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Ninety One reports 27% rise in assets under management

‘Net inflows were flattish … but generally the beneficiary of better market conditions and very solid investment performance’: CEO Hendrik du Toit.

NOMPU SIZIBA: International asset manager Ninety One released its annual results – for the 12 months ended March 2021 the company reported that its assets under management rose by 27% to £130.9 billion. It noted that profit before tax came in at £204.1 million, up 3% on the year prior. Adjusted headline earnings per share came in at 17 pence, up 6%. It’s giving UK-based shareholders, a final dividend of 6.7 pence a share, and South African shareholders 133 cents a share.

To take us through the company’s performance, I’m joined on the line by Hendrik du Toit, the founder and the CEO at Ninety One. Thanks very much, Hendrik, for joining us. Now, a 27% increase in assets under management sounds good. How much of that was new business and how much was that rising global market valuations?

HENDRIK DU TOIT: Nompu, it was a combination of good performance and strong markets because net inflows were flattish, marginally negative this year but generally the beneficiary of better market conditions and very solid investment performance.

NOMPU SIZIBA: To what do you attribute that very mild outflow of £200 million, which is obviously a dent in the billions that you manage?

HENDRIK DU TOIT: Yes. If you look at the last 10 years, Nompu, about half of our growth came from net inflows, and the other half came from markets and performance. This is the second year in 10 years where we have a small outflow and it was really all around – remember we report March to March – the beginning of the Covid correction in the market, which was very severe. It affected some of our performance track records. Also, some of our clients de-risked and there were some specific client reasons. Actually our gross inflows or gross sales were roughly the same as the previous year. But hopefully, with our best endeavour, we will try to turn that around; but it does happen from time to time.

NOMPU SIZIBA: The year 2020 was your 30th year in existence. It’s also the year that you newly listed as Ninety One after transitioning from being Investec Asset Management. All this coincided, of course, with the novel Coronavirus coming to wreak havoc on all of us. What were the lowlights and the highlights of the year for you guys?

HENDRIK DU TOIT: Nompu, If we look back, all I can say is we are incredibly grateful, not only for the 30 years but for having come through this year which was challenging at the outset and could have been much worse. And actually to have record earnings and record assets and the management and record revenues is a wonderful thing – and decent performance. That really explains the highlight, but also the independent listing, successful execution of the Investec and Ninety One de-mergers, and not really changing who we are, but continuing to deliver for our clients.

Lowlights – well, we started the year with a very tough performance position and the fact that, for the second time in 10 years, we had a small net outflow. But I’ll take that any day, looking back. It could have been so much worse, given that the world economy was in such a dire position a year ago.

NOMPU SIZIBA: Indeed. Now, of course, you emphasise that as an asset manager you are a long-term player, working to help grow people’s capital and all of that. But the world is at an interesting juncture right now with concerns around high inflation and talk around monetary policy having to tighten in the not-so-distant future. So how does this juncture impact on your stewardship of people’s funds and how you position them in the equities markets?

HENDRIK DU TOIT: When we talk to our clients, we talk about investing for a world of change. Change is accelerating. We’ve had the tech revolution playing out, and we see it every day. Now we have the sustainability revolution, or the changing of the way the world economy works. It’s as big as the industrial revolution was busy happening. That’s changing things. In the near term, we’re finally coming to terms over the next few years with interest rates normalising, or starting to normalise, particularly in response to rising inflation.

At least we have strong growth and a recovery worldwide happening, which is really important. Markets always change. Markets are always dynamic. Our role as active managers is to manage that process on behalf of our clients. But all I can say is you have to be open to change in regime and in the situation. Just think how conditions have changed over the last year, even. That doesn’t mean that you must flip-flop in your strategy. Your business and your investment strategy must be pretty robust over the long term.

Sometimes when I talk to individual investors out there, they want to go to the latest new thing or change, because something has changed now. The fact that we performed really well over the last year in terms of investment performance was because we stuck to our processes, stuck to our strategy while conditions were changing around us. And I think that’s really good.

NOMPU SIZIBA: To reflect on something that you said, you talked about the whole sustainable development thing. Even in your note, it’s clear that one of your aims is to be a sustainable company that invests on behalf of others in sustainable businesses. Is that ethos already evident in your investment strategies – and ultimately why is this important to you?

HENDRIK DU TOIT: I think firstly we reached a tipping point – and the Covid pandemic actually created a tipping point. The world over and many, many people realised that if we don’t treat our planet with respect, if we don’t recognise our unity as global citizens – it’s not just for a few to win, or have a few green spaces – if we don’t manage the earth properly, we will have much bigger problems down the line. So I think that’s an important trend, irrespective of what Ninety One does or doesn’t do.

As far as Ninety One is concerned, we are a steward of other people’s capital and those people are asking us these questions, saying, “How are you applying our money?” Now, very importantly, the bulk of the money we manage is not tied up in a sustainability-specific or impact mandate, but it is important for us as investment managers to at least consider and price the risks inherent in companies, and therefore ask them if they have coped with this particular risk, which is now really front of mind.

But beyond that, as a firm the people in our business also want to do better and want to do good. We preach about our purpose – which is investing for a better tomorrow by building a better firm, investing in a better way and ultimately contributing to a better world. So it’s part of our ethos. But we’re not perfect. We’ve got a lot to learn. All of us have a lot to learn to live better. So this is not Ninety One preaching. This is Ninety One making a statement of intent, saying as a steward of capital we genuinely have to be responsible and think about this transition.

NOMPU SIZIBA: It’s an aspirational message.

HENDRIK DU TOIT: And it’s a huge opportunity also for all of us, for businesses, for others, just to move out of the carbon century or carbon era.

NOMPU SIZIBA: One of the things you sound most proud of in your management approach is being a so-called capital-light organisation. How do you balance that with also ensuring that you retain and attain the best asset-management talent?

HENDRIK DU TOIT: I think ‘capital-light’ is actually all about that. This is a talent business, this is a people business. Once you have a heavy balance sheet, whether you’re a bank or insurance company or something, the balance sheet always takes primacy. That always is the important thing that you have to protect.

In our case, we have to protect the culture and we have to protect the creativity of our people to generate results with minimal financial capital involved. That’s just the model we have chosen. You can have different models. It’s a signal to our shareholders that we will most likely never ask them for money again. We will send them dividends. We will not raise capital from them to run our business because we can run our business fairly capital-light, and we generate enough cash. But the trade-off for that is you create a people or a talent-friendly environment. So, being a capital-light business supports your quest for retaining talent and attracting very good talent in a world where talent is extremely mobile.

NOMPU SIZIBA: And then lastly, Hendrik, your outlook for the balance of the year?

HENDRIK DU TOIT: Nompu, we think firstly that South Africans in particular shouldn’t underestimate the positive changes that have happened over the last year or so, in spite of the irritation with load shedding and I guess Ace Magashule, the fights among the politicians and corruption.

South Africans are actually experiencing support from the commodities markets. The world economy is growing again. We have higher interest rates, and therefore it’s easier for us to attract capital through the debt markets. And politically there seems to be some will to deal with the problems. We are far away from being competitive, and from being cutting-edge in the world economy. But that rate of change is going to improve asset prices in the country and economic conditions which then create the space for us to do more.

Globally, I think we similarly have a better growth environment, which again gives opportunity for businesses to earn more money and therefore ultimately underpin stock prices. So it’s not going to be a sharp up, but we are not in a bad environment at the moment and I don’t think interest rates will kill the positive momentum that we see in the world economy.

NOMPU SIZIBA: That was Hendrik du Toit. He’s the founder and CEO of Ninety One.

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