The 26th edition of the Alexander Forbes Manager Watch™ Survey of Retirement Fund Investment Managers has been published. It showcases the performance of institutional fund managers in South Africa, revealing the country’s largest and best asset managers and their BB-BEE ratings.
This edition includes 19 surveys: eight balanced, ten specialist and one multi-manager.
“The surveys encourage accountability, competition and improved transparency of reporting investment returns by asset managers,” said Janina Slawski, Head: Investment Consulting at Alexander Forbes. “The publishing of these surveys ensures that clients and their consultants have access to information that can inform independent review and recommendations of asset managers in line with client requirements. The surveys also showcase the progress made by the asset management industry towards a more sustainable industry that successfully meets the challenges in transformation as well as elements of responsible investing.”
The surveys also assist in determining whether international trends toward lower costs, and passive and alternative investment allocations are similarly being mirrored in the local industry.
The survey’s key findings include:
There has been an increase of 18.3% among asset managers and 10.9% of new strategies participating in the Alexander Forbes surveys in 2019 as compared to 2018:
2. Assets under Management survey highlights
According to the June 2019 Assets under Management (AuM) survey, the Old Mutual Investment Group is still the biggest South African asset manager even though there was a decrease in assets of 4.3% from June 2018. Investec Asset Managers leap-frogged Coronation into second place with an increase of 12.3%. Coronation experienced a decrease in assets of 5%.
The top 15 asset managers in the AuM survey constituted 80% of the 65 asset managers who participated in the June 2019 AuM survey.
The asset distribution shifted in 2019 from levels three and four BEE contributors with a significant increase among level two contributors by 14.2% and 10.71% in the level one contributor category. This shows that asset managers are transforming and taking BEE seriously.
Twenty-one of the 65 participating asset managers were level one contributors compared to the 12 in last year’s survey while 26 managers are on level two. Looking at the total AuM of the top five black-owned asset managers in the June AuM survey, it is encouraging to note the growth of 10.7% when compared to the top five black-owned managers in the June 2018 survey.
3. Comparing the one-year performance of some BEE managers across surveys
Some managers participating in the BEE survey performed very well when compared to managers across surveys:
4. SA and Global Balanced Manager Watch™ – Best Investment View: All the managers in the SA BIV category had positive returns for the year except Bridge who posted a return of -4.8% for their Managed fund. Similarly, in the Global BIV category, all the managers posted positive returns for the year with the exception of the PSG Balanced fund with a return of -0.15%.
The Global BIV category significantly outperformed the domestic mandates with a 3% differential between the medians.
5. Asset allocation of the Global Balanced Manager Watch™ – Best Investment View: Most managers remain close to the limits of 30% for investment in global assets allowed by Regulation 28 of the Pension Funds Act. Of the 32 managers, only nine were lower than the limit of 30% by more than 4%.
On average the managers’ exposure to domestic equities decreased by 4.7% in 2019 over the previous year, while the average exposure to SA bonds increased by 10.8% in 2019 over the same period. This creates the impression that investors were uneasy about holding equities, preferring the perceived safety of bonds.
6. 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 with only two of the 13 portfolios able to beat the inflation return for the same period.
7. Fee survey highlights: 49 asset managers participated in the 2019 fee survey compared to the 22 the previous year.
Fees across most surveys continue to stabilise compared to 2015. Surprisingly, money market mandates had the highest fee increase with an average of 8.3% across all AuM categories, while the biggest fee reduction belonged to domestic balanced best investment view (BIV) segregated mandates by an average of about 39%.
Despite the large increase of fees for money market mandates, domestic balanced pooled mandates were the most expensive category averaging at a peak of 74 basis points (bps). Domestic money market mandates were the cheapest, ranging between 17 and 24 bps across all AuM categories. Global absolute mandates had the widest sliding scale ranging on average between 43 and 70 bps. Participation across all mandates varied. Domestic bond mandates offered the highest participation with 34 funds participating in the survey. The global balanced BIV category had the lowest number of participants, with three.
Over the long term, environmental and social issues pose some of the biggest threats to the global economy, and this year’s publication has several articles focused on the theme of sustainability through different lenses.
“As asset managers and investors have grown to recognise this reality, the attentiveness to align societal and environmental benefits with investment returns has gained greater importance,” Slawski said.
“Alexander Forbes is proud to be associated with the Alexander Forbes Manager Watch™ Survey of Retirement Fund Investment Managers. We were awarded the Best Investment Survey Provider at the 2019 Africa Global Funds Service Providers Awards, reflecting the importance of this and the other surveys in our survey range,” she said.