Stanlib back in contention
A decade of woeful performance saw Stanlib bleed clients, to the detriment of listed parent Liberty. That is changing
Stanlib’s 2017 management shake-up appears to be paying off — after a long drought for investors in the company’s equity funds.
The asset manager, under new CEO Derrick Msibi, has closed most of its underperforming equity funds, trimming its offering to just four local equity funds from the 19 it had in 2016.
The "decluttering", as the company calls it, is aimed at getting Stanlib to a position where it can meaningfully compete with heavyweights Coronation and Allan Gray.
And it looks like the right strategy: Stanlib SA recorded net inflows of R16.1bn in 2018, 241% higher than in 2017.
Still, profits for the group, which is owned by listed insurer Liberty, have yet to impress.
For example, the R355m in headline earnings in 2018, while higher than 2017’s profit, is still considerably lower than the R459m reported in 2016.
"If you look at the resources, our size and our position in the asset management industry, [Stanlib] is a business that hasn’t delivered as strongly as it should have done," says head of investments Mark Lovett, who was brought in by Msibi and Liberty CEO David Munro in July 2018 to stem an exodus of clients.
While Stanlib remains one of SA’s largest asset management companies — it has more than R560bn in assets under management — a decade of underperforming the benchmark in its equity funds has dimmed its appeal for investors and overshadowed even those parts of the business, such as fixed income, that continue to hold their own.
"It wasn’t that Stanlib was a complete mess. [But it] was not delivering consistently enough," says Lovett.
"We had great franchises like the fixed income business, absolute return and property which had good, consistent delivery. Unfortunately, the areas that didn’t deliver were high-profile areas within SA: equity and multiassets."
That is changing: by September, the Stanlib Equity Fund had outperformed the benchmark by nearly 1% over a one-year period and was 2.6% above the sector average.
Its performance over a 10-year period is now on par with the benchmark, whereas in May 2017 (the only fund fact sheet still traceable online for that year) it underperformed the benchmark by 3%.
Lovett is regarded as a turnaround specialist, and joined his previous employers, Ignis and Nordea Asset Management, at a time when they were addressing underperforming areas.
He’s under no illusions about how fast Stanlib’s turnaround will be. Luckily, parent Liberty has given Stanlib five years to completely "fix" itself.
"If we were completely on our own, fee pressure from the bad years could get people making irrational decisions. Having a big parent is a big positive for Stanlib as long as we can make sure we use that to get us to a good space," says Lovett.
"You can’t just click your fingers and get one-year performance.
"This is a highly competitive business where you need to put in place processes and quality of people that can deliver. Realistically, that takes time."
Still, any asset manager is judged by how it performs against certain milestones, and the Stanlib team is acutely aware of that.
"Take the fixed income business, for instance — even though it’s been successful in delivering returns in the past, we cannot be complacent," says Victor Mphaphuli, head of the division.
"Mark [Lovett] and Giles [Heeger, the executive for asset management] are pushing us to be better."
Mphaphuli, however, recently won the fixed income manager of the year award from the Association of Black Securities & Investment Professionals in October.
Stanlib is making progress in exiting the problematic African operations that have been draining its earnings, and has sold its stakes in the Ghanaian and Botswana businesses to Stanbic Africa and Vunani respectively.
Hopefully, that will stanch the bleeding: in financial 2018 Stanlib Africa posted a R19m loss, though that’s dramatically better than 2017, when it racked up losses of R226m.