The Star Early Edition

An­chor has the po­ten­tial to re­cover

- Amelia Mor­gen­rood Amelia Mor­gen­rood is the PSG Wealth re­gional di­rec­tor.

THE MAR­KET did not en­joy the last set of re­sults pub­lished by An­chor Group in Au­gust, 2017. The graph of the past two years’ share price is also not a pretty pic­ture – only go­ing one way, and it is not up. In Novem­ber, 2015, the share price reached al­most R18, and to­day it is be­low R5.

In­vest­ment houses are usu­ally highly cor­re­lated with the stock mar­ket in gen­eral, since their in­come is typ­i­cally a per­cent­age of as­sets un­der man­age­ment, and of­ten also per­for­mance fees, and if the mar­ket drops the as­sets are less.

Of course, this can be coun­tered by in­flows of funds and gain­ing mar­ket share. Most in­vest­ment houses listed on the JSE did not do much in the past two years, be­cause the mar­kets moved side­ways.

Fur­ther­more, if in­vestors are of the opin­ion that mar­ket val­u­a­tions are very high, and there is a col­lec­tive feel­ing that the mar­ket can drop in the near fu­ture, this can also be re­flected in the share price of an in­vest­ment house.

This is why com­pa­nies such as Pere­grine, Sas­fin and An­chor are trad­ing at quite low mul­ti­ples. With the sword of down­grades and a pos­si­ble ad­verse ef­fect on lo­cal busi­nesses, the sen­ti­ment is not pos­i­tively in­clined to­wards lo­cal in­vest­ment houses.

An­chor is still a rel­a­tively young com­pany, but they have an im­pres­sive team of sea­soned an­a­lyst and in­vest­ment man­agers. It has in a short pe­riod firmly es­tab­lished itself as one of the lead­ing pri­vate client as­set man­agers in South Africa and is in­vest­ing heav­ily in grow­ing its in­sti­tu­tional busi­ness.

An­chor be­gan managing as­sets in 2012 and had grown rapidly to reach as­sets un­der man­age­ment and ad­vice on June 30, 2017, of R49.4 billion. These are pri­mar­ily pri­vate client and re­tail as­sets, with re­cent growth in the cor­po­rate and in­sti­tu­tional mar­kets. An­chor runs seg­re­gated port­fo­lios, both lo­cally and in­ter­na­tion­ally, and has a se­ries of funds in both the col­lec­tive in­vest­ment scheme (unit trust) and hedge fund cat­e­gories.

The long-term strat­egy of An­chor is to be­come a ma­jor player in South African as­set man­age­ment, with an in­creas­ing focus on off­shore in­vest­ment.

In­terim re­sults

As­sets un­der man­age­ment and ad­vice grew by 8 per­cent to R49.4bn, but head­line earn­ings a share were down 39 per­cent to 22 cents a share. An­chor drew in an im­pres­sive 500 high net worth clients over the six-month pe­riod.

In an in­ter­view with Gi­uli­etta Talevi of Busi­ness Day TV the highly re­garded chief ex­ec­u­tive of An­chor, Peter Ar­mitage, was asked whether he was con­fi­dent of at­tract­ing more as­sets.

“There are dif­fer­ent parts to the busi­ness – eq­ui­ties, fixed in­come and off­shore, and the off­shore part of our busi­ness is grow­ing very nicely. The dif­fi­cult part has been do­mes­tic eq­ui­ties – if you look at the past 18 months of the mar­ket, you’ve had quite a rare com­bi­na­tion of cir­cum­stances where do­mes­tic con­di­tions and hence do­mes­tic eq­ui­ties have done quite poorly, and you’ve also had a stronger cur­rency.

“Usu­ally, when the one hap­pens, the cur­rency weak­ens and then that al­le­vi­ates it. If things con­tinue to get tough here and we go the wrong way po­lit­i­cally, you’ll prob­a­bly see the cur­rency weaken, which would give peo­ple a rand re­turn. No mat­ter what the con­di­tions are, there are al­ways dif­fer­ent things in which to in­vest and make money. If you’ve got a dis­tri­bu­tion ca­pa­bil­ity and a force out there of peo­ple on the ground, you can raise as­sets.”

Last week, An­chor an­nounced that they broke through R50bn of to­tal as­sets af­ter just more than five years of op­er­a­tion. To­tal as­sets at Septem­ber 30 were R52.7bn.

All of the growth in as­sets in 2017 were of an or­ganic na­ture. In­creas­ing brand pres­ence, sus­tained pos­i­tive in­vest­ment per­for­mance and in­ten­sive sales ini­tia­tives have re­sulted in a promis­ing new pipe­line.

From its in­cep­tion, An­chor has al­ways invested mean­ing­fully in a high-qual­ity in­vest­ment process, with the back­bone of a great in­vest­ment team. This in­vest­ment is pro­duc­ing re­sults, and the com­pany is de­vel­op­ing a very cred­i­ble track record.

The An­chor BCI Eq­uity Fund is in the top-per­form­ing funds in SA in its cat­e­gory over three and four years. And I think the share price has the po­ten­tial to re­cover – maybe not to its pre­vi­ous glory soon, but over time. At 490c it is a steal.

 ??  ??

Newspapers in English

Newspapers from South Africa