ARGON ASSET MANAGEMENT
ARGON ASSET MANAGEMENT
African Asset Management With
A Global Outlook PRODUCTION: Timothy Reeder
Argon Asset Management offers that rare, and perfect, blend: An African investment firm with global standards. From offices in Cape Town it has been growing investor wealth since 2005, and CEO Dr Manas Bapela took us through how he sees this leading ownermanaged company taking an even larger slice of an increasingly important African sector. www.enterprise-africa.net / 3
INDUSTRY FOCUS: FINANCE
Argon Asset Management CEO Dr Manas Bapela
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While still a relatively young industry in South Africa, asset management is a hugely important one, which continues to grow at pace. Total private wealth held in South Africa has risen to US$722 billion, and High Net Worth Individual (HNWI) wealth has also increased to US$306 billion. Even further growth is forecast within the industry, as the number of South African HNWIs is expected to increase by 28% to reach approximately 56,000 by 2027. Africa as a whole is rife with opportunity today, currently representing some 15% of the world’s population but contributing just 3% of the world’s GDP and less than 1% of its stock market capitalisation. Wealth continues to increase and the result is a situation which is quickly changing. There is a constant
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upturn in demand for goods and services, and sound financial sectors and fund industries are developing across the continent alongside legal and regulatory frameworks which rank among the top in the world. KEY PLAYER IN GROWING MARKET Offering institutional products including equity, bond, Multi-Asset Class and flexible income funds, as well as a growing range on the retail side like the celebrated Argon BCI Balanced Fund, Argon Asset Management prides itself on being an active, research-driven investment management company, committed to building trusted partnerships which are built on mutual understanding. In large part, its success has been its ability to pair remaining a proudly African company with benchmarks which are recognised worldwide.
// WE HAVE INVESTED A LOT OF TIME AND RESOURCES TO DEVELOP A STABLE, EFFICIENT, AND WORLD-CLASS OPERATIONAL PLATFORM // “We have invested a lot of time and resources to develop a stable, efficient, and world-class operational platform,” the company sets out. “We apply a wide range of security measures that include disciplined adherence to local compliance processes and international best
ARGON ASSET MANAGEMENT
// THE STRATEGIES WHICH WE HAVE PUT IN PLACE ACROSS ALL OUR PRODUCTS HAVE REALLY ENABLED OUR FUNDS TO STACK UP WELL AMONG THE BEST // practice to ensure that your money, investment and personal information is in safe hands at all times.” At the helm is CEO Manas Bapela, a mathematician originally and later a quantitative analyst. He began at Argon Asset Management as its Head of MultiAsset Class before working his way up
through the business, and knows a thing or two about what it means to keep his company at the top of the pile in African wealth management. “Building a sustainable Argon Asset Management means growing the business through a variety of strategies in order to gain more assets,” he outlines, “but how do you make sure that this is done in a sustainable way? The answer is always the same: it comes down to the right governance and delivering on client expectations in a sustainable manner. We really appreciate the importance of good governance and it dictates everything that we do.” This is crucial, particularly with the financial uncertainty which continues to prevail in the country and in wider Africa, according to Bapela. We hear so often of an economy plagued by slow
growth rates, coupled with the political unrest hopefully to be resolved in the upcoming election, and exemplary control and stewardship of a company can be a deciding factor for some investors, Bapela explains. “By and large in South Africa, I feel at the retail level that people are primarily guided and driven by past performance and make inferences from there,” he begins. “It is the foreign flows which are more likely to be impacted by macro-economic factors and questions of uncertainty, however; not so much our local retail investors buying into our funds, but more the external investors from other regions and countries. “They are much more concerned by issues of politics and how things are run, and governance within state-owned entities in particular - how those are likely to affect growth. Asset allocators
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INDUSTRY FOCUS: FINANCE
Argon Asset Management CEO Dr Manas Bapela
will look into all of the macro-economic factors depending on the type of fund. If you can’t set the right culture and tone at the top, as the governing body or the boss, it doesn’t matter how good the operating executives you have are, things are likely to fall apart.” DIVERSITY IS KEY The vast majority of the wealth under Argon Asset Management’s control remains institutional, something which Bapela is keen to change. The company has amassed a broad product offering on both the retail and institutional sides, which it hopes will lure in a wider set of customers moving forward. “We would like to get the man on the street entrusting us with his assets,” Bapela says. “There are a lot
