Absa to unveil BEE buyer for asset unit

Abam responsible for R135bn investments; just outside top 20

● Absa will soon announce the sale of 51% of its asset manager to a BEE business. The identity of the buyer has been kept secret, but one option could be the Patrice Motsepeowned African Rainbow Capital.

Names such as Mazi Capital, AMB Holdings, Aluwani and Sphere Holdings have also all cropped up.

Not all the R319bn managed by Absa will be included, just the institutional business Absa Asset Management (Abam), which has R135bn under management. The R67bn money-market fund, which is really a banking product, will be managed by the bank.

The sale is not on the same scale as the split at Investec between its institutional asset manager and the rest of the group, but it is very much part of the same theme.

And it follows noncore disposals over the past two years such as the sale of Absa Consultants & Actuaries to Sanlam, the sale of its short-term insurance brokerage to PSG, and the sale of its commercial intermediated short-term underwriter to Santam.

Abam without the money-market fund would be just outside the list of top 20 managers, below Abax and Prescient as well as Taquanta, the largest BEE manager. But it would be ahead of Ashburton’s listed markets business.

Absa spokesperson Songezo Zibi says the bank is in the process of building a “winning” wealth, investment management and insurance business that will be able to leverage off the strengths of the retail and business banking operations.

“In our insurance business, the bulk of the leads are processed by the bank, as insurance is added to vehicle finance, personal loans and mortgages.”

There isn’t the same synergy between the bank and the asset manager — there are heavy restrictions on unqualified advice which make it impractical to distribute unit trusts in bank branches.

The new shareholders won’t be buying a cash cow. It made just a portion of the R170m for which the investment cluster was responsible in the six months to June. But under Ann Leepile, the group has had some strong performing funds. She says the Core Income and Bond funds are both doing well, and in equity funds Prime Equity stands out.

The biggest disappointment has been the collapse of Absa’s property fund managed by Fayyaz Mottiar, which was highly exposed to the troubled Resilient group.

It makes sense for the bank to keep other parts of the cluster, such as the multimanager run by Jonel Matthee-Ferreira. This designs “solutions” for Absa’s army of financial advisers.

The unit trust management company is also unlikely to be part of the deal, nor linked investments. BEE links appear to make little difference to the affluent clients of these products.

Once this deal is out of the way, Absa’s retail and business division will absorb the wealth investment, management and insurance division and operate as an integrated business.

This will be another step up in the career arc of the ambitious head of retail and business, Arrie Rautenbach.

Absa seems to be playing down its expertise in private-client fund management, though this division is unlikely to be part of the BEE deal. In the past it boasted — presumably with his permission — that it provided personal and corporate banking services for the now disgraced former CEO of Steinhoff, Markus Jooste. That boast has not been heard for a while now.

Retail banks have never been good owners of asset managers. Nedbank’s attempt to merge UAL and Syfrets was the worst example of incompetence, but neither Standard Bank nor FirstRand have been able to make it work in the long term either.

Absa closed down its asset manager in the 1990s because the performance was so bad, then set up a short-lived BEE joint venture in Cape Town called Abvest. It had a few star managers but a high cost base and a poor relationship with the rest of group.

At least Absa has something to sell in the current Abam, which could be the core of a good BEE manager — much as parts of the old RMB Asset Management have settled into Aluwani.