Ninety One, the asset manager that started out as a unit of Investec three years before SA became a democracy, is eyeing China for long-term growth, though its nearer-term focus is on expanding its operations in the lucrative North American market.
CEO Hendrik du Toit, who founded the firm formerly known as Investec Asset Management in 1991, told Business Day that while Covid-19-related travel restrictions had slowed the implementation of its Chinese growth plans, it still views it as one of the world’s best asset management opportunities.
Du Toit was speaking after Ninety One reported record earnings and assets under management (AUM) in its 2022 financial year after almost 31 years in business.
“If you think long term — the next decade — there are two really big opportunities: the one is ... building a much more substantial position in North America, which we’ve been doing systematically,” said Du Toit. “The other one where there is a very fast-growing, long-term savings market is China. We have long-term ambitions to access the growth of the China market — we will work out what the best way is.”
Du Toit said that while North America, where Ninety One has about 50 people on the ground, is its nearer-term priority given the scale and maturity of that market, the firm has “won a nice mandate” from the Chinese mainland after its 2022 fiscal year end.
While Ninety One does not yet have a domestic business in mainland China, it has about 35 investment and client-facing professionals who service the Asia Pacific region, mainly out of Hong Kong. “We have client relationships on the mainland and we interact with people on the mainland but we haven’t set up a JV [joint venture] or created a local subsidiary,” said Du Toit.
“Now clearly if you want to participate in the domestic market and the internationalisation of that market you need to be both in Hong Kong and the mainland. This is an option that remains on the table because China is an attractive long-term market for asset managers.”
Du Toit’s comments came after Ninety One, which is listed in London and Johannesburg and reports its results in pounds, said on Wednesday that profit before tax increased 31% to £267.1m (R5.28bn) for the year to end-March 2022. It also said AUM increased 10% to £143.9bn while average AUM increased 16% to £138.6bn.
Basic earnings per share increased 34% to 22.6p and adjusted earnings per share increased 13% to 19.2p, allowing the company to propose a final dividend of 7.7p a share, taking the full-year dividend to 14.6p per share.
Ninety One reported net inflows of £5bn during the financial year, which it said were achieved across all asset classes, regions and client channels. That compared with net outflows of £0.2bn reported in the 2021 financial year.
Uncertainty
Despite the asset manager’s solid performance over the past financial year, Du Toit cautioned that business and market conditions deteriorated in the final quarter of the reporting period and are expected to remain challenging. He also warned about what he called “the spectre of inflation and rising interest rates” as well as global supply chain disruptions and rising geopolitical uncertainty.
“The Russian invasion of Ukraine added substantial uncertainty to an environment challenged by rising inflation, expectations of interest rate increases and liquidity withdrawal amid growing political uncertainty at geopolitical level,” said Du Toit. “At the end of the third quarter, our short- and long-term investment performance numbers looked even more compelling than at interim stage. Unfortunately, we were affected by the ensuing volatility in the final quarter.”
Ninety One also said its staff shareholding increased to 25.4% in the past financial year. Asked on a media call what the firm’s BEE plans are given government pressure on asset managers to boost transformation, Du Toit said there are no immediate plans to sell additional equity stakes in the company.
“We are working very hard in our SA business on making sure we stay ahead of the programme in terms of transformation,” Du Toit said.
“Transformation is important but we have no intention to sell equity. The people who work in the firm are buying equity.”
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.