The inclusion of Sanlam Investments swelled the assets under management (AUM) of black-owned management companies to R1.15 trillion in June, from R667.8 billion in June last year. This is according to 27four Investment Managers’ latest annual BEE.conomics 2021 Transformation in South African Asset Management survey.
The survey estimated South Africa’s total savings pool at R8.4tn.
Sanlam added R344bn to the overall black-owned AUM. SIM and Sanlam Alternatives are now, by far, the biggest black-owned players in the country’s public markets and private markets, respectively.
The inclusion of SIM’s CIS portfolios resulted in a 31% surge in the number of black-managed unit trust funds – and, thanks to Sanlam-owned Satrix, a massive jump in passive funds.
Sanlam Investments qualified as a black-owned asset manager, in terms of the Financial Sector Charter, after Sanlam sold a 25% stake to African Rainbow Capital last year.
One of the survey’s purposes is to measure the state of transformation in asset management. Asset managers must meet the following criteria to participate in the survey:
- The company is at least 51% black-owned – that is, black people hold at least 51% of the economic interest and the exercisable voting rights.
- At least 51% of the company’s board of directors are black.
- At least 51% of the company’s senior portfolio managers are black.
- The company must be registered with the FSCA.
This year, 55 (2020: 51) asset managers, across public and private markets, met the participation criteria. Of these, 38 managers focus exclusively on public markets investments, 20 on private markets, and three have offerings across both markets.
The top managers by AUM were Sanlam Investments, Taquanta Asset Managers, Prescient Investment Management, Aluwani Capital Partners and Vunani Fund Managers. These top five represent 73% of the total AUM managed by black-owned firms.
“The industry remains highly concentrated and conspicuously so to managers with strong fixed-income offerings – Prescient Investment Management, Taquanta Asset Managers and Aluwani Capital Partners,” the survey said.
Black market share of South Africa’s total estimated regulated savings stocks (excluding banks, short-term insurance and medical schemes) is 14% including internally managed institutional assets, and 20% excluding, according to the survey.
Collective investment schemes
Black asset managers’ share of the CIS market was 13.5% on June 30, an increase of 5% since June last year following the inclusion of Sanlam Investments, according to the survey. According to Asisa, the total value of rand-denominated CIS portfolios on 30 June was R2.9tn, up from R2.53tn in June last year. Of this, R389bn was managed by black-owned firms.
Public markets asset allocation
As the graph indicates, among black-managed portfolios, there has been a significant swing towards money market and fixed-income strategies, at the expense of domestic equities (2021: 29%), over the past 10 years. Money market and fixed-income strategies now account for nearly half of the assets allocated to black managers, up from about a third a decade ago, the survey found.
The graph also shows, since 2020, the rotation out of money market funds into fixed-income and equities, which the survey attributes to the risk-on sentiment and the significant drop in money market yields following the cuts in the repo rate last year.
The offshore allocation remains low despite the number of black managers in this space increasing from over the past decade; there were 15 this year, from 11 in 2020. The survey says the main reason for the low offshore allocation is the lack of diversity in investment strategies offered.
Private markets
According to SAVCA’s latest industry report, to 31 December 2020, AUM in the private equity market was R205.7bn (2020: R184bn). Black managers had raised R37bn (R19bn), or 18%, at 30 June 2021. Sanlam Investments (Alternatives) accounted for R14.14bn of the R37bn.
Environmental, Social and Governance
Eighty-one percent of respondents said that consultants and clients have shown greater interest in their firm’s ESG activities since the start of the pandemic.
Sixty-two percent of respondents said they were willing to pay a “sustainability premium” for companies with higher ESG ratings, and 90% of respondents expect ESG to lead to more regulatory changes.
However, only 30% of respondents indicated that they map their portfolios against the UN’s Sustainable Development Goals, and 59% do not assess their portfolio’s exposure to companies that are carbon emitters.
Fees
According to the survey, 86% of black-owned firms charge a fixed management fee only, while 14% charge a management fee and a performance fee. Last year, 84% charged only a management fee, 16% had a hybrid fee model and 2% charged only a performance fee.
Less skin in the game
The number of firms whose employees invest alongside investors in the portfolios managed by the firm fell from 76% (2020: 84%) to 24%.
LISPs
The proportion of black-owned firms whose unit trusts are available on a LISP increased from 40% to 52%.
