Proudly sponsored by

SA’s largest asset managers’ market share is decreasing

Unlike the international trend of larger firms getting larger: the global industry grew AUM 15% last year.
Image: Shutterstock

Last year, the global asset management industry grew its assets under management (AUM) by 15% according to new analysis published by the Boston Consulting Group (BCG). By the end of December, a total of $88.7 trillion was invested with firms worldwide, up from $76.9 trillion the year before.

Most of this increase was driven by rising markets, but 2019 also saw much higher net inflows than the 10 year average.

Source: Citywire

‘These flows weren’t captured equally,’ said Lubasha Heredia, a partner at BCG in New York. ‘The larger firms took a larger share of those flows, particularly in the US. There is a “winner-takes-all” dynamic in the industry and we expect that to continue.”

This has been one of the key themes identified by BCG in its annual Global Asset Management report over the past few years: the larger firms continue to get larger and take a greater market share.

Local dynamics

However, this is not the case in South Africa. Over the last five years, the market share of the largest asset managers in the local unit trust industry has been coming down.

At the end of 2014, the seven largest managers – Allan Gray, Coronation, Investec Asset Management (now Ninety One), Nedgroup Investments, Old Mutual, Sanlam and Stanlib – enjoyed a market share of 64.8%. By the end of 2017 that had slipped to 62.1%, and at the end of 2019 it was down to 60.7%.

While this still puts these firms in a dominant position, smaller and mid-sized managers have been receiving greater net inflows.

For example, Stanlib grew its total AUM by 19.3% over the five years from the start of 2015 to the end of 2019. Prescient, by contrast, increased its AUM by 178.1%. (This is at the management company level, so includes co-branded funds.)


Even in South Africa, however, larger firms in an a favourable position.

‘Scale continues to be a source of competitive advantage because if offers you the opportunity to have a cost advantage on the back end, but also allows you to make large investments in new capabilities,’ said Heredia. ‘That capacity is really important if you want to win in the future.’

One area where BCG believes this will be particularly relevant is data science. Firms will increasingly begin to compete on customer experience, and that requires having the tools to understand client needs and deliver personalised solutions.

It is also likely, however, that increased competition from non-traditional players and the need for new business models will place increased pressure on profitability. This will further entrench the size advantage.

In particular, asset managers will almost certainly face a challenge from digital giants like Amazon and Google that already have much better distribution capabilities, and the ability to personalise customer interactions and offerings.

‘We have seen some evidence of these firms moving into financial services and it wouldn’t be a stretch to imagine that they could move into this space as well,’ said Heredia. ‘And that would dramatically change the shape of profitability.

‘It would also reinvent distribution models,’ she added. ‘With Covid-19 the move to digital engagement is already intensifying and it would be interesting to see what the profitability of some of these business models will look like, I expect it won’t be as rich as the traditional way of doing business.’


These are trends that are likely to encourage further consolidation within the industry.

There are others too.

The first is to acquire better distribution capabilities.

‘Are there new ways that firms need to operate in this world where the old wholesaler model, at least in the US, is breaking down?’ said Joe Carrubba, a partner at BCG in New York. ‘We think the necessity is going to force it.’

The second is to capture new revenue streams.

‘Another reason we think there is strong logic to continue M&A activity is that a lot of firms may have particular product gaps, especially in the alternative space,’ said Heredia. ‘M&A could be a good strategy to close that product gap in a fast way.’

BCG forecasts that alternatives will contribute almost half of all industry revenues within the next four years. This is despite making up less than a fifth of AUM.

As cost pressures reduce revenues from traditional solutions, large asset managers could therefore increasingly look to alternatives as a way to support margins.

Source: Citywire

Patrick Cairns is South Africa Editor at Citywire, which provides insight and information for professional investors globally.

This article was first published on Citywire South Africa here, and republished with permission.


Sort by:
  • Oldest first
  • Newest first
  • Top voted

You must be signed in to comment.


I really hope this trend continues. Our “large” asset managers are overcharging without the performance to back up their high management fees….

Scale scale scale. Maybe bigger isn’t better.

It’s about time some of these livelihood-sucking behemoths shrunk.

They take fees from clients whether funds go up or down, and they treat staff like dirt in tough times.

You feel entitled to no fees when your investments go down? Wow. Subsidised risk. I love the idea! Could only be thought of in SA.

Makes perfect sense. Boutique assets managers such as Excelsia, First Avenue and Perpetua are kicking at the heels of the incumbent firms on the back of strong relative performance.

For the large firms its about growing assets under management, and holding onto the assets through the broker network.

For the boutique firms, the focus is on investment returns only. They eat what they kill!

I hope you never allocate money for investors. Here is the independent performance report by 27Four :

Lets agree that March was a tough month for everyone. Excelsia Funds over 3 years have negative information ratio and come in the bottom half of the 14 managers consistently over 3 years. Similarly for the other 2 – their performances are not something to harp on about. Lets please look at facts and not just pander to the marketing.

Those are just numbers, give me facts :p

In all seriousness, I agree 100%, those were 3 very unfortunately examples to use.

These surveys can be found under the pillows of multi-managers and investment consultants.

Disclaimer: Past performance is no guide to future returns.

Its about sticking with investors that can manage volatility. Not trend followers or index huggers.

…I have yet to hear of institutional investors not shadowing the index….

In today’s lightening information highway ….you’d be a fool to not glance over the performances of the index

Your comment is thus moot

The point is that the number of investors will to pay excessive fees for no performance is reducing and will continue to do so. I for one am not prepared to wait 10 years to find out that my unit trust has done nothing while the asset manager took a few % of my returns annually for nothing really.

