31 Oct The Rise of the Black Asset Manager
According to annual BEE.conomics Transformation in SA Asset Management Survey published by 27four Investment Managers, there are currently 48 black asset management firms in South Africa and they manage only 10% or R490.3bn of the R5 trillion industry.
While there has been growth in the number black fund managers and their assets under management in the past couple of years, it has been painstakingly slow. So, why is this? Why don’t we have more black fund managers?
Scale is a challenge for black managers, while there are new firms launched regularly, they struggle to gain critical mass due to lack of support from trustees, institutions and asset consultants. These are the gatekeepers who decide where to invest pension funds, but they tend to select the tried and tested traditional asset managers to avoid risk. The survey shows that in the past 12 months, there were 4 recorded business failures in asset management.
The challenge is not only with institutional investors. Even retail customers looking to invest in say, a unit trust, a retirement annuity or a tax-free savings account, for example, will normally go with the big brand names like Coronation, Allan Gray etc. instead of seeking out a black fund manager. This is largely due to of lack of access to markets and capital by black fund managers.
Understandably, in the asset management space, institutions and retail investors want to invest in a reputable organisation that has a good track record in order for them to develop trust that the organisation will deliver. This acts as a double-edged sword for most black asset managers. The survey shows that of the 48 black asset managers, only 15 firms are greater than 10 years old, and 23 firms are less than 5 years old!
It takes an enormous budget to advertise and market to become a household brand name. Think of all the ads on radio, TV, Gautrain or airports, all you ever see are the big brands i.e. Investec, Coronation, and Allan Gray etc.
Perhaps in trying to prove themselves, black asset managers have gone too much of the traditional route in terms of marketing and advertising, one would have thought, for companies established in the last 5 to 15 years, their approach would be less traditional i.e. print media, rather making use of modern technology and platforms to reach more retail client and become household names?
The numbers are even more sobering when it comes to females in the profession; of the 563 individuals employed by the industry, only 18% portfolio managers are female!
There is good news though, since the beginning of the survey since 2009, there has been a 243% increase in the number of black asset managers, albeit on a larger scale, the number is still small.
One firm, Taquanta Asset Managers manages 30% of the R490.3Billion, and 10 firms including Aluwani Capital Partners, Mazi Capital, Mergence Investment Managers, Argon Asset Managers then Vunani Fund Managers, manage 84% of the R490.3 Billion share.
More conversation and education is still needed to demystify what an asset manager actually does, to encourage more young black people to pursue a career in the asset management industry. Legislation too can help, but within organisations themselves, there needs to be a willingness to mentor and provide a conducive environment to become a fund manager.
This article first appeared in City Press.