PREMIUM FREE TRIAL

Decade of underperformance: Liberty’s Stanlib eyes closing down some funds

JOHANNESBURG — News about Liberty-owned Stanlib looking to close down some of its equity funds will probably spark further debate about the relevance of money managers. Already, the likes of more passive investing tools like ETFs and players such as 10X have started to disrupt the investment world in South Africa, casting a spotlight on fees and performance. Over a decade, the Stanlib SA Equity Fund is ranked 54th out of 60. The company, though, is hoping that a focus on performance rather than fees as well as a rationalisation will help its prospects. – Gareth van Zyl

By Renee Bonorchis

(Bloomberg) — Stanlib, the South African money manager owned by Liberty Holdings, plans to close down some of its 19 equity funds to boost returns as part of a restructuring.

“We’re going to rationalize the product suite and are assessing which equity funds still have demand and relevance,” Herman van Velze, Johannesburg-based Stanlib’s head of equities, said on Monday. Some funds will close early 2018 and the range of mandates will be narrowed without any job losses, he said.

The fund closures follow an organizational revamp that started at the end of last year, which split the investment team into three franchises, consisting of absolute returns, equities and multi-assets, van Velze said. It also changed incentive structures to resemble those of boutique firms, which typically pay managers based on returns rather than just fees. The adjustments have resulted in an improved performance over the past three months, he said.

Liberty Chief Executive Officer David Munro has sought to stem sliding profit at the Johannesburg-based insurer since taking the helm at the end of May after the abrupt departure of Thabo Dloti. Munro has said his team is working with the leadership of Stanlib, which oversees 593 billion rand ($46 billion) in assets, to try and improve the performance of equity portfolio managers at South Africa’s sixth-largest money manager.

Liberty said in August that Stanlib’s South African earnings dropped 54 percent to 115 million rand in the first half as margins came under pressure, mainly because of weaker investment markets. The unit also took write downs related to the termination of an administration program it had outsourced and the start of new franchise businesses.

Betting on Naspers

One of its flagships, the Stanlib SA Equity Fund is ranked 155th out of 164 funds over 1 year and 54th out of 60 over a decade. The 1.9-billion rand fund, managed by van Velze, Theo Botha and Ndina Rabali, declined an annualized 3.4 percent over the 12 months to July, compared with the 4.7 percent increase in its benchmark, the FTSE/JSE Africa Shareholders Weighted All Share Index.

Stanlib is betting on media and technology company Naspers Ltd. to improve returns that have consistently underperformed peers and benchmarks.

The 165-member FTSE/JSE Africa All Share Index has climbed 11 percent this year, driven by Naspers, which has surged 43 percent. The Cape Town-based company’s $132 billion stake in Chinese media company Tencent Holdings Ltd. has helped the stock price increase six-fold over the past five years. Naspers makes up 10 percent of the Stanlib Multi-Manager All Stars Equity Fund of Funds, the only portfolio to have beaten its benchmark consistently.

“We were very underweight on Naspers, but it’s now 20 percent of the South African equity fund,” van Velze said. “We think Stanlib can pick up on the market’s momentum and is reasonably well positioned,” he said. Naspers has slumped 4 percent since reaching a record high on Aug. 24.

More Changes

While Stanlib’s equity funds are struggling, its bond funds are doing better, with the 24 billion-rand Stanlib Income Fund having beaten its benchmark since its inception in April 1987.

Liberty CEO David Munro

Munro, who became the third investment banker from Standard Bank Group Ltd. to take the top post at the insurer, said last month that some errors had been made at Stanlib. Standard Bank, Africa’s largest lender by assets, owns 54 percent of Liberty. Liberty has declined more than 6 percent this year, the biggest drop on the five-member FTSE/JSE Africa Life Assurance Index after MMI Holdings Ltd.

“Liberty and Standard Bank agree that the performance of Stanlib needs to be improved from both a profitability and a fund performance perspective,” said Warwick Bam, an analyst at Avior Capital Markets. “The issues with Stanlib are a combination of investment performance and operational inefficiencies. Our view is that additional changes will be made to Stanlib.”

For a deeper understanding of the world of money and greater financial control, upgrade to BizNews Premium.