SA’s largest asset manager Ninety One’s attempts to arrest the decline in assets in its custody is proving difficult after starting the financial year to end in March 2024 on the back foot.
The group, spun off from Investec in 2020, said on Friday in a quarterly update that it had bled £4.5bn (R106bn) from March to June, setting the scene for another torrid year after the group reported outflows of £10.6bn in the 2023 year.
Announcing the 2023 financials, CEO Hendrik du Toit said: “We are working hard to reverse the accelerating outflow trend recorded here and indeed turning this into inflows.”
However, the first quarter 2024 assets under management (AUM) update released on Friday shows the outflow trend accelerated at the start of the financial year, with AUM down to £124.8bn at the end of June from £129.3bn at end-March.
A Ninety One spokesperson said the company does not comment on quarterly AUM updates and market factors will be addressed when interims are released in November.
Ninety One provided context on market conditions at their year-end results presentation in May, an excerpt of which follows: “Although market conditions are challenging and may remain so for some time, we have seen a stabilisation of conditions. We have not yet witnessed a decisive change in risk appetite among clients, although we have seen signs of that among certain asset owners.”
The latest quarterly update by the London- and Cape Town-based group means it has lost £19.1bn in AUM since Russia’s invasion of Ukraine more than a year ago.
Ninety One, formerly Investec Asset Management, had assets under its custody of £143.9bn at the end of March last year.
Russia invaded Ukraine in February last year, starting a war that saw global financial markets enter a period of increased uncertainty.
The invasion also saw interest rates rise at the fastest pace in 40 years and a geopolitical storm which led to a risk-off environment, hurting large asset managers around the globe.
’Risk assets’
In the UK, where Ninety One is a big player, the group in May said there was an “indiscriminate sell-off of risk assets because of stress” in the liability-driven investment (LDI) market, a money spinner for asset managers.
LDI allows asset managers to use derivatives to “match” assets and liabilities so there is no risk of shortfall in money to pay pensioners.
The UK’s LDI market faced a crisis in September after the “mini budget” included £45bn of unfunded tax cuts which created instability in the UK economy and sparked a near fire sale in the pension market.
The Bank of England was forced to step in to stabilise the market — primarily to protect the country’s defined benefit pension scheme.
The fallout of the budget saw Kwasi Kwarteng resign as chancellor of the exchequer, followed by then prime minister Liz Truss.
Aeon Investment Management’s chief investment officer Asief Mohamed said net outflows experienced by asset managers are mostly being experienced by larger groups.
He said that locally a lot of factors were playing into net outflows — the balance between the funds invested versus money pulled by clients.
“Poor relative performance and possible moves by clients to passive funds may be contributing factors. SA employment has largely been stagnant, while the two-pot retirement system may contribute to a further decline in AUM for the financial industry,” said Mohamed.
“In the case of Ninety One, they translate SA AUM into pounds, so the weaker rand will have partly contributed to the decline.”
Ninety One’s stock weakened 2.36% to R40.49 on Friday following the release of the update.
Makwe Masilela of Makwe Fund Managers, said asset managers are going through a rough patch.
Stanlib CEO Derrick Msibi told Business Day last week the asset management industry will face more headwinds than tailwinds in the next two to three years. Msibi, who runs a firm with more than R600bn in AUM, pointed to returns that had been muted across most asset classes and tepid economic growth as some of the factors behind his analysis.
Ninety One said in May it was looking to North America and the Middle East, specifically in the Kingdom of Saudi Arabia, to capture opportunities in “that fast-growing region”.
The group’s UK share price had jumped about 60% by the end of 2021. However it has since fallen back to near its initial offer price.
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