BUSINESS LIVE - MONEY & INVESTING / 29 SEPTEMBER 2020 - 08:10 / STAFF REPORTER
27four Investment Managers publishes survey on transformation in the asset management industry
The first edition of the BEE.conomics annual survey on transformation in SA asset management was published in 2009 when there were only 14 black-owned asset managers who, combined, managed R91bn.
Fast forward 12 years, and there are now 51 black-owned asset managers managing close to R700bn, indicating that black market share has been increasing steadily. Certainly, in the past couple of years, the number of black private equity fund managers has grown.
A recent Business Day Dialogues, in collaboration with 27four Investment Managers, debated some of the findings of the 2020 BEE.conomics annual survey on transformation in SA asset management survey during a digitised conversation moderated by Nastassia Arendse. The panel consisted of specialists from 27four Investment Managers.
Black market share of the total estimated SA savings and investment pool is 9%. The industry comprises a few large firms, and a long list of small and mid-sized firms operating subscale.
The black asset management industry regards the biggest threats to growth as being the continual decline of the number of companies within public markets, and that the number of stand-alone retirement funds will continue to decline in favour of umbrella arrangements.
At present, 90% of public market asset managers’ base comes from institutional investors such as retirement funds. Large umbrella funds, however, are primarily focused on their own products, making it hard for black asset managers to get a foot in the door.
The Covid-19 pandemic has done the industry no favours given that its profitability correlates directly with the performance of the economy. About half of all survey participants expect the pandemic to have a negative impact on their bottom line. The survey found that most black firms agreed that the Covid-19 pandemic had once again exposed the fragility of financial markets and economic systems, and highlighted the need for an urgent shift towards achieving the UN’s sustainable development goals.
In terms of asset allocation trends, there has been a decline in domestic equities in favour of domestic fixed income which is a reflection of lacklustre performance, poor investor confidence and a struggling economy. Within public markets, more than 60% of industry assets are invested in low-risk money market and fixed-income products. Domestic equities make up just 22% of assets under management.
Another trend noted by the panellists is how new financial sector and broad-based BEE regulation will affect the industry. In a bid to accelerate the country’s economic recovery, the government has suggested using prescribed assets to kick-start growth. This may require a change to Regulation 28 of the Pension Funds Act, which caps private equity and hedge funds at 15%. The Southern African Venture Capital and Private Equity Association has called for hedge funds and private equity to be separated.
The five largest black asset managers control 72% of the assets under management by black firms. Those firms that focus only on equities have struggled, while there appears to be saturation in terms of new managers coming to market. More scale is required at the top level as opposed to the bottom level.
To find out more about the BEE.conomics annual transformation in SA asset management survey, visit the website.
Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER