STANLIB CEO on why the industry needs to rethink retirement

.
.

Covid-19 has the potential to unseat a lot of assumptions South Africans make about society, according to STANLIB’s CEO, Derrick Msibi – particularly around saving for retirement and where (and how) those funds should be invested.


Most people with retirement plans will have received that e-mail from their investment manager; the one that chimed jauntily in your inbox, but ought to have landed to the sound of an anguished cry.

That’s because there’s a crater where your retirement savings used to be, courtesy of Covid-19. There were fault lines in the world economy even before the virus, but for now, with recessions expected in all but India and China, the prognosis for the global economy is on a spectrum of poor to dire.

“First of all, I think Covid-19 is going to leave all of us with a scar,” says Derrick Msibi, CEO of STANLIB, in an interview with finweek. “I would be very surprised if it’s not seen as an important or defining fact in the history of mankind.”

That’s how most people are viewing the impact of the virus. For Msibi, he thinks it has the potential to unseat a lot of assumptions South Africans make about society, including the notion – albeit among a slender cohort of the country – that timely, prudent squirreling away of retirement chips will one day materialise into a holiday home with an uninterrupted view of the Indian Ocean.

It introduces a complexity of moving parts to the things Msibi has been trying to achieve at STANLIB since his appointment as CEO.

Msibi joined STANLIB after eight years at Alexander Forbes in March 2017. Before that, he was at Old Mutual for 12 years. He calls himself “a stayer”, which has proven crucial in helping to attract new skills to the group. People wanted to know if new management would, in a sense, become ‘old’ management, which is to say, hang around, he says.

Msibi's tenure at STANLIB
Initial scepticism aside, Msibi has steered STANLIB from a dwindling presence to – in 2019 – a year-on-year 7% increase in assets under management. At some R568bn, that’s only R10bn behind Coronation, a rival asset manager, while simultaneously ‘refreshing’ management and decluttering the firm’s products, including its dabbling in unlisted property.

Covid-19 won’t change STANLIB’s current trajectory, Msibi says; not even – entirely – the need to work from an office. The literature on working from home has been extensive, especially in the wake of the Covid-19 pandemic, but Msibi thinks blending the way things worked before the virus with how life is working now may eventually be the most effective in a Covid-19 world.

Take meetings, for instance: can you ever dispense with being in the room? You sometimes don’t get the “energy in the room” via Zoom, and it will be hard to keep people connected to a common purpose, says Msibi.

The purpose at STANLIB is proving a return on clients’ money, but there is change afoot here as well.

“I personally think that the concept of retirement is something that needs to be completely relooked,” says Msibi.

“First and foremost, the vast majority of people will never be able to retire comfortably and so this obsession of us all telling them that they must put a lot of money aside and give them these pictures of how way off they are from their retirement goal [creates] unnecessary anxiety.”

Msibi thinks the investment industry should be drawing up a different type of picture; one in which reaching 60 is probably the perfect excuse for thinking about the next career. It’s not a new thought – for sure – but it’s more apposite now than ever.

Financial Times columnist Lucy Kellaway tells the story of how taking up teaching maths to inner city secondary school pupils sure beats another decade in journalism, especially as she makes the astonishing apprehension that she be as good as she’s going to get; and might possibly have become worse.

Says Msibi: “We have these debates in investment which is: is this a cumulative skill which is ‘the more you do, the better you become?’ A surgeon who has conducted 50 heart by-passes is probably a better surgeon for it (one hopes). But do all professions work in this way?” he asks.

“I just see it as a fantastic opportunity for those who have got an attitude to learn new things. Those who are able to do that will obviously have an enjoyable second career – and those who can’t, in my view, will find themselves actually obsolete.”

Away from personal, existential questions about career, money and retirement South Africans also exist in a fluid social and political world. In some ways, the reshuffling in developed economy priorities towards poverty alleviation and a more equitable society that Covid-19 is supposed to be bringing about is a movement in which SA has been involved for a quarter of a century.

Although superficially motivated by the Covid- 19 pandemic, the government’s plan to ‘guide’ private pension funds into state infrastructural development projects adds a political and ideological dimension to future uncertainty.

This is the 38-page document from the ANC’s economic transformation committee, headed by Enoch Godongwana, that talks about economic reform but proposes a conjoinment of privately-managed pension money, as well as funds in the Public Investment Corporation, with public sector ends that looks like continued state control. It’s prescribed assets, but not as we’ve known it.

According to the report as cited by Bloomberg News, measures taken must include “among others, impact investments, interchangeably developmental and productive-asset investment requirements”. Said Kuben Naidoo, deputy governor of the SA Reserve Bank: “If you force someone to buy something, then they won’t buy it. They will find every way of not buying it.”

Msibi thinks the government is missing a beat by effectively circumventing the asset management industry in its efforts to kickstart the economy.

It’s a noble idea, but “... tragic and short-sighted”, says Msibi.

“When you read some of the documents that come out ... that you want to cut out the asset managers, you just realise that it is so fundamentally flawed in terms of understanding who the role players should be in addressing some of these things.”

The asset management sector already has the capability to allocate funds to, say, infrastructural spend. Ninety One, the Investec spin-out, recently launched the R10bn SA Recovery Fund with Ethos Private Equity, the aim of which is to help companies affected by the looming economic recession into which SA is stepping.

In April, STANLIB’s credit alternatives team launched its Khanyisa Impact Investment Fund which has targeted capital for certain investment themes that address SA’s socioeconomic challenges. Msibi says investments of this sort offer clients a quite different type of asset class, but one quite within the grasp of the company to manage.

“If I’m going on 60 and I’m trying to do something in a living annuity, quite clearly infrastructure investment will not be suitable,” he says. In these cases, such a fund won’t have the yield investors want, nor the liquidity. But there are investors who will take to it, says Msibi. “If you’re a large company and you’ve got 40 years of liabilities, you might want to have exposure to infrastructure.”

Matching investors with products are, when all’s said and done, the work of the asset manager, in Msibi’s view. When the match is made in pursuit of a social outcome, so much the better, which is why the government’s insistence that it be the cipher in capital allocation is troublesome.

It’s a conversation the asset management industry has repeatedly had with government and that keeps resurfacing, either prior to elections or, in this case, a crisis. “I can’t believe that these are the same people that we had engagement with a year ago when we agreed what the game plan would be.

“There are still issues of trust between all of our role players and that we’re all aligned, and all have the best of intentions.”

Read more
This article originally appeared in the 25 June edition of finweek. Buy and download the magazine here or subscribe to our newsletter here.
finweek, june, 2020

ZAR/USD
17.14
(+0.09)
ZAR/GBP
21.52
(-0.02)
ZAR/EUR
19.33
(+0.09)
ZAR/AUD
11.90
(+0.11)
ZAR/JPY
0.16
(+0.15)
Gold
1794.38
(+0.02)
Silver
18.27
(+0.19)
Platinum
843.00
(+0.76)
Brent Crude
42.97
(-0.05)
Palladium
1919.99
(+0.65)
All Share
55243.80
(+0.72)
Top 40
50922.32
(+0.83)
Financial 15
10086.99
(-0.47)
Industrial 25
76855.87
(+0.55)
Resource 10
52017.34
(+1.71)
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Please select an option Oops! Something went wrong, please try again later.
Results
I'm not really directly affected
18% - 1734 votes
I am taking a hit, but should be able to recover in the next year
23% - 2272 votes
My finances have been devastated
34% - 3393 votes
It's still too early to know what the full effect will be
25% - 2456 votes
Vote