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of big players already in this space, but we believe that we differentiate ourselves from them due to our product performance and the processes around our portfolio construction. “These elements will continue to enable us to deliver great results in a sustainable manner. We believe in incremental value added, so that over time you can see that, on a cumulative basis, there is significant outperformance of benchmarks.” With this view to expanding the retail arm of what Argon Asset Management does, Bapela recognises the key role that independent financial advisors (IFAs) could play in accomplishing this goal. Their ability to offer advice to clients and recommend financial products from the whole of the
// WE REALLY APPRECIATE THE IMPORTANCE OF GOOD GOVERNANCE AND IT DICTATES EVERYTHING THAT WE DO // market makes them invaluable to Argon Asset Management’s bid for retail growth. “I am looking now at really focussing on the IFAs,” Bapela reveals. “I want to make sure that we use them to really grow the retail part of our business, because currently I feel that it is not really being pushed along as
ARGON ASSET MANAGEMENT
much as it could. Our products are performing very well, so we have obviously succeeded in optimising current performance; this should make it much easier for us to successfully relaunch this key strategy to our longterm planning.” SUCCESS AMID CHALLENGING CIRCUMSTANCES “Volatility has been high,” Bapela says of the market conditions over the last 12 months, “so it has been crucial to have strategies that allow one to harness it.” In the securities market, volatility is often associated with big swings in either direction. In most cases, the higher the volatility, the riskier the security. “Those Multi-Asset Class investments that don’t have exposure
to offshore investments, for example, struggled to beat their targets - inflation plus 4 or 5% - because the asset classes which those funds invest in really haven’t performed well. “The challenge comes then, when you start to try and find where the better returns are hiding.” This has long been a strength of Argon Asset Management - finding these hidden returns - and Bapela goes on to outline some of its star performers over recent months. “Take as a starting point our flexible income fund, which has done phenomenally well: it delivered more than 12% over a 12-month period to December 2018, a really good return relative to what any other asset class would have delivered. In fact, the fund averaged 12% per year over rolling three and five year periods to December 2018. “We are looking at rolling this one out to the retail platform, because it is one of the favourites among the advisers with whom we have been interacting. “Our Equities fund has also delivered terrific returns relative to its benchmark,” he continues. “Take the year to December 2018, for instance: an active return averaging 4% above the benchmark to our clients is a stellar outperformance. “Bond funds tend to be another tricky asset class, which has historically been a tough one to tempt prospective clients into, but again ours has outperformed the benchmark consistently by more than one percent over short and long periods to December 2018 and we have seen a rise in interest since the turn of the year for significant investment. “The strategies which we have put in place across all our products have really enabled our funds to stack up well among the best,” Bapela explains, “and any of them would be superb additions to the retail platform. Absolute return funds, equities and flexible income funds - these are the ones we will be going big with as we drive our retail strategy and our proven performance will be a huge enabler.”
POWER IN PEOPLE Behind all of this continued celebration as thoughts turn to the future will be assembling a peerlessly strong team. “One of the overarching objectives as we grow the team is focussing on the youngsters and giving them opportunities,” Bapela says of Argon Asset Management’s approach to this key area. “We envisage doing even more of this going forward. With us it is a threeyear programme during which we work on them, before they graduate. They may choose to move to other firms; we do not force them to stay here with us, but we really try to keep hold of the ones we think will succeed with us. “In addition to this graduate training programme we also work with University of the Western Cape students, right through their studies, an initiative that I helped to pioneer - we tutor them on a variety of subjects, give them exposure to our facilities and job-shadowing opportunities. The bulk of them are from previously-disadvantaged communities, so we also give them funding where needed. That idea of nurturing talent and educating the young has never left me.” In this respect as well, Argon Asset Management is bucking the trend in order to secure the very best people to take the business forward. “For us it is critical to ensure that we build a pool of talent for the country,” Bapela wraps up, “particularly those who would never have had these opportunities otherwise. “It is easy to go to big universities like a lot of established firms do and just select the cream of the crop, what we are saying is that kids who are often neglected, can also go on to be great portfolio managers, or investment analysts, or accountants. These are individuals we want to give opportunities to and more often than not, they go on to surprise us.”
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MAR CH 2019