A F E N A
C A P I T A L
FEATURE
The next
50 years “HAVE TO BE AFRICA’S”
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Afena Capital FEATURE
Black-led Afena Capital is an outstanding example of savvy asset management. And founder and CEO Tebogo Naledi tells South Africa Magazine that he wants to be judged on the merits of Afena’s philosophy, structure and track record. “The transformation element becomes something that’s important, but it’s kind of an overlay. At the end of the day all we are is an entrepreneurial business that is majority Black owned and managed.” By Colin Chinery
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n what seems a lightning six years, Cape Townbased specialist equity investors Afena Capital has soared from standing start to a R20 billion management portfolio with over 30 institutional clients and a Top 10 market growth rate. “In terms of asset growth we have done well, even relative to our peer group,” says CEO Tebogo Naledi. An owner-managed business operated by founders Tebogo Naledi and three partners, Afena focuses on the management of retirement fund assets and personal investment, predominantly in South African equities. And while the firm is proud of its Level Two Contributor to Black Economic Empowerment rating, its strategy is objectively results-focussed. “Our philosophy is very much around valuation-based investing in shares in which we have done detailed research, shares we believe to be under-valued looking at their profitability and performance through the cycle. “We invest across the market, there’s no size bias and we value companies on their sustainable earnings and through the cycle operating performance.” While the last two years have been challenging for stock pickers, Afena Capital’s investment returns generated for clients over the long-term have been competitive, says Naledi. www.southafricamag.com
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Afena Capital FEATURE
“And we take great pride in the fact that we have not lost a single client since inception – with the small exception of a R50 million incubator fund and this didn’t end for negative reasons. Our job is to look after the true interests of investors over the long-term.” Like its growth record, Afena’s origins are appealing, hatched by Tebogo Naledi in discussions with four colleagues at Investec where he was a fast-rising executive. “Our basic proposition was to build a quality fund management firm. We wanted it to deliver quality for clients and to be run professionally with integrity. We wanted it to have the best talent to be found in South Africa and whose demographics reflect the society we live in. In South Africa we have quite a painful history that has led to an economy and corporate landscape that is not demographically representative of the country.” Three of the four are now Afena Capital executives; Khulekani Dlamini, Head of Research, Khaya Gobodo, Portfolio Manager, and Andrew Joannou, Chief Investment Officer , part of a team that has grown to 16. “Foremost among the factors that have been consistent about Afena Capital is our really talented and passionate team of people.” Graduating from Cape Town University with a Bachelor of Business Science honours degree in Finance and Economics, Botswana-born Naledi, now 38, was uncertain of a career destination. He took a job in the corporate banking division of Standard Bank. Thank you but no 4
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thank you. “It was nice to experience what working life was all about, yet I wasn’t really stimulated. But I had been intrigued by my exposure to asset management.” He moved to asset managers Futuregrowth, rising to Business Development Manager - “it had a socially responsible investment focus that I found appealing” - and three years later moved to Investec. By the time he left there to start Afena he had become MD Africa Business and part of the Investec global executive. “It had been a great move. But I had been bitten by this entrepreneurial bug. I thought, ‘If guys like us aren’t going to do it, then who will?’” With relatively few Blacks in the senior
SBG Securities SBG Securities is a stock broking firm serving institutional investors, and is wholly owned by the Standard Bank Group. We offer Equities Sales, Sales Trading, and Equities Research. Our alignment with Standard Bank’s Equity Derivatives and Capital Markets businesses enables us to deliver an integrated offering to both domestic and international clients. Our research is focused particularly on economies, sectors and companies in sub-Saharan Africa and we have research teams based in South Africa, Turkey, Kenya, Nigeria, and the UK. Our equities platform consists of a dedicated team of 90 Equity Professionals based in Johannesburg, London, Lagos, Nairobi, Istanbul and New York. We support our client, Afena Capital, in their drive to exemplify African excellence.
