Last Updated on 22/08/2024 by Carl-Peter Lehmann
Who you think are the best asset management firms is a bit like picking your all-time best Springbok rugby team – it’s subjective and often comes down to personal preferences. But we love a good debate! However, when it comes to investing your hard-earned money, it’s crucial to consider factors like fund performance, management expertise, and the breadth of offerings. In this article, we’ll explore what asset management is, examine the largest asset management firms in South Africa, and identify who we believe stands out as best fund managers in the country today. Is bigger always better? Our results say otherwise.
What is Asset Management?
Asset management, also known as fund management, involves the professional management of a wide range of investments—such as equities, bonds, property, and alternative assets – on behalf of a pool of investors. In South Africa, asset managers provide various forms of collective investment schemes to the public, including unit trust funds, ETFs, and hedge funds. These investments can be held within different ‘wrappers,’ each with its own set of rules, tax implications, and benefits, such as retirement annuities, pension funds, living annuities, and endowments. Each collective investment vehicle – like unit trusts – operates under specific mandates that categorize them into peer groups, such as local equity funds, balanced funds, income funds, and offshore equity funds. While this is a simplified explanation, it serves the purpose for this article. Essentially, we entrust these institutions with our life savings, retirement funds, and other capital to help us achieve key financial objectives, like financial independence.
The Largest Asset Management Firms in South Africa
South Africa is home to several prominent and large asset management firms, many of which are either independent like Allan Gray and Coronation, or linked to major life insurance companies and banks such as Stanlib, Old Mutual, Sanlam, Discovery, and Momentum. These firms often benefit from managing large institutional pension fund assets and frequently have extensive, active sales forces that help them accumulate substantial assets under management (AUM). Because they have been around a long time and have large marketing budgets – they are names we are comfortable and familiar with.
Largest Asset Management Firms by AUM (Based on Alexander Forbes Survey):
Ninety One: Originally forged out of Investec and now a standalone company listed in the UK, Ninety One tops the list with a strong presence in both local and international markets, renowned for its global reach.
Stanlib: Backed by Standard Bank and Liberty Life, Stanlib leverages its extensive network to maintain substantial AUM, offering a wide range of funds across various categories.
Allan Gray: As the original independent asset manager in South Africa, Allan Gray has a history spanning over 50 years. The firm redefined asset management in the country and boasts the largest fund by AUM, the Allan Gray Balanced Fund. Known for consistently delivering strong fund performance, Allan Gray remains a trusted name in the industry.
Coronation Fund Managers: Once one of the darlings of the local asset management space alongside Allan Gray, Coronation has built a reputation for strategic insights and long-term performance, continuing to be a favorite among retail investors.
Sanlam Investment Management (SIM): As part of the larger Sanlam group, SIM offers a broad spectrum of investment products. Their institutional and retail offerings are bolstered by an active Sanlam advice-based sales force.
But when we look at the performance of the funds they offer, do they stand out relative to their peers, or should we be highlighting other fund management companies that may not get the same media coverage, but have forged reputations for excellece?
How We Assessed and Ranked the Best Asset Management Firms in South Africa Today
To be clear, this is a subjective analysis based purely on Morningstar data, ranking retail funds within their respective ASISA categories to determine performance relative to peers. While we’ve made every effort to be accurate, there could be inadvertent omissions or errors, and at times, the quality of the data might not be perfect. Nonetheless, we hope this analysis is informative, as certain trends did emerge from the data.
You have to start somewhere, and this process has given rise to an entire industry—the DFMs or Asset Consultants—who assist advisory and wealth management businesses like ours in identifying the best funds for our clients (given that there are literally thousands to choose from). But as the resident investment nerd, this is a basic attempt that focuses on several key factors to identify the best asset management firms in South Africa. Here are some of the factors we considered:
Top Fund Managers Ranking Factors
1. Diverse ASISA Category Participation: We prefer firms with top-performing funds across a variety of ASISA categories. This demonstrates their ability to manage money effectively across different mandates.
2. High Competition ASISA Categories: We concentrated on categories with significant competition – ideally, those with at least 30 competing funds over the time frame. The specific 8 categories we focused on include SA MA Income, SA MA Low Equity, SA MA Medium Equity, SA MA High Equity (Balanced), SA MA Flexible, SA Equity, Global Equity, and Global MA Flexible. *MA = multi-asset
3. 7-Year Performance: We assessed performance relative to peers over a 7-year time frame, as this period roughly represents a full economic/business cycle. We believe 5 years is too short to demonstrate consistent skill, while 10 years or more can reduce the number of competing funds in a category, potentially distorting relative performance.
4. Top 10 Fund Rankings: Our analysis emphasized funds that ranked within the top 10 relative to their peers over the 7-year period. Bonus points for ranking well in the most competitive category, balanced funds, which house most our retirement life savings.
5. Retail Fund Classes Only: We focused exclusively on retail fund classes, ensuring that our analysis is relevant to individual investors and not distorted by various fee classes that appear to improve relative performance of a particular fund.
Best Fund Managers in South Africa Today
Based on the framework we have applied above, these are, in our opinion, the best fund managers in South Africa today. The images below show the 7-year performance of the fund, where it ranks in its ASISA category, the name of the category and name of the fund. Data is at 14/08/2024.
1. Fairtree
With around R120 billion in AUM, Fairtree is, in our view, the top fund manager in the country today by a long way. No other fund manager comes close to delivering the number of top performing funds that they do. They boast some of the best-performing funds across almost every ASISA category in which they participate, including Balanced (MA High Equity), MA Income & Low Equity, SA Equity, and Global Equity. Fairtree also manages what is arguably the best hedge fund in the country. Their ability to consistently outperform and win awards is truly remarkable.
