Sad state of transformation in fund management sector

The ninth annual BEE.conomics survey report, launched this week in Johannesburg, revealed the dismal state of transformation in the country’s asset management sector.

The report, which took six months to compile and was published by 27four Investment Managers, revealed how slow transformation in the sector has been, with only four new entrants in the past 12 months, and the overall amount of assets overseen by black managers still less than 5% of the overall available funds under management.

The number of black asset managers has increased to 45 from 41, but they still manage only about 10% of the overall funds managed by the private sector. The new entrants are Summit Real Estate, Solaris Bataung Capital, Idwala Capital and Tamela Capital Partners.

The report indicated that, of the few assets managed by black companies in the sector, there was also a huge gap among them since one company, Taquanta Asset Managers – which is almost 20 years old – oversaw 29.44% of assets, while 32 other companies oversaw less than 1% each of the entire R415.5 billion managed by black asset managers.

The second biggest piece of the pie of 12.7% belongs to Aluwani Capital Partners, which has only been in operation for less than two years.

The top five of the 45 companies account for R204 billion of the R415.5 billion pool of funds under management, and more managers seem to be opting to charge fixed management fees.

The survey was conducted on companies that have at least 50% black ownership and accompanying rights, 50% black representation at board level and 50% black individuals in senior fund management positions.

The entire pool of funds amounts to R9 trillion, of which R4.6 trillion is in private hands.

Delivering the keynote address at the event was Sibongiseni Mbatha, the president of the Association of Black Securities and Investment Professionals. He reiterated his call for black asset managers to be given more assets to manage, and for opportunities to be afforded to all – not just a select few.

“In the inaugural 2009 survey, assets managed by black-owned firms were estimated at R91.4 billion,” he said.

“They have now grown to about R415.5 billion, representing about 9% of the total investment and savings industry in South Africa. This represents a total growth of 355% over eight years.

“Black asset management firms have grown to 45 firms from 14 in 2009. One welcomes the progress achieved. However, significantly more can be achieved.

“Another recent statistic is the less than satisfactory transformation of the stockbroking industry. Of the 465 stockbroker analysts participating in the Financial Mail’s Ranking the Analysts survey of 2017, about 18% were women and 14% were black,” he said.

Mbatha added that the market share, which amounts to a mere 4.4%, could triple in a short time if patterns of allocations and attitudes changed.

“The industry must grow as it transforms. We cannot postpone growth and say we will transform after we grow. Grow as you transform,” he added.

Fatima Vawda, the founder and managing director of 27four Investment Managers, said the entire industry consisted of about 200 asset managers across the country.

Despite the ratio of black asset managers to their white counterparts being at 1:3, the gap in the assets each group manages was much bigger.

Vawda said the report showed that real transformation in the financial services sector would be achieved if the means of production was owned by the majority.

“Significant exponential growth will not occur within the black asset management subsector because the means of production is not owned by black people within the sector,” Vawda said.

She added that participation by women was impressive – there was at least 45% black female participation within the black asset management subsector, and there were positive signs of more progress.

“Cape Town continues to lose out to Johannesburg in terms of attracting new black asset management firms,” said Vawda.

“This is because 71% of firms are located in Gauteng, reinforcing Johannesburg’s status as the country’s economic capital. The dominance of Johannesburg over Cape Town can also be attributed to Gauteng’s larger population count.”

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