Fund management is not a large employer, unlike mining or manufacturing or even the more labour-intensive financial services businesses such as banking and life insurance.
Nonetheless, industry clients such as pension fund trustees must do what they can to encourage BEE in the industry. Black fund managers are already highly employable people — mainly chartered accountants or at least with degrees in finance, sometimes engineers. If their shops fail, they will find jobs easily elsewhere in financial services.
The same applies to the back-office and middle-office administration and compliance staff at these shops. In my experienced as a trustee, when BEE fund managers came to present they always drove more expensive cars and wore more expensive suits than we did.
In those days I was always more concerned about employment equity and skills training than about ownership. And I primarily gave credit for those entrepreneurs who set up “organic” black empowerment companies, such as Asief Mohamed at Aeon, Malungelo Zilimbola at Mazi and Delphine Govender at Perpetua. I would score having a black chief investment officer highly on my personal BEE scorecard.
I supported these companies as a journalist helping to start a black fund manager special report at the Financial Mail, for example. I took the lead from our consultants in manager selection. They suggested we support the usual suspects — the large independent managers. But we insisted on a thorough examination of their BEE credentials.
Looking at the 27four and Alexforbes BEE surveys today, the boundary between mainstream and BEE managers is blurred. Shareholding has become the most important consideration to qualify for these surveys. But from a qualitative point of view how many of us would describe these managers as genuinely BEE?
A board colleague (himself black) once unkindly referred to Sanlam Investment Management (SIM) bringing on a high-profile black shareholder as “renting blackness from Patrice Motsepe”. But this hasn’t prevented its competitors from “renting blackness”. The Forbes and 27four BEE surveys now include Old Mutual Investment Group after it brought some minority black shareholders on board.
Futuregrowth — in effect Old Mutual’s fixed-income shop — has regained the BEE status it lost when Wiphold sold it to the Big Green in 2008. Most recently Coronation has qualified for the BEE survey. It hasn’t followed SIM’s example or even that of Prescient, which brought the (somewhat less plutocratic) Thabo Dloti on board as its anchor BEE shareholder. Instead, Coronation’s BEE shareholders are its staff, a trust and its black public shareholders.
It is a good thing that these large managers have done what they had to do to qualify as BEE — which includes a lot more than just shareholding. But it is a pity to see that the survey is now so crowded. It was once dominated by independents. Some, like Sentio and Argon are organic black businesses; others, like Aluwani and Vunani, are in effect black buyouts from diversified financial services businesses: Momentum and Peregrine, respectively.
In due course this survey will be redundant, as these businesses become generic SA businesses in the same way that Sanlam and PSG are no longer “Afrikaans” businesses. The right way to “do good” is arguably to rather focus on the (often neglected) Forbes targeted development investment (TDI) survey. It is dominated by Old Mutual Investments.
This includes the private markets side of Futuregrowth — as opposed to the more vanilla listed bond side — and the Old Mutual Ideas fund. Both have a bias towards infrastructure. Out of the R81bn in the survey, the equity-focused Ideas Fund has R27bn under management and the Futuregrowth Infrastructure & Development Bond Fund R23bn. Sanlam is still scrambling to catch up with its historic rival, but as a highly professional outfit it will undoubtedly bring some high-quality offerings to the market.
This is a sector in which life offices, with what have come to be called “patient balance sheets” have an advantage over the independent asset managers. Life insurers can hold on to investments for 10 years or longer to match their liabilities.
But there are independents in TDI. There is the Mergence SRI (socially responsible investment) Fund, for example, and the catchily named Ninety One SA Infrastructure Credit Fund. It has attracted only R131m, so maybe it should be rebranded.
There are some specialised funds and segregated mandates, though far fewer than overseas. They include the Prescient Clean Energy & Infrastructure mandates and the Futuregrowth Community Property Fund.
Sharia funds can also be considered TDI. The pioneering Oasis Crescent (domestic) Equity Fund and its international counterpart are in that survey.
Compulsory prescribed assets, as they existed in the 1970s and 1980s, should be avoided, as they have all kinds of unintended consequences. But it must surely be in the national interest to encourage TDI investments, particularly those into infrastructure.
Sharia funds have also gained traction among non-Muslims looking for screened ethical investments. Many Sharia funds, from Old Mutual and Sentio, for example, don’t appear in this survey, which is clearly far from comprehensive. But it’s arguably more important to focus on infrastructure investment than it is on supporting already quite prosperous black-owned fund management shops.
These shops get plenty of airtime in the media, they have articulate spokespeople and a strong lobby group in the Association of Black Securities & Investment Professionals. As the JSE shrinks, the default shouldn’t always be to invest in foreign shares. Pension funds should also invest more into the domestic economy.
• Cranston is a former associate editor of the Financial Mail.
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.