3 minute read
Transformation: Investing in the investment industry
MOHAMED MAYET, CEO and Portfolio Manager, Sentio Capital Management
Rating agencies have often singled out South Africa’s financial services sector as being both world-class and a leader in emerging markets, even ahead of some developed markets. Specifically, the asset management industry is highly regarded globally due to the calibre and technical excellence of its professionals. However, this ‘first-world financial infrastructure’ needs to be sustainable in order to ensure that this centre of excellence continues to compete at the highest level. What many critics of continued transformation in the sector forget, is that one of the defining features of a sophisticated financial infrastructure is that it is inclusive and diverse and that it drives the development and social agenda of a stable economy. So, when and how do we get there?
To understand the complex issue of transformation, we need to understand that it is not a static concept, it is continuously evolving. Moreover, we need to define what transformation means in simple terms (not in complex scores that are easily gamed), and what longer-term transformation means – it has to be more than just a ‘seat at the table’. The evolution of transformation in the industry should not only reflect broader society’s demographics, but also remove the ‘friction costs’ for previously disadvantaged people (especially Africans). These friction costs are the reason why 27four’s BEE. economics 2020 survey highlights that only 9% of the SA savings and investment pool is managed by black managers and, of this, 90% is sourced from large institutional investors. Dig deeper and you will find the stats show even more concentration in the savings pool being managed by a select few.
Sentio believes that the best way to transform the asset management industry is to transform the entire value chain. It’s not enough just asking clients or institutions to invest with black managers, nor is it adequate to just populate the industry with black professionals. To achieve this, the following needs to happen:
1. We need to make it easier for smaller firms (who happen to be black managers) to compete without putting the end-client at risk in any way. With technology, and the kind of services available nowadays, this can be easily achieved with better compliance and oversight too.
2. We all need to focus on growing the talent pool in the industry in an unselfish way, recognising that we might not necessarily retain the apprentices we train but that this is an investment in the industry. At Sentio, we take this very seriously and have developed an in-house academy that goes beyond mere internships but rather seeks to find the smartest talent and make them ‘corporate ready’.
3. We need to proactively contribute to the society we operate in through assisting vulnerable groups directly. Sentio works with two women’s groups that, among other things, operate on the ground to provide the unemployed and destitute educational-based support, feeding schemes, as well as medical and frail care. These communities will produce our future leaders and customers and we need to change our thinking about them.
4. And finally, we need to look at the financial products we sell and their relevance to the broader market. Have we evolved with the market needs or are we still ‘pushing’ our products onto the public? Sentio has an astute product development team that is able to work with our clients to produce innovative solutions for them, utilising our unique AI and machine-learning capabilities.
In our view, transformation is not just a tick-box exercise nor a hurdle but rather an economic opportunity for the sector to show its leadership, and we are comfortable and committed to playing our part.
