The amount of thought and research that goes into picking which stocks to buy should be applied equally to which fund managers handle your investments.
Differentiating good managers from the bad is not an easy task and is becoming increasingly onerous when done rigorously and more collective investment schemes are launched every year, says Albert Louw, head of business development at STANLIB Multi-Manager.
For example, about 400 companies are listed on the JSE, but there are thousands of unit trusts to choose from. While advisers are comfortable with outsourcing the stock selection to an asset manager and recognise their skill in financial needs analysis, they sometimes fail to appreciate the specialist nature of manager research, Louw says.
STANLIB Multi-Manager believes the fundamental understanding of fund managers is key, and this is where its value proposition lies.
In addition to this, regulatory changes in the sector aimed at creating a transparent and fair landscape for the consumer, will likely see the model that STANLIB Multi-Manager embraces become more popular with advisers.
This is because they are increasingly looking for ways to mitigate their advice risk by outsourcing more investment decisions.
STANLIB Multi-Manager offers investors access to different asset classes and strategies, including passive and alternative investments, while selecting the best external fund managers on behalf of investors.
Customised solutions
De Wet van der Spuy, managing director of STANLIB Multi-Manager, says that historically multi-managers have been viewed as generating an extra layer of cost, which due to its scale is not at all the case for STANLIB Multi-Manager solutions.
He also makes a point of clarifying that, instead of being a traditional multi-manager, STANLIB Multi-Manager is a more “holistic solution provider” offering customised solutions for clients.
“We are an end-to-end solution business that offers portfolio construction and research that informs you who the best managers for your investment are,” he says. “You come to us as we offer a full range of expertise.”
STANLIB Multi-Manager was established in 1999 and, according to Van der Spuy, it has built up an excellent performance track record since then.
“Close to 80% of our funds have outperformed our peers over the past 10 years,” he says. But at the end of the day, comparing yourself against competitors is one thing, but meeting the customer’s expectations is the top priority.
It currently has R180bn of assets under management and advisory, R30bn of which is invested offshore via STANLIB Multi-Manager’s London office.
“Our solutions consistently meet investor expectations,” he says.
Key factors that contributed to their success include identifying which signs in the market are important and which are just noise, as well as understanding investor needs or industry trends, believes Van der Spuy.
“We are a client-centric business,” he adds. “We spend a significant amount of time upfront with clients to make sure they understand what they are investing in.”
Alternative investments
STANLIB Multi-Manager employs a team of 15 investment professionals and leverages a further 85 global investment professionals from its relationship with BNP Paribas.
Van der Spuy describes his team as “unrivalled” in the country and says with the scale and reach of STANLIB Multi-Manager, they are able to offer access to unique fund managers and investment solutions at very competitive rates.
As part of its value proposition, STANLIB Multi-Manager offers research insight into fund managers on three levels.
The first, fundamental research, looks at the quality of the team and the process it uses to deliver on its investment philosophy.
The second, quantitative research, is used to validate the manager’s style and track record through detailed return and holdings-based analysis.
The third, operational due diligence, ensures that minimum quality operational and governance processes are in place.
Another aspect of STANLIB Multi-Manager’s value proposition is its focus on alternative assets, such as private equity, unlisted property, infrastructure, hedge funds and unlisted credit.
Van der Spuy says there is high demand for these types of investments, but they come with a lot of challenges around liquidity, diversification, complexity and minimum asset size.
STANLIB Multi-Manager plans to start offering a unit trust product that focuses on alternative assets within the coming months. “It is unique and will be a first in South Africa,” he says.
Regulatory changes
The planned roll-out of the new Retail Distribution Review (RDR) regulations is expected to start being implemented in the second half of 2018.
This will force the advisory market to become more professional and place emphasis on the fair treatment of customers, Louw explains.
Under the new regulatory regime, advisers won’t be able to charge commission, but will rather earn an ongoing advisory fee.
Advisers will need to justify to the customer what advice they are paying for, Van der Spuy explains.
“Advisers will have to demonstrate added value to their client, forcing many to adapt by re-evaluating their business models,” he says. “Our proposition allows the adviser to focus on financial needs analysis which is their value proposition, and outsource the onerous manager research and selection to specialist providers.”
This, Van der Spuy argues, is in line with the shift to goals-based solutions in the industry over the past 10 years.
“It’s important to help clients understand their goals and to think through possible solutions to reach their goals,” he says. “Our job is to build these solutions.”
This article originally appeared in the 1 February edition of finweek. Buy and download the magazine here.