Ninety One and Sanlam are teaming up in a move that will effectively end any rivalry the two firms have enjoyed over the past few years.
It’s an interesting, and potentially contentious move in the eyes of South Africa’s plodding competition authorities, given that Ninety One is the country’s largest fund manager by assets after the Public Investment Corporation, while Sanlam, the 106-year-old insurer, is the second biggest.
Essentially, Ninety One is buying Sanlam Investment Management for Sanlam to shift about R400bn of client funds to Ninety One to manage – while Ninety One ends up with preferential access to Sanlam’s mighty distribution network. In exchange, Sanlam will take a stake of about 12.3% in Ninety One. That means the transaction is nominally worth about R5bn.
“To some degree, having active management and multi-management in the same house is a little bit tricky, because they are two completely different offerings,” says Sanlam CEO Paul Hanratty. “With the one you’re saying, find the best fund manager, and with the other you’re putting forward what one manager believes is a good strategy – and roughly 30% of our assets are in single-manager solutions, which will now fall under Ninety One.”
You could puzzle over the fact that Sanlam will earn fewer fees from the move, given that about a third of its assets are now going to be managed by someone else. But because Sanlam ends up with shares in Ninety One, “from a cash flow perspective, the revenue from these assets would have resulted in dividends attributable to Sanlam”, says Hanratty. “Post the deal, Sanlam will still get dividends from Ninety One through its 12.3% shareholding.”
Still, it’s quite a step change from being competitors to collaborators. Yet Ninety One CEO Hendrik du Toit says that while the two have competed in active investment management for ages, as for the rest, Sanlam was always a client – just like Standard Bank, or Discovery. “So now we’ve decided it’s better to work together and let each of us specialise in what we’re really good at.”

‘Sensible co-operation’
But what happens to the team at Sanlam Investment Management? All the investment professionals will move across to work for Ninety One “so there won’t be any loss of jobs – we see this as positive for South Africa and the market”, says Hanratty.
Du Toit argues that active investor management needs to be practised “in an environment where people are absolutely dedicated to it and where they feel they are in control of their destiny and in an environment that does only that. If you mix it with too many options, it’s always easy to go to others and you won’t position your own brand and your own investment management in the way a dedicated firm does. There’s no takeover involved here – it’s a sensible co-operation.”
For Hanratty, “the investment culture of a firm is absolutely critical” in the asset management industry. “We don’t have the scale of research that Ninety One would have, and I think he [Du Toit] has kept a pure culture that our people are likely to thrive in. We’re betting that they’ll do better in that environment.”
Still, you imagine the competition authorities salivating over some injurious aspect of the deal, if only because they can. But neither Ninety One nor Sanlam seems to think the transaction will fail the Competition Commission’s often-unfathomable test.
“We are obviously going to do our very best to convince everyone that this is a sensible deal – not just for the country, but [for our] clients,” says Du Toit.
Hanratty reckons: “On purely competitive grounds I would imagine it’s hard to see any objection. You’ve also got to look at this through the lens of what is best for customers.”
Long-time market watcher David Shapiro, from Sasfin, says the deal’s “very interesting. It’s consolidation of the industry, which makes sense.”
The caveat, though is that “our market has become so small and there’s so much double counting – in other words you have a lot more funds and entry points than shares or opportunities on the market.”
Tempered optimism
As for Ninety One’s results, released on Wednesday, it’s hard to get that excited – ditto Coronation’s full-year numbers, which came out on Tuesday. In Ninety One’s case the salient figures (for the six months ended September) were that assets under management stayed essentially flat at £127.4bn, pre-tax profits fell 10% to £93.3m, the adjusted operating profit margin came to 30.5%, and the dividend of 5.4 pence was down 8% from 5.9p a share a year ago.
For Coronation, pre-tax profit was 26% higher for the year ended September – partly thanks to the reversal of last year’s provision against a tax charge that Coronation managed to have overturned in the courts. It also meant a much fatter dividend (228c a share, final) – Coronation having kept money back the year before to pay its tax bill. Assets under management were 11% up, to R667bn.
Ninety One says it’s seen inflows since September, thanks in part to a world of lower interest rates and improving markets, though Du Toit worries that it has to “temper” optimism around the government of national unity “because the world is still a very dangerous place”.
Most punters seem to have missed the rally in local bonds, “which were probably the best-performing asset class in the world until about three weeks ago”, says Du Toit.
Ultimately, though, markets just aren’t bullish enough to make a huge packet out of either Ninety One or Coronation, fears Shapiro.
“They do okay because you pay into a pension fund, you’ve got your forced savings industry. But you only make good money when you have a boom market and the value of your assets goes up beyond the inflows. So you’re making more money on which you charge higher fees – then they’re attractive.”
Coronation and Ninety One (and Allan Gray, and Sanlam, and …) need markets and economies to thrive. At the moment, in South Africa, says Shapiro, “all we’re doing is making money because we steal customers from someone else. The actual industry hasn’t really grown for a long time.”
In fact, on a pure share price performance basis – excluding dividends – neither is the stock you’d have wanted to buy over the past five years. While Coronation has surged 28.49% year-to-date, over five years it’s down 9.1%. Year-to-date Ninety One is up almost 11%, but over five years, it’s only appreciated 28.5% in value. And that’s nowhere close to the global market laggard over the past five years – the JSE – which, in comparison, is still up 49.8%.
The writer owns shares in Coronation, purchased in 2022, and is invested in Ninety One’s value fund
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