The criteria to qualify as a black asset manager is the same as those used by the 27 four Investment Managers Annual BEE.conomics Transformation in Asset Management Survey:
* A minimum of 50% black ownership with accompanying voting rights;
* A minimum of 50% black representation at board level; and
* At least 50% black individuals in senior fund-management positions.
Kagiso Asset Management’s risk-adjusted investment performance over the past five years across the funds and asset classes where they compete were exemplary. The company’s retail offering is primarily equity and multi-asset class funds and it did not qualify for the coveted Raging Bull Award for the South African Manager of the Year, as Kagiso does not offer retail products with track records of at least five years across all four major asset classes (South African equity and real estate, South African interest-bearing and multi-asset income, South African multi-asset, and global and worldwide).
According to the 27four survey, the number of black asset management companies increased from 14 in 2009 to 48 last year. But these companies find it difficult to break into the investment industry. Of the estimated R5 trillion in assets available to private sector asset managers, only 10%, or about R490 billion, is managed by black asset managers.
Kagiso Asset Management was founded as a joint venture between the Kagiso Group and Coronation Fund Managers in 1999 and is a subsidiary of Kagiso Tiso Holdings, the investment arm of the Kagiso Trust and the Tiso Foundation, which focuses on social upliftment programmes to poor communities in South Africa.
According to the 27four survey, Kagiso Asset Management is the fourth-largest black asset manager and had R38bn under management in 2018.
Kagiso Asset Management had the third-highest asset-weighted ratings among registered collective investment scheme companies and the seventh highest rating out of 75 competitors in the broader South African equity and real estate category based on risk-adjusted performance.
The exemplary performance was repeated in the broader South African multi-asset equity category where Kagiso had the third-highest asset-weighted rating and the eighth highest rating out of 106 competitors, third-party managers included.
All six of Kagiso’s funds achieved above-average ratings, while three funds made it into the top 10% of their sub-categories.
The Kagiso Stable Fund had the fourth-highest rating out of 77 funds, the Kagiso Islamic Equity Fund had the sixth-highest rating out of 91 funds, while the Kagiso Protector Fund had the fourth-highest rating out of 50 funds.
Kagiso’s investment philosophy and strategy is unique, because they make decisions based on their perceived mispricings in the market. They aim to buy an investment at prices well below their estimation of the intrinsic value of the investment, hold them while the investment delivers strong cash returns and sell the investment when it moves above their perceived intrinsic value. After that the investment is ignored until it offers value again. Yes, a pure intrinsic value manager.
They do, however, recognise that, being an intrinsic value manager and a not market chaser, circumstances may change, resulting in getting out too soon or investing too early.
Other black-owned asset managers, such as Aeon Investment Management and Pan African Fund Managers, have excelled in their respective specialist investment fields.
The black asset management industry has turned out to be a significant job creator. The total number of employees grew by more than 62% between 2015 and 2018, from 346 to 563.
The transfer of skills and experience is crucial to grow the black asset management industry. It is imperative for the big funds and their consultants either to include them as managers of some of their assets or at least to give them an ear.
Transformation goes deeper than having a broad-based black economic empowerment rating. The big asset managers were also small at one time.
Ryk de Klerk is an independent analyst.