Sanlam Group has appointed Ninety One as its primary active investment manager for single-managed assets, a move that will involve the transfer of some R400 billion of assets to the global asset manager, but which has raised some competition concerns locally.
In recognition of the value transferred, Ninety One, a company that before 2020 was part of Investec’s operations in South Africa, intends to issue shares to Sanlam, giving Sanlam about 12.3% of Ninety One’s share capital.
Ninety One is South Africa’s second largest asset manager - the State-owned Public Investment Corporation is the biggest. Ninety One will remain an independent investment manager with staff as its largest shareholder.
Ninety One CEO Hendrik du Toit said in a presentation that for them, the deal will bolster their market leadership in South Africa, and will provide it with access to savings pools outside of Ninety One’s traditional higher income markets.
“We are looking forward to a long and fruitful relationship with Sanlam, a business with a powerful brand and significant scale in South Africa. Our experience and expertise are complementary. This agreement will give us the opportunity, as leaders in our respective markets, to create additional value for our stakeholders,” he said.
Opportune Investments chief investment officer, Chris Logan, said high capital outflows among active asset managers in the UK loomed large behind this transaction, and he questioned whether this deal would have taken place if capital inflows were better in the UK.
Flagship Asset Management investment analyst Philip Short said in that general, large South African asset management firms were under pressure due to their higher costs and fees compared with smaller boutique asset managers, due to the shift towards passive asset management funds versus active asset management, and because pension funds, which allocate capital to asset managers for investment, were also demanding lower fees.
Mergence Investment Managers senior analyst Radebe Sipamla said if one looked at the transaction mindful of the realities of the domestic asset management sector, “the transaction is not positive and should be blocked by the regulators as you will see a situation where assets are more concentrated to firms like Ninety One.”
Sipamla said Ninety One as well as Sanlam had “very few black portfolio managers and senior investment management professionals” with “extremely low levels of assets managed by black professionals at both firms.”
“Competition authorities need to block the transaction as it will effectively make it difficult for truly broad-based black-owned and managed asset management firms to compete with scale efficiencies that the new entity will have,” he said.
Meanwhile, Du Toit said they were confident the transaction would meet the hurdles required by the local competition authorities.
In the six months to September 30, Ninety One’s net outflows came to £5.3bn. Du Toit, however, said they had seen good net fund inflows in September, the first monthly inflow in a long time, but while “one swallow does not make a summer” it did indicate that the tide may have turned.
“We’ve seen a change…Our pipeline of real opportunities is significantly higher,” said Du Toit.
In terms of the deal, Ninety One will take ownership of Sanlam’s active asset manager, Sanlam Investment Management (SIM).
Sanlam will appoint Ninety One as the investment manager of Sanlam Investments UK, as part of which, Ninety One will take over third-party assets, balance sheet assets and the relevant investment professionals who manage these assets in alignment with client requirements.
A total pool of assets of about R400bn (as of 30 September 2024) was expected to transfer to Ninety One. About 80% of the assets are managed in South Africa.
Sanlam will become an anchor investor in Ninety One’s private and specialist credit strategies. The parties’ intention is to enter a relationship for at least 15 years, though both indicated yesterday they believed this would be a relationship that will endure for the long term.
“By leveraging our complementary competencies, Sanlam Investments will be strengthening its South African and global position as a multi-skilled asset manager,” said Sanlam CEO, Paul Hanratty.
“Coupled with Sanlam Investments’ market-leading expertise in passive and alternative asset classes, as well as multi-managed solutions, the relationship is set to unlock value for its clients, distribution force and shareholders.”
The agreement would see Ninety One gain preferred access to South Africa’s largest network for the distribution of insurance, savings, and investment solutions.
Meanwhile, Sanlam views this as a partnership that aligns with its objectives and enhances its competitive positioning.
Sanlam Investments typically builds fit-for-purpose solutions for private, retail and institutional clients by utilising its specialist expertise and strategic partner networks across active, passive and alternative asset classes.
Active asset management is a core building block, and bolstering this capability will enhance its total offering across South African and offshore markets, the group said.
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