The latest annual BEE.conomics survey of 27four Investment Managers found of the estimated R6.97 trillion in assets held in the South African savings and investment industry, only 4.4% is managed by black firms.
The transformation of the industry has not taken place to any meaningful degree.
The 10 largest asset management houses have a market share of just under 80% and it is very difficult for new entrants, whether blackowned or not, to challenge this. Almost without exception, black-owned asset managers are dependent on institutional assets, in other words investments from pension funds.
Large pools of capital from the likes of the Public Investment Corporation and the Eskom Pension Fund have been set aside as incubator assets to stimulate the growth of black firms. That has encouraged individuals to start firms knowing there is a pool of money that they can qualify for. However, it has also led to unintended consequences.
“Being a black firm is the ticket through the door for certain allocations, but it’s not a differentiator beyond that,” says the founder of Perpetua Investment Managers, Delphine Govender.
“People are realising that simply being black-owned is not the reason you are going to gain meaningful scale.” To achieve such scale, managers have to broaden their client base.
“It’s difficult to earn the trust of investors without a significant track record through various market cycles,” says Shanay Narsi, business development consultant at Mergence Investment Managers.
“And that is something that only a few black asset managers have experienced.” The chief investment officer of Mazi Capital, Malungelo Zilimbola, agrees that gaining traction is a tough and long process. “If you look at where the Allan Grays or Coronations of the world were 20 years ago, they were still in their infancy,” he says.
“They took a long time to get to critical mass because people were more comfortable investing with the life companies, knowing that they had protection.” Now there is a new wave of boutique fund managers who are in a similar position.
“It’s difficult because of the structure of the financial services industry, where you have consultants, advisers and multi-managers who are more comfortable staying with the tried and trusted,” Zilimbola says. “We are not labelling anyone anti-transformational. The truth is just that at the beginning it is very tough and painful.”
The biggest challenge for many black-owned asset managers is, therefore, brand awareness. “Financial advisers like the safer option,” says 27four’s founder, Fatima Vawda. “The man on the street doesn’t have a lot of understanding, so if he is familiar with the brand the adviser is putting in front of him, it makes the life of the adviser much easier.”
“You can count the number of independent black advisers on your fingers,” Vawda says. “So the problem is the circle is not complete. There is an affinity for black financial advisers to use black asset managers, but there is no financial advisory network in the black community.”
Firms such as Mazi Capital, Kagiso and 27four are among the top-performing fund managers in the country, yet they tend to be overlooked.
Form is key
Put another way, an investor shouldn’t actually care that these are black-owned asset managers. What they should want to see is performance – and there is that in abundance if they looked for it.
“As soon as you bring up the question of black asset managers, there is the perception that asset owners should just make an allocation and ignore performance, but we are not asking for that,” says Narsi. “We have paid our school fees, we have raised assets slowly and we have the track record. We have the performance that counts.”