Asset Management Industry in South Africa 2024

Challenges

Emigration of wealthy South Africans. High interest rates and geopolitical uncertainty continue to dampen investor risk appetite. Operating costs are outstripping inflation. Political risk increased ahead of the elections and after the ANC failed to get a 50% majority. South Africa’s low savings rate. The industry is still male-dominated. The net outflow of assets and the delisting trend on the JSE are growing concerns. The two-pot retirement system could lead to a significant outflow of funds. Transformation and BEE.

Introduction

Asset managers play an important role in growing and retaining investments on behalf of retail and institutional clients. Total assets under management of South African retirement funds grew in 2023. Several challenges threaten the country’s savings pool, including the poor economy, reduced liquidity, political uncertainty, growing regulations and input costs, and increased emigration. Trends shaping the industry include the use of artificial intelligence, the growing importance of environmental, sustainability and governance and responsible investing and the increased role of alternative assets.

Opportunities

Assisting black asset managers. Cryptocurrency ETFs. ESG and sustainability-linked investment products. Hiring more women. Offshore investment products. The use of AI to streamline portfolio management. Tokenisation.

Outlook

While asset management has been affected by slowing economic growth, negative investment sentiment and political uncertainty, market conditions have been gradually improving. The domestic savings industry is expected to continue to contract due to the poor economy, stagnant formal employment and households under pressure, exacerbated by the outflow of retirement and discretionary savings offshore. The industry may experience net outflows of 1% of assets under management following implementation of the two-pot retirement system. Asset managers are likely to continue investing in technology to mitigate the increase in input costs and increase their focus on responsible investing.

Report coverage

This report on the asset management industry in South Africa includes comprehensive information on the size of the industry, retirement fund assets under management, and issues such as outflows, reduced liquidity, returns, the country’s low savings rate and regulation, including the introduction of the two-pot retirement system. There is information on notable players, their performance, developments and corporate actions, and profiles of 34 companies including the Public Investment Corporation and the Government Employees Pension Fund, large private asset managers such as Ninety One, Allan Gray, Old Mutual Investment Group and Sanlam Investment Managers, and smaller fund managers such as Abax and Benguela Global Fund Managers.

Trends

AI is being used to streamline operations, automate routine tasks and enhance compliance and client reporting. Asset managers are increasingly allocating more to alternative assets including private debt, hedge funds and private equity. Climate change has become a growing long-term risk. ESG is becoming a bigger consideration. Establishment by large asset managers of boutique asset managers. High interest rates and geopolitical uncertainty have fuelled an outflow of assets, while struggling consumers are reluctant to invest in a volatile market. Increased allocation to passive and rules-based strategies. Local crypto companies are looking to offer crypto asset investment products. Multi-managers are increasingly growing their share of AUM. Tokenisation is being considered by some asset managers.