Discovery Group this week announced the launch of its discretionary fund manager (DFM), Cogence, which will give financial advisers access to portfolio analytics and risk analysis tools developed by the world’s largest asset manager, BlackRock, which has about $8.5 trillion under management.
BlackRock will provide Cogent with global asset allocation views, which will be combined with personalised health insights from the Vitality database, to provide investment solutions, including model portfolios, Discovery said in a statement.
“We will be able to give a good estimate of life expectancy from the medical information gathered through Vitality Health, so Cogence should be able to establish how long retirement income, in particular, has to last for each client,” Discovery Group’s chief executive, Adrian Gore, said.
Cogence will be the first South African DFM licensed to use BlackRock’s Aladdin Wealth technology, which provides portfolio analytics and risk analysis to financial advisers.
Gore said Discovery’s decision to enter the DFM space was based on two trends.
First, South African investors were increasingly looking to invest globally.
The recent amendments to regulation 28 of the Pension Funds Act allow local retirement funds and unit trust funds to allocate up to 45% of their capital to offshore assets. “This means we can invest nearly half of our retirement savings in offshore assets – that’s powerful. Research and understanding of risks and the opportunities that global markets present is crucial,” Gore said.
Second, more than 90% of people in South Africa cannot afford to retire and have to rely on their family or the state. The elasticity of savings behaviour was often more important than investment returns, Gore said.
“Cogence is built upon BlackRock’s asset allocation views and has been designed to pair Aladdin Wealth technology with Vitality’s data and analytics to incorporate personalised health and longevity metrics, which essentially maps out every aspect of a financial plan. These metrics consider how long you will live, how healthy you will be, how much money you need and, importantly, support financial advisers in making recommendations to their clients.”
Kenny Rabson, the chief executive of Discovery Invest, said Cogence will offer “a sophisticated premium product” at a fee of 20 basis points plus VAT. Initially, Cogence will offer a range of risk-profiled funds of funds.
“Cogence will be run as an independent business, and we would like to see Cogence funds being made available on third-party investment platforms,” he said.
Cogence will have an investment committee that will see BlackRock advise on the global asset allocation and offshore fund manager choices, while RisCura, a local research and advisory firm, will provide the selection of local fund managers.
RisCura already does the asset allocation for the three Discovery Dynamic Asset Optimiser funds. These are funds of funds that use only Discovery-branded unit trusts as building blocks.
Gore said the combined behavioural science and global investment expertise of Discovery, BlackRock and RisCura will support local financial advisers to deliver more timely information, deeper insights, and superior service to clients that can ultimately result in an optimal retirement outcome.
The collaboration with BlackRock is the second partnership with a global investment giant announced by Discovery in 14 months. In June last year, Discovery Invest partnered with Goldman Sachs Asset Management to launch a global megatrends fund.
A year earlier, Discovery launched its first offshore product, Discovery Invest International, in partnership with BlackRock and Goldman Sachs.
