Alexforbes taking on investment titans

Alexforbes has ambitious plans to take on South Africa’s largest asset managers through its new discretionary fund management offering. 

The 90-year-old financial services firm has been reinventing itself in the past few years, selling off its life insurance business to Sanlam and acquiring OUTvest from OUTsurance. 

“We set out to transform our business, and I am pleased with our disciplined execution, consistent delivery over time, capacity building and progress towards our ambition as a group,” CEO Dawie de Villiers said. 

A key part of this strategy is the company’s entrance into the discretionary fund market, long dominated by Ninety One, Allan Gray, Coronation, and insurers such as Sanlam and Old Mutual. 

Discretionary investment management refers to investment management in which a portfolio manager makes buy-and-sell decisions on behalf of clients. 

The term “discretionary” refers to the fact that investment decisions are made at the portfolio manager’s discretion. 

In April, Alexforbes launched its offering, Investment Solutions by Alexforbes, to take on these giants and leverage its distribution and advisory network to grow its asset management business. 

Its latest interim results, released in December, reveal that its network has over 1.5 million members, so it could cross-sell discretionary fund management products. The company also has R568 billion in total assets as of the end of September.

The company said this would create a new unit within Alexforbes, separate from the existing investments multi-manager and internal adviser business. 

Asset management is an extremely attractive business for financial institutions, promising stable returns with relatively little capital investment. 

“We’ve chosen to reimagine the Investment Solutions brand for our DFM as it’s the best descriptor of what it offers – investment solutions backed up by the scale, experience and expertise of Alexforbes,” De Villiers explained. 

Alexforbes said it is entering this market following the strong growth of DFMs in South Africa, which now manage well over R500 billion in investments.

The new platform will give independent financial advisors access to the same advice and capabilities used by South African investment consultants, corporations and retirement funds through Alexforbes’ existing platforms. 

This includes research processes, offshore solutions facilitated through the company’s partnership with Mercer, new asset classes through our private markets programme, and specialised multi-managed investment portfolios. 

Some of the new asset classes include hedge funds, private markets, and infrastructure investments. 

In its latest interim results, Alexforbes gave an update on the strategy to transform its retail business through its discretionary fund management offering. 

“Our campaign to position Alexander Forbes Investments as an investment destination for clients launched in this period. Alongside these and other activities, we intend to win a greater share of assets from clients across institutional and retail segments,” the company said. 

This has been led by the company’s entrance into the discretionary fund management business with the launch of Investment Solutions by Alexforbes. 

The launch of this business has been coupled with an increased focus on its independent financial adviser team and the integration of Alexforbes Invest into its advice process. 

“We have maintained our ability to attract advisers into our business and are actively seeking acquisition opportunities to grow our network of advice partners,” it said. 

Alexforbes previously said it plans to double its retail business over the next five years by capitalising on a new, slimmed-down structure and consulting expertise. 

“The growth area for us is to double our retail business in three to five years,” De Villiers told Bloomberg. 

The asset manager and fund administrator, backed by South African billionaire Patrice Motsepe, wants to take advantage of legislative changes allowing pension fund administrators to communicate and advise members directly. 

Previously, they remained in the back office with access limited to human resource departments, not members.

“That is the massive opportunity,” De Villiers said, adding that the changes could bolster growth in its retail base. 

“We have solutions that our clients have invested in throughout their savings life, and now they can continue in those solutions with us post-retirement.”

Earlier this year, Alexforbes bought the OUTvest digital investments platform from OUTsurance to form a crucial part of its discretionary fund management business. 

OUTvest is a digital investments platform launched in 2017 that connects people to financial advice and investments to help them achieve their financial goals.

Alexforbes has also sold its short-term insurance business to Momentum Metropolitan and disposed of its life insurance unit to refocus on consulting and advisory.

The company used those proceeds to acquire Sanlam’s retirement fund administration business for R154 million in 2021, expected to boost client numbers by 40%. 

According to de Villiers, the Sanlam deal will add as many as 400,000 new members to the firm.

“The strategy around acquisitions is to build scale on administration — the more members you have under administration, the more overheads it covers and the more scale and synergy benefits you get,” De Villiers said.