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Umbrella funds are one of the biggest barriers to the transformation of the asset management sector as they offer a large list of services in-house and own the value chains, making it difficult for black asset managers to penetrate the market.
This is according to managing director of 27four Investment Managers Fatima Vawda during an interview with City Press this week, ahead of the official launch of the 10th BEE.conomics Transformation in Asset Management report on Wednesday.
Vawda said even the majority of the 48 survey participants agreed that industry umbrella funds, sponsored by the large financial institutions, do limit the inclusion of black-owned asset manager products on their offerings.
Vawda said the push to have less independent, stand-alone funds with own boards of trustees and more consolidated umbrella funds was a key that locked a significant number of black players out.
'Not a skills issue'
“The majority of the black players have demonstrated investment performances that are either on par or above, so it’s not a skills capacity issue. Black asset managers only focus on institutional markets because they don’t have the distribution network to tap into the retail market. Within the institutional space they tend to focus on large public sector pension funds because those are sensitive to the needs of transformations,” she said.
The report paints yet another bleak picture of the rate of transformation in that sector, with a meagre R490bn managed by black asset managers out of the total of R5trn under private sector management.
The entire pool of assets under managements is R8.7trn.
Vawda said that of the R490under management by the 48 asset surveyed managers, almost half of that is Public Investment Corporation funds. While there is gender parity in terms of employees, the majority of top management and boards are men.
“The employment dropped by about 20 people because the economy is tough. There were also several players that closed shop last year because on the survey we have 10 new ones, but seven out,” she said.
The report also revealed that the overwhelming majority of the managers started their business from their own personal finances and personal savings. There also was no single black-owned linked investment service provider because of the high capital barrier.
Capital is a barrier
“Capital is a huge barrier there because you need almost R50m for bare minimum systems and the teams are big,” she said.
Vawda said another major obstacle was the default regulation set to kick in next year in March, which she supported because more people needed to save.
The regulation will require that once someone retires they have to buy an annuity and unfortunately only life insurance companies can issue annuities, another sector almost completely devoid of black players.
The majority of managers this year prefer to use Deloitte, while last year most preferred KPMG. Taquanta Asset Managers, Aluwani Capital Partners and Mazi Asset Management account for more than 50% of all assets in black hands, with Taquanta leading the pack by R146bn of the R490bn.
The launch of the report will be addressed by Economic Freedom Fighters deputy president Floyd Shivambu in his capacity as an MP in the standing committee on finance, Vawda said.
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