Key insights into South Africa’s asset management landscape

By: Janina Slawski, Head of Investment Consulting at Alexforbes

Alexforbes has released its 2023 Manager Watch™ Survey of Retirement Funds Investment Managers results. Janina Slawski, Head of Investment Consulting, described the survey as invaluable, covering growth trends and the integration of emerging technologies in the industry.

Key themes include:

  • Ninety One emerged as the largest single manager, while Alexforbes Investments led as
    the top multi-manager.
  • South African multi-managers exhibited consistent growth compared to their single-manager counterparts, with the Assets under Management (AuM) ratio shifting from 86%:14% in 2016 to
    77%:23% in 2023.
  • A notable increase was observed in the number of asset managers rated as level 1 contributors, with all top 10 managers and 19 out of the top 20 in the June 2023 AuM survey achieving this status.
  • In the Global BIV survey category, a significant portion of managers reflected high offshore allocations, with 34 out of 45 exceeding a 30% allocation, and 11 out of 45 surpassing the 40% mark. The peer group’s average exposure to offshore assets in December 2023 stood at 34.2%.
  • The adoption of artificial intelligence (AI) among South African asset managers remains modest, with only 31.8% of respondents incorporating AI into their investment strategies. This cautious approach indicates considerable potential for future growth in AI utilisation within the investment sector.
  • Collaboration between asset managers and academia plays a pivotal role in enhancing financial literacy among clients and students, providing invaluable insights for improved financial understanding. As clients become more knowledgeable, they are better equipped to appreciate the expertise required by investment professionals to navigate the complexities of the investment landscape.

Survey highlights

This edition includes 28 surveys: 13 balanced, 14 specialist and one multi-manager. The key findings of the survey results include that in 2023, there was a 3% decrease in the number of asset managers participating in the Alexforbes surveys compared to 2022, along with a 9% increase in new strategies. The most significant increase, 36%, was observed among portfolios in the BEE survey from 2022 to 2023.

AuM survey highlights

Ninety One Asset Managers remains the largest asset manager, with a 6% increase in assets, solidifying its position. STANLIB AM retains second place with a 6% asset increase. Coronation moved to third place with an 8% increase in assets, surpassing SIM. Alexforbes Investments ranks as the top multi-manager in South Africa, showcasing a diverse portfolio approach. Multi-manager assets continue to grow, with a shift from single to multi-manager portfolios over the years. In 2023, total AuM increased by 12% over 2022, with the top 10 managers collectively holding 62% of the total assets.

AuM survey universe summarised according to BEE contributor levels

In the latest survey, 51 out of 79 asset managers achieved level 1 contributor status, an increase from 49 out of 70 last year. Notably, all top 10 asset managers from the June 2023 AuM survey, as well as 19 of the top 20, were rated as level 1 contributors in 2023.

Environmental, social and governance (ESG) considerations

In 2023, the uptake of responsible investing principles saw a further increase. Sixty-nine asset managers participated in the AF surveys, endorsing CRISA, compared to 62 in 2022. Additionally, 59 asset managers signed up for PRI, compared to 48 in 2022. This growth underscores a continuing trend towards the integration of ESG factors into investment and business decisions, highlighting an enhanced commitment to sustainability within the investment industry.

SA Equity Manager Watch™ benchmarks

In the SA Equity survey, over half of the 81 participating portfolios use the FTSE/JSE Capped SWIX All Share Index (ALSI) as their benchmark, while just under a quarter of the portfolios have the FTSE/JSE SWIX ALSI as theirs. This will align in the near future due to the JSE Index Harmonisation exercise.

Fee survey

In 2021 and 2022, most asset managers transitioned from reporting separate fees for domestic and international assets within their global balanced funds to providing a single total fee for these portfolios. This trend continued into 2023, complicating fee comparisons across years. Managers were asked to standardise fees using a sliding scale framework based on distinct AuM bands, further enhancing fee transparency and comparability.

SA and Global Balanced Manager Watch™ – Best Investment View

In the Global Best Investment View category of the Manager Watch™ Survey, performance for the year surpassed domestic mandates by 4.5%, with median returns of 12.6% and 8.1% respectively, driven by strong global equities. Out of 45 surveyed managers, 34 exceeded a 30% allocation to international assets, with 11 surpassing 40%. Average exposure to international assets rose to 34.2% in December 2023 from 29.9% in December 2022. Only four managers had international asset exposure below 30% by more than 5%.

The integration of artificial intelligence and machine learning

The asset management landscape in South Africa is witnessing a profound shift driven by the integration of artificial intelligence (AI) and machine learning (ML). A survey of 24 asset managers sheds light on this transformation, revealing insights into adoption rates, benefits, challenges and industry prospects. Currently, only 32% of asset managers have embraced these technologies, indicating early-stage adoption. However, this cautious approach underscores significant growth potential. As the industry evolves, strategic investments, skill development, ethical considerations and fostering collaboration will be vital for maximising the potential of AI and ML.

Converging paths of asset management and academia

Improving investment knowledge helps investors and asset managers. Collaboration between academia and asset managers is important. The goal is not to make investors experts, but to help them understand investments better. This understanding helps them appreciate the skills needed by investment professionals. Together, asset managers and academia work to build financial wisdom, creating a stronger investment environment in South Africa.

Tagged under:

Visit the official COVID-19 government website to stay informed: