Between the end of September 2014 and the same time this year, the money invested in South African collective investment schemes grew from R1.70 trillion to R2.31 trillion. This includes all unit trusts, exchange-traded funds and regulated hedge funds.
Overall, this increase in assets under management (AUM) represents growth of 36% for the industry. Some asset managers have however seen a lot more of this than others.
At the top end of the market, Coronation was the largest manager in this space at September 30 2014. It has however fallen behind Allan Gray in the subsequent three years.
Of the other big managers, Sanlam and Nedgroup Investments have shown by far the greatest percentage growth. At the table below shows, they have made significant gains relative to their peers.
Source: Asisa
It is noticeable that the bottom five managers all grew their AUM quicker than those larger than them. This is understandable, given the dynamics. In absolute numbers, Allan Gray and Sanlam saw similar increases, but because Sanlam is so much smaller, it recorded much faster growth.
It is however significant that Sanlam and Nedgroup are the only two managers on this list that grew their AUM faster than the industry average. This shows that there is a lot of growth happening elsewhere in the market, among small and mid-sized managers.
Among the latter, Discovery more than doubled its AUM over these three years from R19.5 billion to R40.9 billion. PSG also showed substantial growth up from R23.2 billion to R42.7 billion.
It is however among the boutiques where the really rapid growth has taken place. This is both among small managers with their own management companies (mancos), and those firms that white-label or co-brand funds for third party managers.
Boutique Collective Investments (BCI), which predominantly runs white-labelled funds, has grown into the tenth largest management company in the country. At September 30 this year it had R85.5 billion in AUM, up from R22.8 billion three years ago.
Around half of this growth has been due to funds moving onto its licence from other management companies, but the rest is from new funds and additional assets in its existing portfolios. It now runs 319 funds, which is more than double the 133 it had at the end of September 2014.
Some of other mancos in the white-label space have also seen substantial growth. The co-branded assets on Prescient’s management licence have grown from R12.9 billion three years ago to R33.2 billion. Sanlam’s third party assets jumped from R5.2 billion to R13.6 billion.
These may not seem like huge numbers, but taken together boutique managers are starting to command a reasonable chunk of the local market. Around R210 billion is now managed by firms that could reasonably be considered independent boutiques, which is a total market share of just under 10%.
This rise of boutique managers is now one of the most significant trends in the local collective investment scheme industry, and the entrance of more hedge funds will only add to it. One could argue that there are too many of them and particularly the quality of some discretionary wealth manager funds can be questioned, but they are unquestionably changing the nature of the market.
Not all will survive, and some consolidation will have to take place, but investors are showing that they appreciate the investment options boutiques are giving them.
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