When it comes to sustainable outcomes for retirement savings, asset management is considered one of the most influential industries. It is these organisations that direct how and where retirement funds such as pension schemes are invested, to generate returns on behalf of a client. They strive to get this right because they understand that retirement investments are one of the most significant assets an individual will have once their working life comes to an end and, as a result, opportunities are constantly being sought to deliver better outcomes at lower costs.
South Africa’s asset management sector has seen strong returns in recent years but this is unlikely to continue as Old Mutual Investment Group MD Khaya Gobodo points out. ‘South African investors have been richly rewarded by better-than-average returns as a result of a combination of domestic political change, structurally lower inflation, synchronised global growth and a powerful equity bull market,’ he says. But that’s all about to change.
‘We are currently at an interesting and challenging point for the asset management industry,’ says Gobodo, explaining that with the expectation of lower returns setting in, and an increased focus on costs, there has been a shift towards passive strategies. ‘However, we expect such passive management trends to slow down in coming years, given that in a low nominal return environment, a portfolio’s measure of risk when compared to the market becomes more valuable; and therein exist increasing risks that will require active management of portfolios in order to protect capital.’
These are the times when a leadership track record – such as the one Old Mutual Investment Group has – counts. Its investors comprise a full cross-section of South African society, inclusive of large and small institutional investors, retirement funds, trusts of various kinds and end investors through its extensive unit trust offering. It also engages directly with representatives, including asset consultant brokers and independent financial advisers.
With ZAR636 billion in assets under management, not only is it the market leader in innovative fixed income and credit, it’s also the largest investment manager in the country, offering a full and unique spectrum of capabilities, strategies and solutions across asset classes under one banner.
‘No other asset manager can offer such a broad range, be that infrastructure, equity, private equity, and domestic and international multi-asset solutions, specialist equity, passive or structured investments. We create solutions for clients on a scale that no other asset manager can match and therefore have an incredibly valuable offering that we need to structure and deliver in ways that create even more value for our clients,’ says Gobodo.
One of the ways it does this is by integrating environmental, social and governance (ESG) principles into its investment decisions to provide clients with appropriate risk-adjusted returns through investments that drive a more sustainable economy. One such example, the Old Mutual Responsible Investment Fund, which tracks the MSCI ESG Indexes, is the first of its kind in South Africa. ‘This [index] fund has a slant towards companies with strong sustainability profiles,’ he says.
The impact of an investment such as this is felt across the economy because as allocators of capital, Old Mutual Investment Group can deploy funds productively into the economy in ways that can build resilience in society and the environment. ‘There is an enormous opportunity for our industry to be more creative in how we deploy capital, to play a meaningful role in South Africa – to create a more sustainable economy,’ says Gobodo.
‘When it comes to the deployment of capital, from our perspective it is not just about responsible investing in listed markets but also in the kind of unlisted assets that we invest in – such as infrastructure and clean energy, that make an impact on not only the economy but the population directly.’
The industry, however, is not without its challenges. For example, there has been an increase in the cost of regulation. ‘This will ultimately impact the cost of delivering an outcome to end clients,’ he says.
‘Transformation is also not where it should be. Considering our country’s history, this is an important challenge and one that we need to step up to – it’s what our clients expect and it’s the right thing to do. Patience is running thin on the issue, so we, as the industry, need to proactively participate in the conversation and demonstrate progress.’
Gobodo has much optimism for the industry, and his hope is that, together, everyone can create something truly special. ‘I’d like to leave a legacy that can look after itself. As an industry leader, Old Mutual Investment Group has a responsibility to its clients to ensure that when they retire, the world is a safer, better governed and a more environmentally sound place.’
