Assets under management growth by black asset managers in South Africa slows in 2017
Assets under management by black-owned asset management firms grew 1.76% from R408.3 billion in 2016 to R415.5 billion in 2017 – slower than the 32% leap from 2015’s R309.2 billion. This represents 9% of the total R4.6 trillion of assets available for management by private sector asset managers (out of a total savings pool of R7.9 trillion). The number of black assets managers also expanded from 41 to 45 over the recent year. This is revealed in the ninth annual BEE.conomics survey, published by 27four Investment Managers, released today.
Since the inception of the survey in 2009, the amount of assets under black-owned asset managers has grown by 355% from R91.4 billion to R415.5 billion, and the number of asset managers participating in the survey has more than tripled from the 14 that were in the field for the first survey.
“The downturn in the economy has resulted in job losses, triggering retirement fund withdrawals, thereby shrinking the pool of retirement savings available for investment,” says Akona Mlamleli, Head of Transformation at 27four Investment Managers.
According to the survey’s research, the top five black asset managers include Taquanta Asset Managers (which manages nearly 30% of the total assets under black-owned management), Aluwani Capital Partners, Mazi Asset Management, Kagiso Asset Management and Argon Asset Management. The top 10 black managers control over 86% of the industry assets and Taquanta Asset Managers still holds the top spot, managing more than twice the number of assets managed by second-placed Aluwani Capital Partners.
Twelve black-owned firms have less than R100 million in assets under management. While half the firms are younger than five years, those that are older than five years manage 82% of the industry assets.
Institutional investors now account for 79% of the industry assets compared to the 85% they made up last year, and retail assets now account for 21%, up from 15% in 2016. This signals that some asset managers have made good strides into the direct consumer market. As of 31 December 2016, the total size of the Collective Investment Schemes (unit trusts) industry was R2 trillion, but the total value managed by black asset management firms was R87 billion, or 4% of the total. Of the 1 520-unit trusts registered, only 55 are managed by black-owned firms.
Black-owned asset managers now employ 586 people, 45% of which are represented by women and 113 black portfolio managers with more than five years’ experience in money management.
“While the majority of firms focus on traditional fund management offerings such as long only equity and fixed income, it is pleasing to see the increased participation in the survey by managers outside of these conventional capabilities,” says Mlamleli, as this year saw the inclusion of a number of private equity fund managers. “This may also be reflective of changing trends in investor appetite outside of listed markets, where returns have been depressed, particularly on the domestic front.”
Asset managers procure a number of support services such as compliance, stock broking and administration from external service providers. Only 11% of external service providers used by the survey participants have a Level 1 B-BBEE contributor status. “So while the industry has grown, the value chain remains largely untransformed,” Mlameli says.
Access to markets remains an obstacle as black managers largely depend on direct relationships with institutional clients for product distribution and vehicles such as Linked Investment Service
Providers (LISPS) remain inaccessible. None of the participants own a life company and only two have Collective Investment Schemes Management Companies.
The findings also show that increased attention on building brand awareness and embracing new technologies such as social media should be adopted by black asset manager company executives to gain excess to and communicate with the consumer.
The research also evaluates the impact the firms are making on the broader economy such as job creation, contribution to the fiscus, consumer education and the introduction of products that cater for the LSM 4,5,6 market. The sustainability of the firms is also measured.
“To truly transform the industry and create companies that can compete with the largest firms, there needs to be some consolidation among some of the smaller companies,” Mlamleli says. “Only through a consolidated effort can we create progressive institutions that can achieve significant economies of scale and compete with the larger players, locally and globally.”
The survey includes detailed sections on asset growth, investment products, human capital, responsible investment, socio-economic impact, brand building and distribution amongst others. It also features content from public and private sector influencers and valuable input on the Revised Financial Sector Codes, which is the framework for the financial services industry.