Regulation 28 brings changes to Alexander Forbes’ Large Manager Watch
With Regulation 28 allowing asset managers greater offshore exposure, global has now become an integral part of some South African managers overall active value proposition. For other asset managers, staying focussed on local investment exposures remains the name of the game.
To accommodate this changing competitive environment, Alexander Forbes’ has taken the decision to launch a new look Large Manager Watch (LMW) that recognises that the managers that qualify for the Global Large Manager Watch may not necessarily be the same managers that have qualified for the South African Large Manager Watch.
“Today, with asset managers allowed to allocate as much as 25% of their portfolio to offshore opportunities, “this is no longer merely dabbling but rather a mandate with a distinct focus on offshore investing – and a very different offering from a portfolio invested 100% in local assets” says Kim Strydom, Head: Performance Surveys, Research and Product Development, Alexander Forbes Financial Services (Pty) Ltd.
Traditionally, the Alexander Forbes Large Manager Watch aimed to create a single universe of the largest (in terms of total assets under management) South African asset managers managing balanced mandates for clients.
Since the Large Manager Watch represented anything from 85 - 90% of total South African assets under management, the survey provided trustees with a reasonably accurate idea of the performance of South African asset managers managing institutional portfolios.
The new surveys recognise two groups of large asset managers with distinctly different skill sets. Firstly, asset management players who were precluded from participating in the original Global LMW survey, because they lacked an international component can now be included in the domestic-only LMW survey for the first time. Secondly, “those asset managers who are choosing to focus on fully global mandates in preference to local-only mandates will be removed from the South African-only survey since the reduced size of their investment in these mandates falls below our LMW minimums” explains Strydom.
Effectively, the participants of the Global Large Manager Watch will remain unchanged. So, for the year from 1 April 2012 to 31 March 2013 these will remain; Allan Gray, Coronation, Foord, Investec, Momentum Asset Managers, Oasis, OMIGSA, Prudential, RE:CM, Sanlam and Stanlib.
The South Africa Large Manager Watch will, however, see the following changes to what was traditionally a universe that mirrored the Global Large Manager Watch:
· The inclusion of ABSA Asset Management’s South Africa balanced portfolio. While ABSA has always been a large assets under management house, they were excluded from the Large Manager Watch in the past as they did not have a global balanced offering. At the time of re-evaluating the Large Manager Watch they were slightly short of the requirement for a one year survey history on their global offering. That said, “next year they will be a key contender in for the Global Large Manager Watch” added Strydom.
· The removal of the Stanlib and OMIGSA portfolios from the South Africa Large Manager Watch. These portfolios have become increasingly smaller over the last months as a result of clients moving their assets to combined balanced portfolios i.e. those with an offshore exposure and, as such, are not representative of the quantum of assets a large manager should be expected to be managing in this universe.
· An important point to bear in mind though is that, while these portfolios have indeed shrunk, a firm’s adherence to its Global Investment Performance Standards policies could also account for numbers that appear smaller than those managed by its peers.
Strydom believes that these changes to Alexander Forbes’s Large Manager Watch “reflect shifts we can expect to see as balanced portfolios adapt to regulatory changes.”
While it is not immediately obvious whether South Africa-only balanced portfolios will constrict as assets are moved to global balanced mandates, it is clear that there has, and will be, far more attention paid to offshore investing. This could be done via specialist offshore managers with no impact on local only balanced mandates. That said, with the trend away from specialist mandates towards balanced mandates, it is plausible that local-only balanced mandates will bear the brunt as assets are moved offshore.
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