PSG Konsult optimistic about SA despite lower trade volumes
Although its biggest unit struggled with lower trade volumes, PSG Konsult remains exceptionally upbeat
While many financial services firms are panicking from poor economic indicators locally and are therefore moving funds offshore, PSG Konsult says it will focus on its home market.
Although its biggest unit, PSG Wealth, struggled with lower trade volumes than usual, PSG Konsult said it remained exceptionally optimistic about SA and would not turn offshore for better performance.
The financial services group, with operations including wealth management, asset management and short-term insurance, reported an 18% rise in headline earnings for the six months to August 2018. But its wealth business had a decline in trade volume and earnings rose only 7% increase, compared with the average of 18% achieved in the past five years. The division offers individuals and businesses a platform to directly trade shares and other securities, among other things.
PSG Konsult CEO Francois Gouws said it was a difficult equity market, but the company increasing its total assets under management 19% was encouraging.
“We are very optimistic about SA. I think many SA companies have been getting questions about why they are not diversifying and investing offshore, but our stance is: we are a South African company. I think the recent political and policy changes afford the country the opportunity to recover quite a lot,” Gouws said on Thursday.
PSG Konsult had recorded good trade volumes and fund inflows for many years and so regarded market difficulties in 2018 as a minor setback, he said.
“We’ve got a resilience business model. We are gaining market share even during periods of difficulty. I think it’s because we have a different approach to our competitors. We are advice led rather than product led,” said Gouws.
PSG Konsult’s total assets under management rose to R230bn in the period under review, of which R182bn was attributable to PSG Wealth and R48bn to PSG Asset Management. Short-term insurance arm PSG Insure increased its gross written premium 25% to R2bn.
“Our business is heavily orientated towards retail clients, which is what helps and sets us apart from most asset managers. Most inflows to our asset management business went to higher-margin funds because of our focus on the retail market,” said Gouws.
He said PSG Konsult’s strategy was to avoid low-margin, high-volume operations. The short-term insurance business was predominantly focused on the commercial lines, mostly servicing SMEs. PSG Insure’s net underwriting margin, a measure of profitability, improved to 10.5% while the country’s biggest short-term insurer, Santam reported a margin of 8.4% at end-June 2018.
Even in 2017, when most short-term insurers’ profits were ravaged by catastrophic events such as Western Cape storms and Knysna fires, PSG Insure’s net underwriting margin stood at 7.4% in the first half of 2017.