Why Prudential is rebranding as M&G Investments

London-headquartered M&G plc has once again become the majority shareholder in Prudential Investment Managers. As part of Prudential’s reversion to being a subsidiary of M&G, it will be rebranded as M&G Investments before the end of this year.

M&G has increased its shareholding in Prudential from 49.99% to 50.12%. In a parallel cash-funded transaction, the Prudential Staff Investment Company (PSIC) raised its shareholding from 28.01% to 28.08%. M&G’s majority ownership was facilitated by Thesele Group, Prudential’s black empowerment partner for the past 14 years, decreasing its shareholding from 22.0% to 21.8%. The transactions were concluded in July.

Prudential said the sale by Thesele did not impact its B-BBEE rating. After the transaction, Prudential received its first Financial Sector Charter Level 1 rating.

“Prudential’s B-BBEE shareholding is now 31.4%, and when the strategic M&G shareholding is excluded, 63% of Prudential’s South Africa resident shareholding is now owned by black people,” it said.

It said no other shareholding transactions affecting Prudential “are currently envisaged”.

International funds

The change in ownership does not automatically mean that Prudential’s South African clients will be able to access M&G’s international funds.

“The M&G group’s UK-, Singapore- and Luxembourg-domiciled collective investment schemes are not currently approved for distribution in South Africa under section 65 of Cisca. Most of these funds were designed for specific regional clients’ needs. We do not intend applying for blanket local section 65 approval to distribute these M&G international funds. We will, however, consider doing so on a case-by-case basis, if we believe a specific fund is appropriate for our South African clients and regulatory environment, and where there is demand for a specific capability that our Prudential Global Fund range does not already cover,” Prudential said.

Prudential said the ownership and identity change would not affect how its unit trust funds or institutional mandates were managed. “M&G and Prudential share a similar fundamental and valuation-based active investment process.”

Prudential said there would be no change to its local investment team and management structure.

It said Prudential’s integration with the M&G group would create opportunities for the South African business to implement “lower-cost administrative solutions and best-of-breed technologies that should help reduce costs for our clients”.

Its governance structures would remain the same, although it added that as part of a UK-domiciled financial services firm, it was indirectly subject to the UK’s Financial Conduct Authority, in addition to the FSCA. “Our controls frameworks, internal audit, compliance and risk functions therefore must meet global best practice standards.”

Shareholding changes

Explaining the motives for M&G’s decision to increase its ownership, Prudential said: “M&G has realised its ambitions of establishing an independent global investment management operation, with centres of expertise focused on the UK, Europe, the US and Asia. It was therefore a logical step forward for M&G to seek closer ties with Prudential Southern Africa, as the successful and experienced investment manager that it has owned since 1994, in order to extend its investment expertise into Africa and other emerging markets.”

Prudential Portfolio Managers UK established the South African business in 1994. Five years later, Prudential plc merged with M&G Limited. Subsequently, Prudential UK’s shareholding was restructured so that M&G became the shareholder in Prudential Portfolio Managers South Africa (PPMSA), in order to align the South African business with the investment management division in the group.

M&G’s shareholding in PPMSA started to decrease from 2005, when it sold 10% of its shares to a staff trust and then, in 2006, 15% of its shares to Thesele.

In January 2012, the staff trust was replaced by a staff share ownership scheme, the PSIC, holding 28.01% of PPMSA. And with Thesele acquiring additional shares from M&G, taking its stake to 22%, M&G’s shareholding fell below 50%. PPMSA became an associate company of M&G.

M&G plc, representing M&G Investments and the UK and European insurance businesses of Prudential, demerged from Prudential plc and listed separately on the London Stock Exchange in October 2019.