Transformation: Charter council calls for more black asset managers
A new survey reveals black firms manage just R415.5bn of the R4.6-trillion industry
The Financial Sector Charter Council, which oversees transformation and black economic empowerment in the financial services sector, wants new targets set to encourage retirement funds to appoint black principal officers and service providers such as asset managers.
The industry has a parlous transformation record with a new survey revealing on Tuesday that black firms manage just R415.5bn of the R4.6-trillion industry.
The proposed amendments to the code and the scorecard include up to 20 points for the participation of black people on a retirement fund’s board of trustees and executive management, if applicable, and up to 80 points for preferential procurement of services from black service providers.
On Tuesday, 24four Investment Managers unveiled the results of its survey into transformation. It shows that black asset managers manage just 9% of the funds available to private-sector asset managers and excludes restricted assets such as that of the Government Employees Pension Fund, managed by the Public Investment Corporation. The assets that black-controlled firms manage grew just 1.8% from 2016, it shows.
Council member Sibongiseni Mbatha who is also president of the Association for Black Securities and Investment Professionals, indicated disappointment with the findings, saying the sector now needed to move towards collaborating with the government on transforming.
"We need to realise that we no longer have time. For the past 23 years, we have been saying, ‘Please transform, please transform’," he told delegates at the launch of the report.
"We are no longer going to do that," Mbatha said.
Trevor Chandler, another member of the council representing the Association for Savings and Investment SA, had not responded to questions by the time of going to print.
Retirement funds account for R1.8-trillion of the assets available for private sector asset managers to invest, the second-largest source after collective investment schemes, such as unit trusts, which account for R1.9-trillion, according to the survey.
Even umbrella funds, which are established by financial services firms to offer retirement benefits to a number of companies, employ trustees who prefer to use household names such as Coronation, Old Mutual and Allan Gray. Asief Mohamed, chief investment officer at Aeon Investment Management, said that asset consultants, which advise retirement funds, were also not advising their clients to invest with black firms.
"There is no clear reason why," he said. "We believe we have to assume it is racism."
Mohamed said that "excuses" advanced by the consultants included issues relating to "excessive market risk", which just did not apply.
27four MD Fatima Vawda said that while the revised code, which was still at the council and had not yet been approved or gazetted by Trade and Industry Minister Rob Davies, would deal with the transformation of retirement funds, collective or individual investments were left up to the "client consumer".
"They [clients] use independent financial advisers," she said. "[For black asset managers], this requires being a lot more inventive, being a lot more out there."
The survey showed more than half of the participants spent less than 1% of their revenue on advertising, branding and marketing, and relied mainly on direct relationships with large retirement funds to distribute their products, failing to tap into the retail market.