Asset management behemoth Ninety One is looking at tapping into the Middle East as a new growth frontier for the group, whose assets under management declined 10% in the financial year to end-March.
Spun off from Investec three years ago, the group had net outflows of £10.6bn in the period under review, taking its assets under management to £129.3bn.
The company’s management fees decreased 4% to £607.7m in the year, while profit after tax fell 20.2% to £163.8m.
CEO Hendrik du Toit said it has been a “challenging year” characterised by high inflation, rising interest rates, bank failures and geopolitical uncertainty as the war in Ukraine continues.
“All of this led to unprecedented risk aversion among asset owners,” Du Toit said.
“Furthermore, and regrettably, we have to mention the deterioration of economic prospects in our original home market, SA, where we have a substantial business. We consider it our duty to call this out, but also to work constructively with government, civil society and other stakeholders to improve this situation,” he added.
Most of the group’s assets under management comprise equities, followed by fixed income.
Most of the assets by client group are in Africa and the UK.
Ninety One said it is backing its investment in North America to come good, while looking to grow in the Middle East.
Capture opportunities
“We consider the North American institutional and [sub-advised] opportunities as primary medium-term growth drivers. We remain confident that our investment in North America will pay off,” Du Toit said.
“We have and will be investing further to build our presence in the Middle East, specifically in the Kingdom of Saudi Arabia, to capture the opportunities in that fast-growing region.”
He added that the SA business held up well in the year under review.
“The adviser business and the platform business were net-flow positive, but the institutional business did see some outflows given the structural challenges facing the industry like the declining economy so retirement funds shrinking. We did however retain our market share in this segment.”
However, Du Toit bemoaned SA’s economic performance and structural impediments in Africa’s second-biggest economy.
“The weak SA economy dampens the growth potential of the likes of Ninety One, Coronation and … PSG … what has happened in SA is tragic. The lack of decision-making and the lack of urgency to solve the problems is just not good for the long-term economic growth,” he said.
“On top of that, what we have had in SA is the relaxation of exchange controls on retirement assets at a time when the country is not attracting offsetting flows of the same quality. That puts further pressure not only on the industry but ultimately on asset prices in the country because there is less money buying assets.”
The group is bracing itself for another challenging year and has highlighted unsupportive financial market conditions, further bank failures, hostile macroeconomic conditions, and muted interest in emerging markets investing as some of the hurdles.
It also flagged the “substantial relaxation” of exchange controls regarding SA institutional investors and the increased regulatory scrutiny as challenges.
“Though we acknowledge the much-publicised structural challenges facing the investment management industry, we remain resolute that this industry is full of opportunity. Investment management at its core is a talent and results business … scale helps, but at the high-value end, there are many other more important success factors.”
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