PSG Konsult expects rebound in asset management unit after investors withdraw funds

Financial services firm PSG Konsult forecasts a rebound in its asset-management business after the unit took a double-digit hit as investors pulled money out of its funds in the six months to the end of August.

PSG Konsult CEO Francois Gouws said the asset-management unit experienced a normal cycle of underperformance and it would recover. He was not sure how long it would take, but said the company had already begun to see inflows return.

“For the simple reason that the returns for the last six months have been quite good and we’ve seen that the outflows have turned to inflows, but it’s very early to say. You can’t really predict whether that will be sustained or not, but I’m positive about PSG Asset Management,” Gouws said.

PSG Konsult’s asset-management division, which grew for three years running, saw headline earnings fall 39% after it was affected adversely by the Covid-19 pandemic.

The division did not earn any performance fees during the period, when assets under management for the segment decreased 14% to R31.5bn as a result of a combination of market movements and net client outflows, the company said.

“What we saw on the asset management side is some outflows but we also saw clients moving from equity investments into income investments which now ... is slowly moving back into equity investments, given the reduction in interest rates that we saw in SA and the rally in the market,” said Gouws.

As part of the SA Reserve Bank’s intervention to combat the economic fallout from the Covid-19 pandemic, policymakers have cumulatively slashed interest rates by 300 basis points so far in 2020, to a low of 3.5%

Unlike the group’s asset manager, the wealth division was the best performer, increasing earnings 25% boosted by an increase in management fees and local brokerage fees as well as increased trading activity.

Assets managed in wealth increased 11% to R213.7bn, which included R6.3bn of positive net inflows.

Flows in the in-wealth management side were propelled by individuals who spent more time at home and looked at personal financial affairs and redirected savings that occurred into investments, Gouws said.

Overall, the group grew headline earnings 4% to R324m and raised its interim dividend to 8c, an increase of 7%.

The company’s share price at close of trade on Thursday was 3.01% weaker at R7.41c.