By Ndabezinhle Mkhize
A first in the investment industry! The Eskom Pension and Provident Fund (EPPF) recently made the announcement that our transformation and incubation programme is expanding to the private and international markets. This is a natural growth of the EPPF’s transformation initiative, which was launched more than a decade ago and has contributed meaningfully to the R490-billion managed by black asset managers.
The initiative has so far produced stellar results, including some asset management companies, which graduated from our programme, growing their employee, client and portfolio numbers. Mazi Asset Management grew from two to 30 employees, and from two to 112 clients, while its assets-under-management (“AUM”) grew from R380-million to R48.2-billion; and Perpetua Investment Managers grew from seven employees to 27, and from two to four clients, while its AUM increased from R260-million to R11.5-billion.
We are proud of the impact we’ve made thus far, but are aware that it’s still not enough when only 9% to 10% of assets in the investment market are managed by black managers (and that’s only listed assets – the numbers are more dire in unlisted assets). We are not transforming the investment industry in leaps and bounds, and cannot yet celebrate success when black managers are competing for a slice of 10% of the assets.
Unfortunately, transformation in the South African market has been a contentious issue, and even with our robust pursuit of change in the investment industry, it remains slow moving. Lip service is often paid to transformation, but not enough substantive change happens, and to this day although there are many black financial analysts, they seldom progress to become portfolio managers or chief investment officers (who are usually picked from the crop of portfolio managers).
We also need to look into the psychology that contributes to slow transformation. A considerable number of asset owners don’t believe black chief investment officers (CIOs) have the ability to grow their funds and achieve great returns on investment. This is a false assumption – black asset managers perform as well, if not better in some cases, as white-owned asset management companies, as shown in the graphs below:
As these graphs show over the years represented, black asset managers (BM) performed on par with, and at times surpassed, non-black asset managers (NBM). These results were shared at the recent annual EPPF Transformation Breakfast – a way in which the Fund reports back on progress and implores other asset owners to take a stronger role in transformation and to work together collaboratively to make a difference.
A positive sign of the growth of the transformation initiative was the announcement of Thuso Incubation Partners – a JV between Ke Nako Capital and its black staff – as the managers of the Fund’s assets in the private market. The move into the private market will work concurrently with a roll-out of the incubation programme into the international market, which will be managed carefully and responsibly by Thuso Incubation Partners with the direction of the EPPF.
The international sleeve represents close to 30% of the value of the Fund. However, we as the EPPF don’t have black managers in our international schemes, so the move to grow the incubation programme into international markets will help change this. The success of the incubation programme in the local market is another factor driving the roll-out – it makes no sense to keep something so successful in the domestic market only and not grow it internationally, too.
When all is said and done, assets managed by black managers need to reflect the demographics in the country. The EPPF’s incubation programme is intent on ensuring that black managers are given the space to grow, diversify and work with a bigger slice of the pie, without sacrificing any skills or returns on investment.