It wasn’t so long ago that there was a simple division in investment management. Asset managers picked stocks and bonds and packaged them together. Asset consultants — sometimes called fund selectors in the retail market — would then try to pick the likely winners for the next five to 10 years.
Still by far the largest fund in the pensions industry, the Alexforbes (previously Investment Solutions) Performer fund has R305bn under management, making it about twice the size of the largest unit trust in South Africa, the Allan Gray Balanced Fund.
It invests in half a dozen balanced funds and doesn’t get involved in the asset allocation. After all, Alexforbes was a firm of consulting actuaries, not fund managers.
But the lines between multimanagers and single managers are increasingly blurred. A good example of the hybrid model is PortfolioMetrix (PMX). Chief investment officer Philip Bradford buys vanilla South African bonds himself, packaged in a unit trust. There’s no point in paying fees to a third party for such a straightforward task – the fund has done very well in its own right.
However, in the PMX model he would subcontract to a specialist manager, particularly as the options for non-government debt increase and even unlisted credit becomes a meaningfully sized asset class in South Africa.
Bradford said focusing on top-down asset allocation decisions is often the best use of a chief investment officer’s time. But, unlike the days of vertically integrated teams of analysts, the modern asset management business doesn’t need to recruit the best analyst of banks or the best gold analyst.
At times it makes more sense to opt for a low-cost passive solution rather than to look for a house with a stock-picking superstar such as Peter Lynch at Fidelity in the 1980s or Terry Smith of Fundsmith today. In Smith’s case there have been some severe bouts of underperformance.
The venerable full-service asset managers of the past are moving towards cheaper quantitative or index models. This is quite a change, because 20 years ago they were adamant that with skill they could outperform a passive portfolio, if not every year then at least from a long-term perspective.
In the most extreme example, Stanlib has closed down the fundamental equity team it inherited when Standard Bank merged its asset manager with Liberty Asset Management. It now runs equity ― and more recently listed property ― through a quantitative process managed by former Fairtree star Rademeyer Vermaak.
These black-box quantitative models work well until they don’t, as investors in Long-Term Capital Management will remember. In the 1980s Liberty and Old Mutual were the top training grounds for the industry. But perhaps old-fashioned active management is too expensive and returns are too unreliable.
Two houses that still have a large market share and maintain a single process fundamental approach are Coronation and Allan Gray. Over the 10 years to March 31, the Allan Gray Balanced composite (it includes segregated funds) has delivered a 10.4% return compared with its benchmark of 9.6%. It might not seem like much of an outperformance, but over time the compounding effect is significant.
Coronation has delivered a marginally better 10.6% return. In fact, out of the big balanced shops, the low-key and unglamorous M&G (previously Prudential) did even better than its peers with 10.7%. It is well set up to take market share in the large but shrinking market for balanced funds.
These are the middle-of-the-road portfolios, designed for pension funds. More adventurous stock-pickers and asset allocators have delivered a wider range of returns. The top performer over 10 years, PSG Balanced, has given a 12.6% annualised return over that period. But this is a unit trust that isn’t even actively marketed in the pension fund industry, so investors are likely to have a shorter-term outlook and a higher risk appetite.
The weakest performer, the Merchant West Managed P&G Fund (which stands for Payers & Growers, not Procter & Gamble) has a distinct high-dividend strategy focusing on so-called quality shares, mainly consumer staples, which have underperformed for much of the past decade.
What is noticeable now is the number of multimanager portfolios in the flagship Alexforbes Manager Watch, and not just in the separate Multimanager Watch survey. There are funds from Sanlam Multimanager, Symmetry ― Old Mutual recently changed the name of its multimanager back to Symmetry ― Stanlib Multimanager (sometimes called INN8) as well as the Momentum Max Factor range.
Independent multimanagers such as Mentenova and PPS are increasingly visible. The big life offices are refocusing on their multimanager products and de-emphasising their single-manager businesses. Momentum has been operating a hybrid model for years, doing most of its fixed income in-house and outsourcing equities.
In a big-bang move in November 2025, Sanlam sold Sanlam Investment Management to Ninety One, taking a stake in listed Ninety One shares. Ninety One could do with some new blood, as its institutionally balanced team is on the back foot. It is 36th out of 45 balanced managers over three years.
David Knee, Ninety One’s new head of South African multi-asset funds, should knock it into shape along with the new recruits from Sanlam. Knee was previously chief investment officer of M&G Southern Africa, where he had a strong run for quite a few years.
Old Mutual is the odd man out, as it hasn’t unveiled the plans for its single manager. It has expanded its index and quantitative capabilities in recent years. But it will miss its experienced asset allocation specialist, Peter Brooke. Now that Brooke has retired, and with a new group CEO in Jurie Strydom, Mutual might consider its options. Some kind of consolidation with M&G, or conceivably Coronation, is a possibility.
• Cranston, a financial journalist, is author of ‘The Mavericks’, a book about South African fund management.
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