Alexander Forbes sees transformation in fund managers

South Africa's asset management industry is undergoing a transformation, with Ninety One, the asset management business spun out of Investec, claiming the top spot in the 2021 Alex Forbes Manager Watch survey. The survey, a long-standing tracker of the retirement fund industry in South Africa, revealed a 7.5% increase in assets under management compared to the previous year, despite the high concentration among the top 10 asset managers. Janina Slorsky, Head of Investment Consulting at Alex Forbes, joined CNBC Africa to discuss the findings and shed light on the trends shaping the industry. Ninety One's ascent to the top position was attributed to changes in assets managed by Old Mutual Investment Group. While 91 emerged as the largest manager of South African assets, its international assets were not included in the survey, indicating its even greater magnitude. With a diverse range of capabilities encompassing equity, multi-asset classes, local, and global investments, Ninety One has garnered popularity and esteem within the industry. Moreover, the survey highlighted the significant progress in transformation and ESG practices, with a growing number of asset managers achieving high BEE level ratings. This commitment to transformation is evident in the substantial increase in level one asset managers, reflecting a strong dedication to inclusivity and diversity in the industry. Clients are now showing a keen interest in the investment professionals managing their assets, pushing for broader definitions of transformation beyond BEE ratings. This shift has benefited smaller emerging black managers, who are now receiving asset allocations that were traditionally reserved for larger firms. Furthermore, clients are setting targets for the percentage of assets allocated to majority black-owned entities, further driving the transformation agenda. While progress is evident in promoting diversity, concentration remains a challenge among the top 10 asset managers, who collectively manage around 65% of industry assets. However, there is a positive trend as managers outside the top 20 are starting to manage more assets, fueled by delistings from the JSE and the growing opportunity to allocate funds internationally. The industry is witnessing a gradual shift towards supporting smaller managers and emphasizing transformation, signaling a promising trajectory for increased inclusivity and diversity. The survey also underscored the growing importance of ESG considerations in asset allocation decisions. While it is challenging to measure the exact impact of ESG practices on returns, there has been a notable increase in asset managers committing to responsible investing principles such as signing up for the PRI. Clients are increasingly demanding ESG-focused portfolios, particularly in international markets where established ESG measures are prevalent. Despite measurement challenges in the ESG space, efforts to standardize metrics and enhance reporting are underway, aiming to provide a more comprehensive view of ESG performance and its impact on investment outcomes. Overall, ESG considerations are gaining prominence, with clients advocating for responsible investing practices and driving conversations around sustainability and good governance in the asset management industry. With a continued focus on transformation, inclusivity, and sustainable investing, the South African asset management landscape is poised for a dynamic evolution.