Wanted: R1 billion of assets

To hire one investment professional – 27four transformation survey.

JOHANNESBURG – Black asset management firms need an additional R1 billion of assets under management to add one highly skilled investment professional to their team, a new survey has found.

But while many black firms have delivered relatively strong returns over the past year, many still struggle to attract funds.

Speaking to Moneyweb ahead of the release of their annual BEE.conomics survey on transformation in the South African asset management industry, Fatima Vawda, managing director of 27four Investment Managers, said the biggest challenges for black asset management firms are brand recognition and capital.

For start-up firms sourcing talent can also be a significant challenge as there is a limited pool of black investment professionals in South Africa, which are expensive to take on board, Vawda said.

Collectively the 32 black-owned asset managers that participated in this year’s survey managed R283.1 billion of assets as at June 30. Ten companies managed 94% of the overall assets.

Taquanta Asset Managers and Kagiso Asset Management, which have both been in operation for more than a decade, collectively manage over 50% of the R283.1 billion total assets under management (see below).

Source: BEE.conomics survey, 27four Investment Managers

To be eligible for inclusion in the survey firms had to have a minimum of 50% black ownership, at least 50% black representation at board level and a minimum of 50% black individuals in senior fund management positions.

New entrants

Eight new managers entered the survey this year.

Vawda said investment professionals are aware that asset allocators are under pressure to facilitate transformation and therefore support emerging black fund managers.

“Hence it’s created a gap or a perceived opportunity in the market,” she said.

There are also a lot of talented entrepreneurs in the South African market that don’t want to work for someone else – they want to generate their own ideas and drive their own businesses.

But how can these asset managers differentiate themselves and attract more funds?

While majority black-owned asset management firms have not been able to penetrate the R1.6 trillion local unit trust market an opportunity exists for these companies to diversify away from the institutional market and to take advantage of opportunities in the retail market, the survey found.

It suggests that black-owned firms could capitalise on opportunities provided by a growing black middle class with disposable income.

Black-owned firms sourced almost 84% of overall assets from institutional investors, largely standalone pension funds like those of the Public Investment Corporation and Eskom.

Only 16.1% of assets came from retail investors.

Vawda said black-managed firms have not been able to penetrate the unit trust market due to limited brand recognition and a lack of diversification amongst independent financial advisors.

Distribution channels of independent financial advisors largely drive the retail market, but there has been very limited transformation in this industry.

Vawda said very few black-managed firms have made an attempt at entering the unit trust arena and could enter the space by having small gatherings and speaking to independent financial advisors.

Millennials also offer an attractive opportunity for these firms.

She says managers have to embrace technology and make their offering available to Millennials through applications on their phones, tablets and on the website.

This generation is tech-savvy and don’t require old-fashioned insurance salesmen to knock on their door to sell them an insurance product. They do all their research online and want to be able to invest in the product directly without paying an advisor fee, she said.

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