Sanlam subsidiary Glacier is on track to becoming the dominant linked investment service provider (LISP) in South Africa after Sanlam announced last week that it has finalised the acquisition of Alexforbes’s individual client administration business.
The deal was announced in December 2021.
Read: Alexander Forbes, Sanlam to buy divisions from each other
Glacier by Sanlam took full control of Alexforbes Individual Client Administration and its two wholly owned subsidiaries, Alexforbes Retail Client Administration and Alexforbes Nominees, from March 1.
A LISP is an administration company that offers investors access to collective investment schemes across a number of different management companies, on a single platform.
According to the Association for Savings and Investment South Africa (Asisa), Allan Gray’s LISP business was the largest at the end of December 2022, with assets of R388 billion. Glacier’s total assets were R318bn, while Ninety One’s LISP had R263bn in assets.
The acquisition of Alexforbes’s LISP business adds about R76bn to the R318bn already administered on the Glacier platform, giving the combined entity an asset base of R394bn.
It should be noted that not all LISPs disclose their data to Asisa. These include some of the largest, such as Old Mutual’s.
Business Day quoted Earl van Zyl, the head of product development at Allan Gray, as saying the LISP industry could be underestimated by as much as 30%. He said the LISP industry in South Africa is probably between R1.7 trillion and R2.1 trillion.
The publication commented that Glacier by Sanlam’s asset base is expected to grow even further after the integration of Absa’s LISP business:
Absa agreed to sell its LISP business to Glacier by Sanlam in October 2021 as part of the broader merger of Sanlam’s and Absa’s investment-management businesses. The integration of Absa’s LISP into Glacier is expected to be finalised towards the end of 2023.
Though Absa has stopped disclosing LISP data to Asisa, the most recently available number for the business was R66bn as at end-June 2021.
Read: Absa to sell LISP business to Glacier as part of deal with Sanlam
‘Buying market share’
In a statement, Sanlam said the deal will enhance its competitiveness in the LISP market, while the individual clients of Alexforbes will be provided with improved administration and user functionality thanks to Glacier’s technological capabilities.
In addition, a comprehensive set of Alexforbes’s individual client products, covering both retirement and savings, will be administered on the Glacier platform.
Business Day quoted Glacier by Sanlam chief executive Khanyi Nzukuma as saying that the deal also allows Glacier to “buy market share” when moribund economic growth is making it more difficult for businesses to expand organically.
“We’ve realised that organic growth is going to be flat for quite some time,” said Nzukuma. “There’s a lot of consolidation inside the market … it’s shrinking a little bit.”
Expansion plans
News24 commented that Glacier “is repurposing to grasp as many opportunities as possible”.
It reported that Glacier plans to white-label its platform and allow other LISP operators that have neglected their platforms in the past few years to use its technology for a fee.
According to News24, Glacier is trying to change its reputation in the market as mainly a provider of post-retirement products and expand into new areas.
“It has taken over the administration of Sanlam Life’s single-premium clients, for example. So, it now it has a system for administering life insurance premiums. From the new Alexforbes acquisition, it also getting pre-retirement capabilities. Its LISP platform now also offers guaranteed investment products,” News24 reported.
It said the Alexforbes acquisition will provide Glacier with an administration base in Gauteng. Its administration hub is in Cape Town, which limits Glacier’s reach among high-income black clients.
Nzukuma said Glacier will also have access to Alexforbes’s retail client administration business’s broker and adviser network, as well as its post-retirement products.
“We want to access numerous segments where we have not been,” said Nzukuma, adding that Alexforbes is strong in the “retailisation” of pension fund members when they exit their funds.
Glacier is positioning itself to “win over” fund members who, terms of the regulations to the Pension Funds Act, must be offered a default in-fund preservation arrangement, News24 reported.
