Sygnia is looking to acquire a platform business in the UK to sell its index-tracking products and offer robo advice, says the asset manager’s CEO, Magda Wierzycka.
Passive investing continued gaining momentum in that market, where there was a huge focus on costs, Wierzycka said on Tuesday.
Locally, asset managers have struggled to attract inflows, as growing retrenchments have led to large withdrawals from retirement funds. "There isn’t a new pool of savers coming into the market," she said.
Growth came predominantly from taking market share from competitors, particularly active asset managers.
Sygnia’s share price rose 3.4% on Tuesday to R11.17, as investors welcomed news that it planned to raise only half the cost of its db X-tracker (DBX) acquisition via a rights offer.
There was an expectation that Sygnia would raise the full amount via the equity market to fund its R325m purchase of Deutsche Bank’s DBX exchange-traded funds (ETF), which it plans to rename Sygnia Itrix ETFs, Wierzycka said. This led to short selling of the stock, which could partly explain the pressure it was under, she said.
Instead, Sygnia would raise only R160m via a rights offer of about 17.7-million shares, borrowing the rest from Nedbank.
In effect, only about R38m would be raised on the market and that mostly from existing shareholders following their rights, Wierzycka said. She and her related parties would buy R40m worth of stock, lifting her effective stake in Sygnia to more than 60%. Black economic empowerment partner African Equity Empowerment Investments (AEEI) and a strategic international investor, a retired investment banker, would take up an additional R82m, taking their respective stakes to 1.65% and 5.02%. Sygnia planned to increase AEEI’s interest.
Sygnia grew assets under management nearly 2% in the second quarter to R162bn. It was expecting an additional R6.1bn in institutional assets in the third and fourth quarters, some of which would go to its umbrella retirement funds.
While the stated asset growth might look thin on paper, the substance was much greater, said Vunani Securities analyst, Anthony Clark.
On his understanding, Sygnia had replaced lost or forgone assets with assets that paid a better margin.
Sygnia had continued to invest for future growth, with the DBX deal adding a meaningful new earnings stream, he said. The deal added R11.3bn to Sygnia’s assets overnight.
Sygnia said it would launch additional offshore ETFs and a "fourth industrial revolution" ETF, which tracks an index comprising companies in fields such as 3D printing and drone technologies, in 2017.
While the stock is down 38% in 2017, analysts are targeting prices between 34% and 79% above its current level.