Investors notebook: Playing the field

Who knows where black-owned fund managers would be without Fatima Vawda and her 27four multimanager? She has provided seed capital to many start-ups and the most comprehensive survey of the group, comprising both their investment returns and their BEE credentials.

The total managed by these firms is now R283bn, according to 27four. This is just 4.4% of the investment and savings industry asset pool. Vawda tells me black managers remain far too focused on a handful of public sector funds. And they are far too concentrated on SA equities, which account for 55% of assets. A further 26% is in money market assets, in which Taquanta is the dominant player. In the money market Taquanta, with R10.6bn under management, only has one competitor, Argon, with more than R500m.

One area which 27four is urging black managers to explore is the large umbrella funds, such as Old Mutual Super Fund and the Alexander Forbes Umbrella Fund, where they are barely represented. Subscale private sector funds, and increasingly midsized pension funds, are folding into umbrellas. And the choice of fund managers will not be at the sole discretion of the fund promoters — who blatantly support their in-house asset managers.

More investment decisions will be made by management committees at the underlying company level and these committees are likely to be more sympathetic to black managers than the fund providers. It will be a slow process but black managers should start appointing business development staff with experience of umbrellas to widen their targeted funds.

Black managers have struggled to gain a foothold in the retail market. The group has R44bn under management, but 80% of this is accounted for by Taquanta, and mainly by the Nedgroup money market fund, which it manages. Even Kagiso, with a superb record in both equity and balanced funds, sources just 4% of its assets from retail unit trusts. Its brand, which is so powerful in the institutional market, is too “radical” for the highly conservative retail market. Vunani wisely hides behind the innocuous Mi-Plan brand when it sells unit trusts.

All this is an indictment of the financial planning industry, which is one of the most untransformed areas of the SA economy. I wonder how many advisers bother to read the 27four BEE fund manager survey. In fact the 17 equity managers in the survey had a better hit rate than the 124 equity unit trusts (see Money & Investing page 40) — 24% beat the Swix index compared with 15% for the unit trust sector.

The outstanding performer was Mvunonala, which recently recruited Mac Dhlamini, the former head of equities at the Public Investment Corp. It had a 16.6% return in 2014 and Argon was next with 16.2%.

Source: Financial Mail, 29 January – 4 February 2015

Author: Stephen Cranston