So they must manage money for nothing! Irrespective of what markets do fund managers still have fixed costs etc. If your work is sub-standard do you still get paid? The way fund managers are remunerated in this country is in line with global practice yet somehow you frame as a local issue. Fund managers do not control what returns markets provide (also called beta), if markets (not fund managers) provide poor returns that is the environment that fund managers must work with. There is no magic here. Finally, name just one fund or fund manager that is charging ‘excessive’ fees. Just one, I’m not saying there aren’t any but what do you construe as ‘excessive’?

@Colson…. where did I say that they should manage money for nothing? Where did I say that this is a local issue? Show me…. ever seen an asset managers offices? With their Bonsai plants everywhere, bean to cup coffee machines at every corners, leather chairs for all staff, remote controlled blinds….sports cars in the basement. Please don’t talk to me about fixed costs. In years when they outperform a bad bunch I get charged a performance fee, in years when they are negative, I still get charged the same fees…. and for what? To pay for their fancy lifestyles while they battle to outperform and index? No thanks….!! ETF have overtaken traditional collective investments in the US and they are growing globally. If you are happy to get robbed blind…. go for it….! Coronation sent me a nice email that they are reducing the costs on a number of their funds…. why? Because miraculously their fixed costs came down? No…. because they are losing funds under management in the retail space annually while ETFs continue to grow…. and they are cutting costs to try to hold on to clients…. asset management is in the midst of being seriously disrupted and many won’t be around in 10 or 20 years time….

Oh, so you do have investments with Coronation (they won’t just send a letter to an arbitrary critic such as yourself) yet you criticize their fee reductions.

What is so wrong with fancy offices? If your lawyer,doctor, accountant has fancy offices does that also mean their costs are excessive? If low cost indexing is your favoured approach make a strong case for it instead of bashing actively managed funds. ETF are a welcome low cost additional to the investment roster i.e. more investment choice allows investors to tailor their selections. That’s good isn’t it. Plus investors moving to lower cost options is another good trend – that is how investors create change, not by complaining but by doing something. BTW ETFs are growing but have not overtaken actively managed retail equity assets in the U.S. The combination of assets invested in ETFs AND index funds have overtaken actively managed retail equity assets. All these development are positive for investors so why are you complaining?

I think its a question of what is a “value-for-money” cost of fund management.

When a fund is new, the 0.5% (or similar) makes sense to provide investors with professional management and to stay afloat/break even. That seems fair.

However, if one listens to our listed fund managers’ annual results, its all about growing assets under management for the same or slightly higher cost base. Hence the golf days, airport posters and broker networks. Unfortunately, the marginal cost of fund management does not change significantly – maybe a few more analysts and administration staff, but to pay for more marketers that lunch does not seem like value for money for the investor.

A cost pass-through model would work best.

In the institutional market, lower costs as client AUM increases in very common.

Yip, South African equity unit trusts are not cheap from a fee point of view but are more or less in line with the global average(>1.5% and < 2%). Countries with fees < 1% are Australia, Mexico, Netherlands and the US.
One thing no one is talking about right now are the asymmetric performance fee structures – the house always wins.
The retail investment environment in South Africa should be ripe for disruption. There are far too many rent seekers encircling the investor.

Does your famous three of Excelsia, First Avenue and Perpetua utilise a cost pass through model?

Looking at their relative performance (beta adjusted Honorary Colson), the famous three should be paying investors for the privilege of managing their money!

Fat chance they are in it “to make returns for their clients”..they need to scale to keep the houses in bishops court, private schools and overseas holidays. Many of them where 3rd rate managers at their previous houses and conveniently omit the disastrous funds they managed at stanlib, cadiz and investec. In SA the “halo” factor still counts for something. Their performance speaks volumes.

Compound interest is a mean machine for sure

Compound fees is its fugly cousin.

The concept of fees based on assets is astounding. How does managing $1b mandate earn 1000 times managing $1m? Does a billionaire’s dentist cost 1000 times more than a millionaire’s dentist? Both are professionals.

The ONLY aspect that matters is a fee based on performance in excess of the risk-free rate or in case of equities performance in excess of the broad equity index. If you want to call yourself a professional and you cannot beat the broad index you should go back to mommy’s basement or get a real job. You deserve no fees at all

Please apply the benchmark logic to your industry and maybe you are on your way to mommy’s basement or in the process of getting a real job. When the benchmark is the market then by DEFINITION 50% must be below before costs.

I did not say you need to be above the average of managers’ performance. I said if you as a fund manager cannot beat the broad index (eg S&P500) then the investor may as well just buy the index and pay 0.1% for SPY etf instead of what – 15 or 20 times that to a fund manager. SPY delivers exactly the S&P500

No comment on why the fee on a billion fund is 1000 times the on a million fund?

My comment had nothing to do with the average manager! BTW the SPY return does not generally equal the S&P500 after fees, it also systematically underperforms. SSGA also need their fees and the SPY has actually underperformed the S&P500 by over 0.25% per annum since inception!! I believe that fund managers and advisers should share economies of scale with investors and while this happens in the institutional market it is not happening in the retail market. Investors are responding to this by moving to index funds which is how industries evolve for the better.

Can anybody tell me who 91 are and do they have anything to do with Investec ?


91 refers to the 91 hobbits, elves and dwarfes that J.R.R. Tolkien left out of the Lord of the Rings. They went into finance and asset management because charging fees is more fun than fighting orcs.

It is the Investec Asset Management division that was spin off into it’s own independent firm. Inevstec might have retained some shareholding, I don’t know?

91 – that refers to the year they were founded within the Investec camp. 1991

End of comments.





Follow us:

Search Articles:Advanced Search
Click a Company: