Asset management is one of the most important industries in SA, responsible for safeguarding the savings of millions of workers. Yet, 27 years post-democracy, black-owned managers are largely left out, accounting for a mere 9% of assets. Is that number a true reflection of what is happening in the industry?

In December 2020 deputy finance minister David Masondo delivered a keynote speech at an event hosted by the Black Business Council, criticising the slow pace of transformation in SA’s asset management industry.

Masondo warned that the government would be working with the Financial Sector Conduct Authority to ensure that the country’s 100 biggest retirement funds bolster their transformation efforts, and also ensuring retirement funds apply the financial sector BEE scorecard to all service providers, including asset managers.

Central to his critique of the sector is that a mere 9% of all assets under management in SA are overseen by black-owned asset managers. The 9% figure has its origins in an annual report by 27four Investment Managers called “BEE.conomics”.

In the 2020 report, 27four found that as of June 30 2020, a mere 32 black-owned asset managers oversaw R668bn, equivalent to just 9% of SA’s total savings pool of R7.63-trillion.

However, established industry players argue that the 9% figure is a skewed representation as it excludes the likes of the Public Investment Corporation, the largest asset manager in Africa. They also argue that the figure ignores the transformation efforts by asset managers that may not yet be considered black-owned in terms of the 51% ownership rule. Nevertheless, there is broad agreement that the sector can do more to achieve a more equitable racial and gender balance.

So, how can SA successfully navigate towards a more transformed asset management sector without resorting to strong-arming tactics to enforce compliance? It’s not ideal to legally dictate to investors, particularly at the retail level, who they should select to manage their retirement savings.

Another issue is that SA has one of the widest arrays of investment managers and unit trust offerings in the world, with many analysts saying the industry needs to consolidate. This is also happening amid worldwide disruption in the asset management industry, given the growing dominance of passive, low-cost products.

The trend towards passive investing inherently favours bigger companies with sufficient scale to generate profits off lower fees. Creating a wider pool of black asset managers will by definition mean more fragmentation at a time when the global trend is towards consolidation and scale.

How can SA reconcile these two seemingly conflicting realities?

Join the Business Day editor Lukanyo Mnyanda for the online BDFM Investment Dialogues on March 16 as he engages with speakers and key representatives from the asset management sector to discuss this complex topic and ways to achieve a more inclusive asset management industry.

 Confirmed speakers include:

  • David Masondo
  • Kganki Matabane, CEO, Black Business Council
  • Fatima Vawda, MD, 27four
  • Robert Roux, CEO, Sanlam Investments
  • Luvuyo Manyi, business development advocate, Assegai

 

How is asset management in SA adapting and improving? Picture: PEXELS.COM/PHILIPP BIRMES
How is asset management in SA adapting and improving? Picture: PEXELS.COM/PHILIPP BIRMES
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