Written by Jannie Leach and Leonard Mamogobo
Insights
The global giants
The “global giants” manage the bulk of active and rules-based assets. The ten largest houses accounted for 35% of total industry assets and 88% of the rules-based assets in 2023. It must be noted that the industry is highly concentrated, with Blackrock and Vanguard overseeing 57% of all rules-based assets, and the next three managers looking after another 20%.
The growth in rules-based funds within these houses has resulted in economies of scale, which has led to the reduction in costs for investors over the years. However, this has also meant that they have come under increased scrutiny over “holding enormous [voting] power”. As a result, we are seeing a trend towards asset managers offering investors the scope to do their own proxy voting and/or select their own proxy voting agent.
Source: Largest Asset Managers by AUM in 2024 (investingintheweb.com) updated to 31 December 2023 using the latest financial results for each firm.
South Africa's leading asset managers
The South African industry is even more concentrated than its global equivalents, with the largest ten firms managing 72% of the total assets in the industry and 90% of rules-based assets. Over 90% of these assets are in traditional active strategies however, as we discussed in Part 2 of this series, rules-based assets are growing significantly faster than their active counterparts. Life insurers, banks and other vertically integrated firms have seen the most growth in rules-based assets while independent asset management firms, still have a focus on traditional active management, similar to many of their global peers.
Source: Largest Asset Managers by AUM in 2024 (investingintheweb.com) updated to 31 December 2023 using the latest financial results for each firm.
Given the diverse nature of the parent companies owning rules-based asset managers, we have seen these firms gaining traction in different market segments using a variety of investment vehicles. Most of these vehicles use some sort of pooling of assets as it provides the necessary economies of scale for greater efficiencies and cost reductions. While single asset class strategies still dominate the total rules-based AUM, we are seeing increased traction in multi-asset strategies across most firms.
Source: Total - Manager Watch™ Annual Survey, December 2023. Rules-based - Collective Investment Schemes – ASISA, Non-CIS – Old Mutual, Satrix
In 2023, market growth led to most fund management firms seeing a growth in assets. However, most rules-based fund managers have seen a continuation of strong net flows during the year. Over the past decade, very few rules-based managers have experienced net outflows across their businesses in any year. The drive to lower overall cost within client portfolios has driven an increased adoption of rules-based strategies. As per the global trends this is likely to continue over the coming decade, which will benefit most of the large rules-based firms.
Source: Collective Investment Schemes – ASISA
The largest rules-based funds in South Africa
In 2014, the ten largest rules-based funds in South Africa collectively managed just over R30 billion, making up 51% of the rules-based CIS market. A decade later, the top ten has seen their assets soar to over R130 billion, representing 41% of the CIS rules-based market. Many of these funds are now among the ten largest within their respective fund categories, on par with many of the big brand actively managed funds.
A decade ago, the largest rules-based funds were predominantly focused on market cap strategies such as South African, global and regional equities. However, over time the growth in rules-based funds has followed the longer-term CIS industry trend towards the multi-asset categories. The two largest are now multi-asset high equity funds. Over the past year global equity, multi-asset and SA bond funds have attracted the largest net flows.
Source: Collective Investment Schemes – ASISA
This is Part 3 of the Core Chartbook 2024 series.
Disclaimer
Please note that Nedgroup Collective Investments (RF) Proprietary Limited is not authorised to and does not provide financial advice. This document is of a general nature and intended for information purposes only. It is not intended to address the circumstances of any investor and cannot be relied on as legal, tax or financial advice, either express or implied. Whilst we have taken all reasonable steps to ensure that the information in this document is accurate and current on an ongoing basis, Nedgroup Investments shall accept no responsibility or liability for any inaccuracies, errors or omissions relating to the information and topics covered in this document. Nedgroup Collective Investments (RF) Proprietary Limited is a member of the Association for Savings & Investment SA (ASISA).
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