Alexforbes Manager Watch™ Survey of Retirement Fund Investment Managers shows increased pace of transformation among large managers
Highlights
An impressive increase in the number of participating asset managers who were Level 1 BBBBE contributors from 21 to 36 of the 72 participating asset managers
7 of the top 10 asset managers were rated as Level 1 BBBEE contributors and the remaining 3 were Level 2 BBBEE contributors
For the first time, there were 13 Level 1 BBBEE contributors in the top 20 managers ranked by size, an increase of 85.7% over the 2020 finding when there were just 7 Level 1 BBBEE contributors of the top 20
Assets under Management of participants increased by 7.5% from June 2020 although the concentration was still among the top 10 asset managers
43 managers indicated that they were signatories to the United Nations Principle for Responsible Investing (PRI) up from 34 in 2020
Johannesburg, 13 April 2022 – The Alexforbes Manager Watch™ Survey of Retirement Fund Investment Managers has been published, showcasing the performance of institutional fund managers in South Africa, the largest and best asset managers, as well as their respective BBBEE ratings. The Alexforbes Manager Watch™ has tracked the retirement fund investment management industry since the dawn of democracy in South Africa and now includes 22 surveys: nine balanced, 12 specialists and a multi-manager survey.
The survey provides a key reference point to all stakeholders in the South African retirement funding industry and is a demonstration of both the depth of research expertise at Alexforbes and our commitment to empowering retirement funds with insights that enable them to make informed decisions.
Here are the key survey findings:
Increased pace of transformation
An impressive 36 of the 72 participating asset managers were Level 1 BEE contributors compared to 21 in the previous comparative year’s survey. 7 of the top 10 asset managers were rated Level 1 BBBEE contributors and the remaining 3 were Level 2 BBBEE contributors.
For the first time, there were 13 Level 1 contributors in the top 20 managers ranked by size; an increase of 85.7% over the 2020 number, when there were just Level 1 contributors out of the top 20.
While the increased pace of transformation amongst the large managers is admirable and reflective of their appetite and intent to transform, we must also caution that emerging black asset managers still require support across various dimensions to further the organic transformation of the industry.
General
New strategies noted in the survey increased by 14% approximately compared to 2020 as reflected in the table below. This reflects the increased diversification of strategies within the participating manager base.
Number of participants (portfolios) across surveys
The biggest increase in 2021 over 2020 was 18.6% shown among benchmark cognisant portfolios in the SA Equity survey. There has been a sustained downward trend in SA Equity non-benchmark cognisant portfolios over the period, potentially reflecting improved investment governance as well as reduced appetite among retirement funds for performance dispersion and risk.
AuM survey highlights (figures at June 2021)
Ninety-One was found to be the largest South African asset manager, moving up in the rankings over the year from second place with an increase in assets of 14% from June 2020 to June 2021. STANLIB AM was second, with an increase in assets of 15% over the period, while Coronation leapfrogged into the third spot, with an annual increase in assets of 20% from June 2020.
Total Assets under Management (AuM)
AuM of participants in the survey increased by 7.5% from June 2020, with the concentration still remaining among the 10 largest asset managers. The AuM held by this group constituted almost two-thirds (65.4%) of the assets for the total universe of 72 managers participating in the survey.
SA and Global Balanced Manager Watch™ – Best Investment View
The Global Best Investment View delivered a similar performance as the domestic mandates with a differential of only 10 basis points between the medians with returns of 22.3% and 22.2% respectively. The two best performers in the Global Best Investment View category of the survey were PSG and ClucasGray who returned 37.7% and 29.6% respectively for the year.
All the managers in the SA BIV category had positive returns for the year with 9 out of the 13 managers beating the BIV median of 22.2%. Counterpoint and MandG, previously known as Prudential, were the two best performers for the year in the category with returns of 35.1% and 28.9% respectively.
One of the best-performing asset classes for the year ending December 2021 was domestic property, with the SA Listed Property Index returning almost 37%. It was no surprise that Counterpoint was the best-performing SA BIV manager for the year after reversing its poor performance in 2020. The majority of Counterpoint’s over-performance could be attributed to its overweight position in listed property with exposure of 19.6% at the end of the year.
Asset allocation of the Global Balanced Manager Watch™ – Best Investment View
For the year, most managers in this category kept their domestic asset allocation relatively stable with the exception of Old Mutual Multi-Managers (Managed) and Prescient, who increased their allocation to domestic equities by 20.7% and 12.8% respectively over their positions in December 2020.
Most managers still remain close to the limits of 30% for investment in international assets allowed by Regulation 28 of the Pension Funds Act. Of the 36 managers, only 8 were lower than the limit of 30% by more than 5%. Nedgroup (Balanced) was the lowest at 18.9% followed by ClucasGray on 19.3%. Oasis had the highest exposure to international assets at 38.5%, which we infer includes some exposure to Africa equities.
During the annual Budget Speech delivered on 23 February 2022 the Minister of Finance, Mr Enoch Godongwana, announced an increase in the offshore allocation limits for institutional investors. The offshore limit has been increased from 30% offshore plus an additional 10% Africa allowance to a single limit of 45%. It will be interesting to monitor how asset managers respond to this decision and future iterations of the Alexforbes Manager Watch™ will include such detail.
For the year, most SA Best Investment View (BIV) managers kept their asset allocation stable with the exception of Absa and Aeon who increased their allocation to local equities by 6.3% and 8.4% over their position in 2020.
ESG considerations
ESG is a key trend among managers with focus now turning to demonstrating the impact created across the three factors of responsible investment – environmental, social and governance. CRISA and the PRI are two codes that encourage companies to incorporate environmental, social and governance issues in business decisions and investment processes. In 2020, 34 of the participating managers in the Alexforbes surveys were signatories to the United Nations Principle for Responsible Investing (PRI), while 43 adopted the principles and practice recommendations in the Code for Responsible Investing in South Africa (CRISA). In 2021, this increased as 43 managers indicated that they were signatories to PRI and 56 endorsed CRISA.
SA Property Manager Watch™
According to the survey, the performances of the managers in the 75%-100% listed property category indicated a tough investment environment for 2019. 2020 was even tougher as all the participating managers returned performance for the year of -25% and less. In 2021, the South African property sector was the best-performing asset class with the South African Property Index (SAPY) Index returning 36.9%. The participants in the survey returned an average of 38.5% for the year.
SA Equity Manager Watch™ Benchmarks
Benchmarks of portfolios participating in the Equity survey as a percentage of the survey are:
If we are comparing performance figures between various portfolios, it is not enough to only ensure that they are genuinely comparable from a strategic asset allocation perspective, but we also need to assess each portfolio’s performance in the context of their mandated benchmarks.[1]
Fee survey
Asset managers were reluctant to share fee information and the response to the request for the submission of data was disappointing. Some categories were omitted from the survey as we received two responses or less for these.
The managers were requested to break down their fee structure into a standardised sliding scale framework using distinct AuM bands. In the past, managers used to report the fees of the domestic and international assets of their global balanced funds separately. In 2021, however, most asset managers opted to report a total fee for their respective global balanced portfolios, making it difficult for us to compare the fees for international assets with those of previous years. The standardisation of fees in AuM categories may not reflect an individual manager’s fee scale.
Maximum, minimum and average base fees charged
[1] The progression of the SA Equity benchmarks, Alexander Forbes Investments, March 2021
DOWNLOAD OPTIONS:
To download the survey / view survey online / watch the video, see below…
PDF Version
Online Version
Video
Slide presentation
ENDS
