Discovery Invest is looking to double assets under its management to R300bn in the next five years, with the company’s CEO backing the firm’s firepower to achieve its goals.
Kenny Rabson said the company had laid a strong foundation for future growth.
“Discovery Invest today runs on its platform assets of about R150bn. That is roughly what we have on the platform. The aspiration is to double that in five years. We are positive on what we have built and the solutions we provide,” Rabson told Business Day on the sidelines of the Cogence Summit in Johannesburg.
“We have big aspirations for Discovery Invest as well as the Cogence business,” he said.
The Discovery group two years ago launched Cogence, a discretionary fund manager, in partnership with the world’s largest asset manager, BlackRock.
Discretionary fund managers had gained prominence, managing about R500bn in investments over the past decade, with further growth in the sector pencilled in in the years ahead. Cogence has about R20bn in assets under management.
Investments multi-manager Alexforbes in April made its foray into the growing discretionary fund manager market, with the launch of Investment Solutions by Alexforbes.
SA’s asset managers have increasingly been partnering with their global peers, looking to draw in global expertise.
Stanlib has a partnership with JPMorgan Asset Management, while Ashburton recently struck a partnership with Morgan Stanley.
This is as local money managers increasingly allocate funds internationally, in response to regulation 28 which allows retirement funds to invest 45% of their members’ money outside SA from 30% previously.
Rabson said Discovery’s partnership with BlackRock had several benefits and advantages.
‘Advantages’
“There are a lot of advantages for having a relationship with BlackRock. Being the largest asset manager in the world gives them access to all the fund managers and technology in the world. They also have buying power, so when they want to include another company’s fund in their solution, they can do that,” he said.
“They are also sitting with staff in over 40 countries who are analysing the market and are in touch with people on the ground. They also have thousands of people in their research team who are bringing the solutions together, compared to an average solution in SA where there might be a handful of analysts trying to navigate the world.
“In SA we think that especially with regulation 28 which allows the industry to take up to 45% of the money offshore, does not mean this is an easy task. We need expertise to navigate the global world. BlackRock for us comes with that expertise.”
BlackRock, run by celebrated investor Larry Fink, is said to have assets under management in excess of $11-trillion.
Rabson said many advisers were making a mistake by channelling clients’ monies to income funds at the expense of equities.
“The cause of it is because when people are scared and advisers are nervous they opt to put money in cash. This is because they know there will be positive returns. The downside of that, particularly tax, you’re earning less than inflation,” he said.
“We know that over the long term, equities will outperform cash. But if you switch everyone into cash, people lose out on the benefits that come with bull runs. This is why we have partnered with Cogence and BlackRock, so we tell advisers that their decisions are irrational.”
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