it is particularly difficult to persuade black fund managers to move south.
We could have expected Ninety One to be distracted in the weeks after its listing. The former Investec Asset Management has been spending too much time marketing, and its fund managers have been assembling PowerPoint presentations rather than watching the money.
It was the worst performer in June apart from the secretive Oasis. But over seven years Ninety One remains the best performer, with a return two percentage points per year ahead of the median manager.
Over those seven years the asset consultants have proved to make the best calls. The top performers were the favourites, Ninety One first (9.8%) and Coronation second (8.6%), while Allan Gray (8.3%) was pipped by Prudential (8.4%).
Allan Gray’s global asset management partner, Orbis, gave it a competitive edge for many years through its ability to pick neglected gems before the market discovered them. But with the value style having been out of favour for the entire seven years, it has been a liability.
Allan Gray has recently seen a change of chief investment officer from Andrew Lapping to Duncan Artus. It isn’t exactly a generational change as they are contemporaries. But Artus was often used to pitch to pension funds because, compared with Lapping, he is an extrovert. He is at least keeping the ship afloat, with above-average performance over six and 12 months.
One surprise has certainly been the extent to which Foord has bounced back after a tough 2018. There are often just a few basis points between the returns of the players in the Large Manager Watch, but in the 12 months to June Foord returned a remarkable 10.6%, which was double the return from secondplaced Stanlib.
Foord founder Dave Foord says asset consultants have a habit of dismissing managers after they have had a bad year and may well bounce back, which is a form of selling low. And they hire the ones that have done well, which is buying high.
Almost as big a surprise was the negative 2.6% return from Prudential, which is getting onto more fund manager buy lists. It hardly lives up to its brand positioning of consistency.
Another negative performer was the inappropriately named OMIG MacroSolutions (part of the Old Mutual group though most of the public probably wouldn’t guess that). Its clients said goodbye to 1.8% of their assets. Absa, in spite of a sterling June, was down 0.8%.