How black asset managers are financing real assets
Increasingly, they are moving into the private equity space, even as black-owned firms still manage only about 18% of assets in SA
Black asset managers are increasingly making inroads into the private equity space, an indication that the investment industry is changing in many other ways, says 27four Investment Managers.
The debate around transformation in asset management still predominantly revolves around race 25 years into democracy; black-owned firms still only manage about 18% of assets under management in SA.
Very little light has been shone on how transformed the industry is in terms of where it invests people’s savings and pensions despite RisCura data on the allocation of pension assets showing that more than 72% of SA pension funds monies is invested in equities. The investment advisory and financial analytics firm’s research found that only 2.3% went into other assets such as private equities, which fund initiatives such as small business ventures and infrastructure.
27four, which has been pushing for transformation in the investment and asset management industry, said its latest BEE.conomics survey, to be released in September, show that black asset managers are increasingly branching into private equity and infrastructure investments as their share of assets under management grows. The BEE.conomics survey polls companies with assets under management ranging from less than R1bn to more than R100bn, and tracks how the industry has evolved since 2009.
Although more precise details about the shift towards private equity will only be released when the report is published, 27four’s head of unlisted investments Rory Ord said the proportion of black-owned firms to traditional managers in the private equity space has grown notably compared to the representation of black firms in the asset management industry as a whole.
“Most of them are generalist private equity fund managers, so they invest in companies across different sectors of the economy. But there are specialists who invest in infrastructure, renewable energies, or are into real estate,” said Ord.
At roughly R170bn in assets under management, private equity in SA is only a drop in the ocean when one considers that the country has a savings pool of more than R8-trillion. However, small as it is, private equity plays a big role in financing small business ventures and developing infrastructure, among other things.
“A lot of support for smaller businesses, a lot of the transaction activity that happens outside very large companies listed on the stock exchange, is reliant on the private equity sector to make that happen,” explained Ord.
Chad Potter, associate for unlisted investments at 27four, said that even though many back private equity managers are generalists and manage far fewer assets, some are beginning to specialise on impact investments.
“There is definitely recognition of the need to look at other types of investments that have an impact on communities. At 27four we have an investment into a healthcare fund that has created new hospitals in rural and peri-urban areas.”