SOUTH AFRICA - The announcement that Aka Capital is acquiring a controlling stake in BOE Asset Management has accelerated the nascent trend towards empowerment in the South African asset management industry.
The deal creates one of the largest empowerment asset managers in the country with some R17bn in assets under management.
While some of the businesses established a few years ago have been most successful, many fell by the wayside or were absorbed into bigger asset management operations.
Today the opposite is true and asset management companies are doing their best to encourage empowerment within the industry.
Steven Braudo, the managing director of Investment Solutions, the country's largest multi-management company, explained the history of empowerment in the industry: Some seven years ago, the asset management industry spawned a number of fledgling empowerment or break away companies, many of which have effectively disappeared.
“They were either absorbed into larger companies or closed their doors. The reasons for their lack of success include the fact that many of the firms started without a track record and as a result could not build up sufficient critical mass to be profitable.”
He added: “For an investment management business to be sustainable, a critical level of assets under management is required. This threshold may vary, but the cost of investment professionals, business systems, marketing and general operations is high.
“Our research shows a firm with a staff complement of 10 would need a minimum of R3bn in assets under management to break even.”
While the year 2000 was a period of great consolidation, 2001 was relatively quiet, but this year, with the merger of SCMB Asset Management and Liberty Asset Management into Stanlib and now the Nedcor/NIB/BOE deal, the consolidation pace has picked up again.
A succession of empowerment alliances have been highly successful. A shining example of this is the Oasis Group which was established in 1997 as an independent asset manager, wholly-owned by its staff, some 97% of whom are previously disadvantaged individuals. It has built its assets under management to around R8bn.
The largest empowerment company is the growth oriented manager Metropolitan Asset Managers with R32bn in assets under management.
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