Ola Leepile | March 18, 2025
For financial services companies, ticking to achieve top-based Black Economic Empowerment (BBBEE) status is not the same as genuine transformation.
This is especially true in the asset management industry, where businesses lack the advancement of black professionals.
There is one way to address this issue.
Sitting between the pension fund's trillion rand custodians and those responsible for managing these assets is the capital allocation gatekeeper, asset consultants.
Asset consultants provide investment advice to institutional investors, such as retirement funds, including screening, selection and recommendations for asset managers.
Their role is to research the market, evaluate the best asset managers, and present the finalists to the trustees. The trustee decides who will oversee the members' savings.
These asset consultants should do the above while taking into account the importance of true transformation.
However, for most financial services companies, transformation remains a major challenge.
Last year, asset managers missed all their employment equity targets in 2022, according to a report released by the South African Association for Savings Investment (ASISA).
Black managers accounted for 41% of senior positions in 2022, but when it broke, Black Africans only made up 13% against the 52% target.
In middle managers, they accounted for 18% of the total, with a small excluding the 65% target.
Overall black women in black African and junior roles fell.
Within this context, responsible asset consultants should present to the trustee at least two or three viable options (often encountered among Novare competitors) rather than one pre-determined choice.
Councillors should be comfortable ensuring that the consultant has implemented a strict due diligence process.
In addition to promoting manager choice, asset consultants should guide the trustees in asking appropriate questions and making informed decisions.
Although ultimately accountability lies with the trustee, asset consultants must ensure that they provide their clients with the knowledge they need to make sound investment choices.
Transform Prioritization
Transformation in the asset management industry is often stripped of it unless it is explicitly included in the fund's mission.
While performance should be non-negotiable for retirement funds, trustees should consider how investment decisions can drive wider economic change.
Of course, risk and returns remain the most important. After all, this is pension money.
However, once these criteria are met, the transformations must be integrated as a core component of the Asset Manager selection process.
Asset consultants and multi-managers are set up on their own to influence this shift.
The consultant will make recommendations, but multi-managers who operate in discretionary obligations will make allocation decisions by determining which money managers funds flow.
These companies are unlikely to secure delegation without asset consultants putting transformed managers in front of the trustees.
How Novare approaches conversions
At Novare, when mounted on institutional clients, our first step is to review the fund's investment strategy and assess its suitability.
This includes analyzing the fund's demographics, helping the trustee set goals, and quantifying each goal using specific goals.
From there, you will develop an asset allocation strategy and inform asset manager selection.
The valuation criteria honed through years of asset consulting and multi-management experience prioritize risk-adjusted performance.
However, we go further by integrating the transformation as another consideration.
By the time we present recommendations to our clients, we ensure that selected asset managers meet both traditional investment standards and meaningful transformation benchmarks.
If a client prioritizes transformations or actively drives the agenda, it is integrated into the screening and selection process, and additional rating layers are applied to identify truly transformed managers.
Change is not just ownership. It also assesses the company's commitment to diversity in management teams, gender representation, and developing young professionals.
Pension funds legitimately prioritize risk-adjusted returns, but there is a false misconception that transformation and performance are mutually exclusive.
Diverse investment teams bring about a broader perspective, strengthen decision-making, reduce cognitive bias, and ultimately lead to better long-term outcomes.
Plus, it's important to remember that outperformance over the course of a year is not trending.
Asset consultants should not view change as an add-on, but as a key component of a balanced investment strategy.
By systematically including transformed managers in the selection process, consultants help trustees access a broader talent pool while maintaining high performance standards.
The role of a consultant is to challenge outdated assumptions and ensure that the best managers are given a fair opportunity to compete.
Novare – Transformed Asset Consultant
To promote change so that asset consultants can trust, they must first embody the changes they advocate.
A consultant who remains unchanged cannot trust clients on diversity and inclusion, failing to internally reflect these principles.
We take the internal transformation of the industry and it very seriously.
Recently, Novare was awarded the 2024 awards Black Securities and Investment Professionals Association of Black Securities and Investment Professionals (Absip) Best Multi-Manager or Asset Consultant.
The award recognized the arrival of Novare to sub-Saharan Africa, the richness of decision-making and experience, and the technology that supports these outcomes.
In valuing the entries, Absip looked at how Novare is investing in its unique ability to benefit others, and the percentage of funds we allocate to black managers.
The reality is that if asset consultants and multi-managers support the status quo, the rest of the industry remains the same, so we are proud of this achievement.
To ensure we are investing in the future of our nation with our pension fund members, we all need to speak by selecting and recommending performance managers that are transformative promotion.
However, asset consultants hold the key to the broader industry.
They are the bridge between pension fund capital and the future of South Africa's asset management industry.
By integrating transformation into the selection process, they have the power to reconstruct the landscape of industry leadership.
The question is whether they step up or strengthen the status quo or strengthen.
“Disclaimer – the views and opinions expressed in this article are the views of the author and are not necessarily those of the Bee Room.”
