Getting back together
Sanlam and Absa (once known as the Amalgamated Banks of SA) have had a cultural affinity for many years, in particular through the Volkskas component which Sanlam saw as part of the emerging Afrikaans business community from the 1930s onwards.
And Sanlam rescued another part of Absa — Trust Bank — from bankruptcy in the 1980s. There was also a memorandum of understanding which was supposed to encourage cross-selling of Sanlam life and funeral policies in every Absa branch. Ultimately, that didn’t work because, whatever Absa’s faults, it built an excellent in-house insurance business which remains a source of substantial profit at the bank.
Ties between the giant institutions weakened after Sanlam sold its 19% of Absa to Barclays of the UK in 2004. Back then, sentiment was evidently trumped by a very full price.
But it comes as little surprise, now, that Absa has, according to insiders, turned to its historical ally Sanlam in the sale of its asset management business. The sale is also to be expected, given Absa’s failure — despite several attempts — to create a full-scale asset manager. Absa Asset Management (Abam) was also propped up by its R80bn Money Market Fund, which Absa is now unwinding.
Sanlam has the deep pockets needed to buy the business and some analysts believe it can fetch R3bn, though this looks way too high, given that the much larger Sanlam Investments was also recently valued at R3bn. Abam may fetch only about R1.2bn now that most of the assets in the original Absa Money Market Fund have been moved onto Absa’s balance sheet as bank deposits. It means the rump of Abam only has about R150bn under management. At least the venture will have empowerment credentials now that African Rainbow Capital (ARC) has a 25% stake in Sanlam Investments. ARC can certainly write a cheque of up to R500m to buy into Abam without much difficulty.
So what will Sanlam get for its money? For a start, some top empowerment fund managers. Fayyaz Mottiar, who runs the award-winning Absa Property Fund, would be the logical choice to take over the combined property fund. Kanyisa Ntontela, who co-manages the Absa Inflation Beater Fund, would be a useful addition to the Sanlam Investment Management (SIM) absolute return silo. Kurt Benn at the balanced franchise could either work for SIM or be deployed into the team which manages Sanlam’s life money.
Another advantage of an Absa tie-up would be to bring across Abam’s exclusive relationship with Schroders, the largest listed fund manager in the UK, to run its global funds. This would streamline Sanlam’s global offering, which is run by a confusing mosaic of managers.
Still, there is plenty of duplication at the top. For example, there seems little need even now to have Robert Roux as head of Sanlam Investment Group and Nersan Naidoo as head of Sanlam Investments. Armien Tyer, the head of Absa Investments, might need to settle for head of the enlarged SIM, which excludes growing areas such as the Satrix index fund business.
And this assumes that Ann Leepile, the head of Abam, doesn’t want to put herself forward. She has never worked at SIM and comes with a lot less baggage than Tyer, who left SIM after a famous row with his then mentor, Johan van der Merwe.
But whoever runs it, they will need to launch a proper tilt at the institutional market. Both Abam and SIM, for now, have a feeble presence among wholesale clients.