There is one fistful of cash out there that asset managers are salivating for. Government's investment manager, the Public Investment Commissioner (PIC), has more assets in hand than Old Mutual. And it is looking to dish out more of those assets to private-sector managers.
Funds from the PIC may mean the difference between life and death for some of the managers formed over the past two years, in particular index managers such as Kagiso Asset Management and Umbono Fund Managers.
The PIC is itself an asset manager, responsible for the investments of the Government Employees' Pension Fund (GEPF) as well as statutory bodies such as the Road Accident Fund. It swings with a R260bn bat.
Traditionally, the GEPF invested exclusively in fixed interest, but in 1995 it gave domestic equity mandates to the five leading asset managers of the day, Old Mutual, Sanlam, RMB, Southern (now Futuregrowth) and Liberty (now Stanlib).
These managers now run about R80bn of funds for the PIC.
A public tender for private-sector managers is expected this year. First, the GEPF needs to be restructured to have a board of trustees, rather than the finance minister as sole trustee.
Firms that were too small to be considered for the PIC mandates in 1995, but have grown into large managers, such as Coronation, Investec and Prudential, may be in line for funds.
Investec Asset Management CEO Hendrik du Toit says he would consider the PIC to be a status account, though it should not be treated as the saviour of the industry. "We need a growing economy and higher [financial] market levels for sustained growth."
Investec will be counting on its recent empowerment status, now that it has sold 25% of Investec Bank to black investors.
It is widely assumed that the PIC will insist on empowerment credentials in awarding funds .
Black-controlled managers such as Quaystone and Abvest Associates are likely to be in a good position, along with Metropolitan Asset Managers and Real Africa Asset Management.
Oasis, which has the best investment track record of any black-owned firm, must also be in contention.
It's possible that the PIC will adopt a core-satellite approach, and black-owned firms such as Kagiso and Umbono, which have a low-cost infrastructure, have set themselves up to win this business.
They will be at a disadvantage, however, as Futuregrowth already provides an enhanced index fund for the PIC, so it is in the best position to win a larger core mandate.
Alternatively the PIC may run a straightforward tracker portfolio in-house.
Du Toit is confident that black shareholding will not be the only factor in an empowerment scorecard and that asset managers will be given credit for the development of black professionals and the way they use funds to effect empowerment.