2. Truffle
This c. R80 billion asset manager is a name that might not be familiar to many but has forged its reputation as one of the best in the business. Most of the funds they manage rank among the top performers in their respective ASISA categories. Some of these funds are managed on behalf of other managers, such as Nedgroup Investments and Amplify but there is no doubting their consistent excellence.
3. Sygnia
Not going to lie, this one surprised us. But a number of their funds kept popping up high in the rankings across a number of categories. We also know Sygnia is a somewhat polarizing figure in the industry, largely due to their outspoken CEO, but their performance across a number of their funds is impressive. Known primarily as a low-cost passive fund manager, it demonstrates asset allocation often trumps stock selection. Their flagship Sygnia FANG.AI Fund, despite only having a six-year track record, is so far ahead of the competition that we felt it deserved special mention. Additionally, their balanced fund, Sygnia Skeleton Balanced 70, is comfortably in the top quartile (21st out of 156).
4. Aylett
Though Aylett has a smaller range of funds, what they do, they do exceptionally well. They have long been recognized for managing some of the best balanced and SA equity funds in the country. Additionally, the Worldwide Flexible Fund they manage on behalf of Nedgroup Investments is also a top performer. Another name many might not have heard of, they’re a boutique that punches above its weight.
5. Special Mentions: Gryphon, 36One, Centaur, ABAX and Amplify
Gryphon: Gryphon is a small but interesting name, which similarly to Sygnia, focuses on asset allocation rather than stock selection, with a low-cost selection of funds. Three of their funds rank highly in their respective ASISA categories – Gryphon Prudential (6/156), Gryphon Flexible fund (4/33), and their global equity fund (11/46). Having one of the best balanced funds in the industry with a TIC of only 0.55% means they’re one to watch.
36One: Predominantly an equity-only and hedge fund manager, 36One’s two SA equity funds both rank in the top 5 and they have one of the best hedge funds in the business. Their flexible fund also ranks amongst the best in its peer group.
Amplify: Although not a pure asset manager, Amplify has built a reputation for identifying the next generation of asset managers, such as Terebinth, Matrix, and ABAX, to manage Amplify-branded funds. Many of these funds are performing exceptionally well in their ASISA categories. Amplify also offers a diverse and interesting hedge fund range.
ABAX: With one of the best balanced funds in the industry ranked 3rd out of 156, its high performing Absolute Fund, and the flexible fund it manages for Amplify ranked 6th out of 33, they are definitely one of the best boutique asset managers in the country.
Centaur:With one of the best balanced funds in the business (5th out of 156) and industry leading flexible fund (1st out of 33) deserves attention. The early signs are that their equity fund is also one to watch!
Read Next: The Best Performing Balanced Funds to Consider For Your Retirement Annuity
What About the ‘Big 3?’ Allan Gray, Coronation, and Ninety One
These names continue to command attention due to their reputations and their status as some of the largest fund managers in the country by assets. But how does their performance measure up today? None of them have funds that rank among the top performers anymore, though they do have a few that remain in the top quartile. Overall, their performance has been somewhat disappointing, which is why we like to remind our clients that there are many other compelling investment opportunities beyond these familiar household names. To be clear, its not that we don’t recommend them, but building a successful investment portfolio today means having a much broader pointof view.
Ninety One: Among the ‘Big 3,’ Ninety One is probably the most consistent. Of the 10 funds they have in the ASISA categories we’re ranking, here’s how they stack up: Two funds are top quartile performers—the Ninety One Opportunity Fund (22/156) in the balanced fund category and the Ninety One Value Fund (11/122) in the SA Equity category. As for the rest, five are 2nd quartile performers, one is in the 3rd quartile, and two are in the 4th quartile. In total, 70% of their funds sit in the top two quartiles—solid but not spectacular.
Allan Gray: Allan Gray has six funds in the ASISA categories we’re ranking. Two of these are top quartile performers—the flagship Allan Gray Balanced Fund (40/156) and the Allan Gray Stable Fund (24/114). They also have two 2nd quartile funds, and one each in the bottom two quartiles. This means 66% of their funds are in the top two quartiles.
Coronation: Coronation has been the most disappointing of the ‘Big 3’ in terms of performance. Of their 10 funds in the ASISA categories we’ve ranked, only one is a top quartile performer—the Coronation Top 20 Fund, which ranks 16th out of 122 in the SA Equity category. Their flagship Coronation Balanced Plus Fund is a 2nd quartile performer, sitting at 45 out of 156 funds, and is one of five 2nd quartile funds. They also have three 3rd quartile funds and one 4th quartile performer. Overall, 60% of their funds are in the top two quartiles, but none stand out.
Further Reading: Ranking the Best Performing SA Equity Unit Trust Funds in South Africa
Conclusion
Selecting the best asset management firm for your needs is ultimately a personal decision, influenced by your investment goals, risk tolerance, and financial outlook. While the firms mentioned here are all top contenders with excellent track records, the choice of the best will vary depending on what you’re looking for as an investor. Remember, like picking the best Springbok team, identifying the top asset manager is subjective. However, by considering the performance and consistency of their offerings, you can make an informed choice that aligns with your financial aspirations.
Now Read: Who are the Top Performing Global Equity Funds in SA Today?
Carl-Peter Lehmann
Carl-Peter is a CERTIFIED FINANCIAL PLANNER and Investment Professional with over 20 years experience. He is a Director and Partner at Henceforward.
