Novare Holdings, a Rosebank-based financial services group, has set its sights on growing further in the cut-throat industry.
Business Day sat down with the group’s CEO, Olaotse Leepile, to look back at the group’s journey and the road that lies ahead.
Tell us more about Novare and what you’re most proud of?
Novare has been around for 24 years. We started out as investment consultants but quickly branched to multi-management and private markets investment solutions. We launched a fund of hedge funds in 2003 and it continues to be one of the best performers in the SA market, receiving accolades from industry peers.
We have also been managing an offshore fund of funds for more than two decades, and that fund also performs well relative to its peers and benchmarks. In 2021 we launched the Novare SA Impact Fund, which we are busy raising capital for.
We consult to predominantly pension funds in SA and the proudest moments are always seeing these pension funds growing and generating good risk-adjusted returns through Novare tailored solutions, which ultimately enable members to retire comfortably.
One of your solutions is to develop property projects across the African continent. Tell us more.
In 2010 we ventured into the rest of the continent and raised a property fund to develop commercial projects in Sub-Saharan Africa excluding SA. We raised another fund in 2016 with a similar mandate and between those two funds we developed four shopping malls in Nigeria, four properties (three shopping malls and one office block) in Zambia and a shopping mall in Mozambique.
Unfortunately, the Africa story did not play out as expected. The deteriorating macroeconomic prospects led to a decrease in dollar returns and lower dollar property values. This has not been an issue just for Novare, with other property investors such as Hyprop, Attacq, Resilient, Momentum and Sanlam also experiencing similar challenges.
What about SA’s economy keeps you up at night and what needs to be done to fix it?
The persistent low rate of economic growth and the associated triple economic challenges of poverty, unemployment and inequality remain the biggest challenges for the economy and source of our discomfort. We believe these challenges are unsustainable and potentially would lead to social unrest if not addressed expeditiously.
There’s no one thing that can be done to address these issues but it will require the government and private sector to work together in a co-ordinated way.
You’re in a competitive industry. Tell us the state of competition in the industry and what sets Novare apart?
The intensity of competition in our industry is very high and especially so for black players. We all knock on the same doors to raise capital because there’s a pool of institutional clients out there who are uncompromising and very committed to transformation. We also work with those less committed to transformation as we believe in our strong value proposition.
What sets Novare apart is our diverse and dedicated team which is also very entrepreneurial. For us diversity is a business imperative and not a nice-to-have. We are in the decision-making business as investment professionals and our diversity thus allows us to consider as many perspectives as possible before making decisions.
Transformation, or lack thereof in the industry, has always been an issue. Share your experience on the state of transformation, and what can be done to see more black asset allocators get more work-funds to manage?
Transformation in asset management and the broader financial services sectors is a great anomaly. Everyone, including large and predominantly white companies, has miraculously attained Level 1 BBBEE contributor status. In my view a lot of these certificates are not worth the paper they are written on. It’s more of a box-ticking exercise rather than substantive transformation.
For substantive transformation to take place we need to move beyond just ownership and the actual technical investment teams (trigger pullers) need to also transform. A lot of times the picture that’s painted is not the same as the reality internally, which is why a lot of highly regarded black executives end up leaving.
Is the Public Investment Corporation (PIC) doing enough to empower small black players in the industry?
It’s difficult to say whether the PIC is doing enough or not because “enough” is not defined or quantifiable. In executing their mandate, the PIC will be guided and restricted by the agreements they entered into with their clients and that will influence the decisions they make.
I do, however, believe that they are doing a lot and playing their part. Additionally, the PIC cannot transform the asset management industry by itself. Other asset allocators must play their part.
There have been calls for smaller players in the industry to consolidate to build sizeable companies with scale to compete. What are your views on this?
Typically, when an industry has too many players offering similar services with minimal differentiation consolidation becomes necessary and one could argue that the asset management space in SA exhibits such characteristics.
I used to believe that there was a need for consolidation, but I am no longer sure if it will yield any benefits because I am yet to see any evidence that suggests assets will flow to players who team up with other players to create sizeable organisations.
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