Investing: Why Stanlib is raking in the money

Asset manager Stanlib is becoming a source of pride for its parent companies, Liberty and Standard Bank, after swimming against the tide in 2019, growing its fee income and assets under management at a time when industry heavyweights like Coronation struggled.

After a decade of under-performing, the benchmark in its equity funds – the most prominent asset class among investors in South Africa – Stanlib struggled to keep clients, let alone attract large values of new investments.  

But in the 2019 financial year, the Melrose-based asset manager increased its assets under management (AUM) by 7% to R568 billion, putting it only R10 billion behind Coronation, which recorded R578 billion in AUM at the end of December.

The gain in assets shows that Stanlib is reclaiming its spot in the league that makes the cut of the IPE Magazine’s annual asset managers ranking.

SA investors were more cautious in 2019

"What helped us is that, when you look at our net flows, we didn’t lose a lot of money. We managed even in the high margin areas, like balanced funds, to not see significant terminations. In a nutshell, it was a market that was favourable to Stanlib because we’ve got big exposure to what was attractive," said Stanlib CEO Derrick Msibi.

About 40% of Stanlib’s investments is in fixed income, which is a more conservative asset class than equity, and one that some investors run to when the equity market is experiencing a downturn.

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Giles Heeger, the executive for asset management at Stanlib, said more retail investors were putting their money in fixed income, income funds and balance cautious funds, among others.

Performance has improved well right across all of funds except the local property fund, said Heeger.

While the asset manager also felt the strain in its equity and property funds, it was this dominance of less risky asset classes that helped the firm raise its net fee income by 5% to R1.7 billion in 2019.

Will investors reap the benefits of improved Stanlib?

Heeger notes that since the asset manager became part of the turnaround strategy that swept across all Liberty’s businesses in 2017, it has brought in new talent in key positions. The management team, including him, Msibi in the CEO position and the head of investments, Mark Lovett, all joined during the restructuring process.

After the company underwent a review of its investment philosophy, most of its funds, except for local equities, have had better returns and are now ranked among the best performers on a one-year basis. But in investments, consistency is everything, and Stanlib must prove that it can generate good returns in the long term, and not just in one year.

"From here, we’ve got the right philosophy, we’ve got the right processes, the right people and the right leadership. What’s important to get right now is consistency. To make sure that 2018 and 2019 were not flashed in the pan and that we can deliver for 3, 5, 7 and 10 years," said Heeger.

He admits that Stanlib has not mastered stock selection in South African equities. The firm is now bringing in a new head of equity research, Andrew Cuff, who will be starting with the firm on March 2 to help it on that front.

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