PSG Financial Services CEO Francois Gouws says wealthy South Africans have not been spared the harsh consequences of a moribund economy, which has eroded asset prices.
“The wealthy are also getting poorer. In a deteriorating economic environment, everybody is less well off. That is something that is not commonly talked about. But the reality is that partly because of lower asset prices and increases in the cost of living, everybody is suffering, including the wealthy,” he told Business Day.
Gouws was speaking after the release of the company’s interim results last week, which showed it increased assets under management in the six months to end-August by 19% to R375.9bn.
PSG offers a range of services including financial planning, stockbroking, estate and trust services and insurance, via its three units — PSG Wealth, PSG Asset Management and PSG Insure. PSG Wealth generated the bulk of its headline earnings with 64.9%, followed by PSG Asset Management with 20.8% and the rest from PSG Insure.
Gouws said being an advice led business rather than a product led business has put the company in good stead in the prevailing economic headwinds.
“This is a difficult environment and there is a lot of uncertainty. And when there is uncertainty, people tend to rely on trusted advice and we have 969 advisers in 269 offices across the country, and they are locals. I think that’s a key differentiator of PSG and that has led us to gain assets,” he said.
“The second reason is that for a very long time, we invested in systems and infrastructure. We have worked relentlessly to ensure we supply our advisers with digitised infrastructure to augment the personal relationships which they have with clients.”
The JSE has fared poorly against the global equity market and other asset classes for more than a decade.
Anchor Capital’s investment team on Friday in its asset allocation note, said: “There is already much negativity in the price of domestic assets, and we have a neutral stance among equity, listed property and bonds. We believe that domestic factors may improve into 2024, though there is much uncertainty around this view.”
Derrick Msibi, CEO of Stanlib, one of SA’s biggest asset managers, told Business Day in April that “high-net-worth individuals continue to emigrate and externalise their wealth”. He said the flight of wealthy individuals is one of the reasons the industry will in the next two to three years face more headwinds than tailwinds.
David Knee, chief investment officer at M&G Investments, said the company has strategically shifted its preference for platinum group metal (PGM) companies within the sector to the higher- quality platinum companies which are likely to see production growth as a result of their investment in capacity.
“In the first quarter of 2023, we sold out of Sibanye-Stillwater in order to further increase the quality of our holdings in the platinum sector, which now only comprise Northam and Impala Platinum. In the past quarter, in order to remain underweight the platinum sector and given the relatively good performance of Northam, we reduced this position slightly, although it remains our favoured exposure within the sector,” Knee said.
“PGM Companies continued to be impacted by the fall in PGM prices — for example, the price of palladium has fallen 42.5% in the past 12 months. Rhodium, at its peak over a year ago, was contributing more than 50% of a typical platinum producer’s revenue and contributed massively to their profitability. This sector’s fortunes have changed rapidly over the last five years.”
Knee added that over the past year, the asset manager has gradually decreased its overweight to the banks sector as earnings and dividends have recovered strongly post the Covid lows.
“We continue to be positioned in favour of the lower-rated banks, Standard Bank, Absa and Investec, and underweight the more highly rated banks, FirstRand and Capitec. Absa is worth mentioning as it has shown a steady improvement in operating performance and is generating a return on equity of 17%, up substantially from the high single-digit returns it was generating just a few years ago,” he said.
“Although its share price has performed relatively well versus the other banks, we think that it is still undervalued and it remains one of our top overweights in the banking sector ... we continue to have an overweight position to the banks sector as we think that the banks that we own are trading on undemanding valuations, especially given that earnings and dividend growth are exceptionally strong currently.”
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