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reaches of the asset management sector, it was and remains a good question. “Overall I think it’s a difficult industry in which to start up, establish and grow, and there are many examples of attempts that have not worked out - Black or White owned. If you look at the proportion of assets managed by Black-owned firms it’s a very small percentage - single digits. It’s still a major challenge. We need to see the emergence of more quality Blackowned firms, people like ourselves, and it involves a lot of training, mentoring, and providing a conducive environment. And as an industry we haven’t done enough of that.” Naledi enlarges on the theme. “If you look at corporate South Africa there’s no doubt that we need to transform. One way of approaching that transformation is to say you will allocate a proportion of your assets. Some firms have taken that approach, allocating say two per cent of their assets to Black managers where the criteria is around how Black is their shareholding, how Black is their team, and things like that. 6
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“We believe that transformation is essential. It’s critical and we are passionate about it. But the way you approach it is very important. An analogy I like to give is like the old Homeland kind of approach – find the lousiest parts of the country and say the Black people must live there. Well that’s not how you transform the industry. The big thing is to identify good quality Blackowned, Black-operated firms. We are not by the way subscribing to 100 percent Black ownership; our approach to transformation is that we want to represent the demographics of this country.
about afena capital Athena Capital offers financial advisory services. The firm provides private equity, mezzanine debt, and trade finance transaction advisory services. Additionally, it offers debt and equity finance raising services. The firm caters to the residential property sector. Athena Capital was founded in 2003 and is based in Cape Town. “We set out to build a sustainable legacy in the form of a quality investment management firm that grows client wealth and is truly representative of South Africa,” the company says. “This was the driving force behind the business when it started. We continue to be motivated by this vision. We believe that we are playing a valuable role in generating client wealth by providing a quality alternative in a market dominated by traditional investment management firms.”
Afena Capital FEATURE
“And we want to be judged on the merits of our philosophy, structure and track record. There should be no cutting a slice or pigeon-holing people in to that particular space. The transformation element becomes something that’s important, but it’s kind of an overlay. At the end of the day all we are is an entrepreneurial business that is majority Black owned and managed.” While skill shortages continue to be a major worry for South Africa’s business sector, overregulation and red tape emerge as the biggest constraint to business expansion according to the latest quarterly survey from Grant Thornton. Naledi is unpersuaded. “I agree
regulation is one of the areas where there has been an increase, particularly for startup businesses, and this has made it much more challenging. But for me skills are right at the top of what is needed to stimulate the economy, savings and growth. “The legacy of apartheid in terms of the damage done to the skills base is immense. And we are talking across a range from simple basic education to tertiary level, technical and artisan skills, to professional and entrepreneurial skills. There are great technicians and operators here, great entrepreneurs. But if you look at the demographics it is no way reflecting the country. There so many sections locked out of these opportunities. “And this is where potential exists for this country to truly become great. So in my view, without a doubt, focussing on education and skills – and involving not just academia or government but also industry - is vital. “Some argue that an injection of capital into the economy will stimulate growth. But a study I have just read shows that while it may, the beneficiaries will remain the current status quo. At the end of the day, if you want to spread the benefits as well, you need to ensure that you upskill people so they can participate in that growth. “A State of Emergency should be declared around our skills situation. Skills, skills, skills; that for me is top priority.” As a picker of long haul winners, Afena Capital is not into short term forecasting, but Naledi judges his market to be
We take great pride in the fact that we have not lost a single client since inception
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Afena Capital FEATURE
Maitland The Maitland/ Afena partnership is a mutual success story. We offered Afena our complete, scalable fund administration platform from its inception. This afforded the fledgling boutique the same platform integrity their prospective clients would have expected of some of the world’s largest fund managers. Afena was guided by our administration model and has seamlessly and successfully grown its assets on our platform. We provide front, middle and back office services giving them the comfort and freedom to focus on what they clearly do so well, which is manage funds. We believe in them and they believe in us. A true partnership. For more information on Maitland and our funds offering, visit www.maitlandgroup.com
“probably fair to maybe slightly over-valued. We are not concerned about major risk in terms of market collapse looking forward, but neither are we excited about a massive upside coming through. “Certain pockets of the resources space are looking reasonably attractive, particularly in things like precious metals and maybe oil. Financials too are looking relatively attractive in certain areas. Industrials as a sector are one area that’s had a long run and here we do find a lot more of the over-valued companies. Nothing too exciting out there.” 8
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Naledi says Afena sees itself as being “very much part of the new way of investing that will emerge in the future. We are a team of people who have been very disciplined, very dedicated, and who demographically, reflect our society. Our job is to look after the true interests of investors over the long term, and that does require patience, focus and dedication, qualities that as a firm we very strongly subscribe to.” And six years after its launch, Afena is looking to expand. “We do have medium to long term ambitions beyond South Africa, and there are many opportunities to add value and many opportunities for us to help in the development of skills and capital markets in the rest of the Continent. “I’ve been fortunate in being able to work in several countries outside South Africa, and Afena Capital can be a very very exciting part of the development of Africa. The next 50 years have to be Africa’s.” END
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