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Transformation in asset management underwhelms

Black asset managers responsible for R490 billion in R5 trillion asset pool.

Transformation in the asset management industry continues to underwhelm and industry demographics are not reflective of those of South Africa, a new survey shows.

According to the latest Transformation in South African Asset Management survey conducted by BEE.conomics, R490.3 billion in assets is managed by majority black-owned asset managers, which is equivalent to almost 10% of the R5 trillion available for management by private sector asset managers and around 5% of the total value of the R8.7 trillion savings and investment industry.

“We haven’t moved at the speed we should have moved at and therefore we must gain traction. If we are crawling we must start walking, if we are walking, we must start running and if we are running we must start flying,” says Sibongiseni Mbatha, president of the Association of Black Securities and Investment Professionals, referencing Martin Luther King Jr.  

Black market share in the unit trust sector was found wanting, with black asset managers managing less than 0.8% of the R2.18 trillion available as at March 31, 2018. Only 72 of the 1 584 unit trusts in South Africa are managed by black asset managers. Fatima Vawda, managing director of 27four Investment Managers, the company responsible for the survey, describes the statistic as “shockingly disappointing”.

“Your man in the street who wants to buy a tax-free savings investment, a retirement annuity, a living annuity [or] a preservation fund is not coming to any of the black service providers. He is going to all the big branded names, and what we’ve discovered, through the survey, is that access to capital and markets remains a very big problem.”

The total number of black asset management companies has increased by 243% to 48 since the survey was first conducted in 2009. However, only 10 firms manage 84% of the R490.3 billion, and one company – Taquanta Asset Managers, which has been in operation for over 18 years – is responsible for 30% of the value.  

The attrition rate among black asset managers is also high with four business failures recorded over the 12-month period under review. Of the 48 existing black asset managers, 15 companies are over 10 years old; the remaining 23 have been in operation for fewer than five years.

More than half of the 48 black asset managers report annual revenue of less than R10 million while 12.5% earn in excess of R50 million.   

Guest speaker Floyd Shivambu, who is deputy president of the Economic Freedom Fighters and a member of Parliament’s Standing Committee on Finance, called for legislation to accelerate the pace of transformation. “Unless we legislate concrete transformative changes, which will enforce economic inclusion of black people and women, we will be describing the same problem in 50 years’ time.” He says Section 9 (2) of the constitution provides for legislative action to be taken to advance or protect persons disadvantaged by unfair discrimination.

More than 85% of respondents polled for the survey said “appropriate” targets should be set in the Financial Sector Code for asset managers and asset consultants. At the same time, over 60% of respondents said the current broad-based black economic empowerment targets on ownership, management control procurement, skills development and the like are at appropriate levels.

The 2017 report on transformation in the financial sector by the Standing Committee on Finance and the Portfolio Committee on Trade and Industry will, following a series of public hearings, inform the agenda of the upcoming National Economic Development and Labour Council (Nedlac) Financial Sector Summit.   

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COMMENTS   9

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“Guest speaker Floyd Shivambu”? If you are unsuccessful in business, legislate some new BEE requirements to direct a stream of revenue in your direction. What could go wrong?

let’s concentrate on what is overwhelming us right now – economic recession.

“Through good times and bad, SA’s policies have favoured redistribution ahead of competitiveness and middle-class growth. As a consequence, what is now required is a fundamental reassessment of the political economy.”

You can’t transform off the back of a failing economy.

So, in a free world the best asset managers should attract the more investors. Lets have a comparison of results. It might be that the more successful black asset managers do not get enough exposure to the market.

For an asset manager to get my money there a few very simple requirements:
1) performance.
2a) a clear understanding of what your investment philosophy and approach is because,
2b) this allows me to understand how you differ from every other asset manager out there.

A fund manager’s track record should speak for itself. Good track records will attract deposits.

Retirement deposits are easy money for fat, lazy, poor performing managers. They sit back and the funds roll in month after month, year after year. They don’t have to work hard to attract funds. Once again, SA appears a dangerous place for retirement investments because SA government interference always makes matters worse.

I am fed up being told that I can not choose the best doctor, accountant, fund manager, etc I can afford but I have to choose the “right” colour one.

Floyd I agree with you. So here is a novel idea for you to consider. Force all people of color to only invest with people of color. Let’s see how that works out.

VBS – say no more

let’s concentrate on what is overwhelming us right now – economic recession.

“Through good times and bad, SA’s policies have favoured redistribution ahead of competitiveness and middle-class growth. As a consequence, what is now required is a fundamental reassessment of the political economy.”

You can’t transform off the back of a failing economy.

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