The 27four DEInvest Annual Survey 2024 provides an in-depth analysis of South Africa’s asset management sector, which encompasses 93 asset managers overseeing R8.42 trillion in assets. The sector plays a vital role in financial intermediation and economic stability, ranging from large, established institutions to smaller niche players. Key findings from the survey are as follows:
- The top five asset managers control about 65% of total assets, and the top ten manage approximately 81%, indicating significant resource concentration with limited opportunities for emerging firms to thrive.
- 60.5% of total assets under management (AUM) are invested locally, with 39.5% allocated to international opportunities. This distribution reflects adherence to South African exchange control regulations and a strategic approach to mitigate domestic volatility while exploring global growth.
- Public markets dominate, making up 90% of AUM, although AUM in private markets is growing, now accounting for around 4% (6% in ‘Other’). About 40% of firms provide private market offerings, recognising the strategy’s potential for returns and addressing long-standing needs due to underinvestment.
- 6,523 full-time employees work in the sector, with a gender ratio of 53% female and 47% male. However, there are significant disparities at management levels; black employees are well represented in entry-level positions but less so in senior roles, where white males dominate. This gap highlights the need for targeted initiatives to enhance diversity in leadership, particularly for women and black professionals.
- Client distribution patterns indicate the significant influence of institutional investors, accounting for R5.47 trillion of the AUM, while retail investments stand at a total of R2.95 trillion. 62% of responding firms cater to both institutional and retail markets, with 37% exclusively serving institutional clients. The concentration of client relationships for many participants is evident, as the top five clients represent a substantial portion of total AUM, signalling opportunities for firms to diversify and enhance resilience.
- Global partnerships are gaining traction within the industry, providing additional opportunities to investors looking to increase their international exposure, while perhaps also reducing the amount of investment capital ultimately available domestically.
- The survey shows a preference for domestic fund domiciliation, with 70% of firms managing global funds based in South Africa to meet regulatory requirements and a preference for ZAR valuations. The current landscape presents relatively few unit trusts and hedge funds compared to developed markets, suggesting growth potential, especially for active exchange-traded funds (ETFs) and diverse investment options.
- Fee structures in the industry vary according to market demands, with traditional asset classes typically using fixed fees between 0.20% and 0.60%. Performance-based fees are common for specialized strategies like hedge funds, reflecting investor preferences for tailored solutions. Risk management practices correlate with asset sizes; larger firms typically secure higher insurance coverage, whereas smaller managers often opt for lower limits due to cost.
- The regulatory landscape remains dynamic, with recent changes influencing asset allocation and investment sentiment. The formation of a Government of National Unity could further drive interest in infrastructure and public-private partnerships, profoundly impacting future regulatory frameworks.
Overall, the sector stands at a pivotal juncture, with established and emerging firms navigating evolving strategies, regulatory changes, and commitments to diversity, positioning themselves for sustainable growth that benefits all stakeholders. For growth and stability in South Africa’s asset management industry, consultants should diversify client bases to reduce concentration among top players while boosting private market investments to unlock opportunities and higher returns. Enhancing leadership diversity through initiatives that elevate women and black professionals into senior roles will help reflect the country’s demographics and diversity of idea generation. Additionally, forging global alliances with international firms can strengthen local capital markets and improve investment strategies. Exploring innovative fund structures, such as active ETFs, will attract both retail and institutional investors. Finally, engaging proactively with regulatory changes is crucial to ensuring a supportive environment for sustainable growth.
By implementing these strategies, the industry can significantly impact South Africa’s economic development.