Stephen Cranston has been writing about South Africa’s financial world for years, earning recognition along the way with awards like the Citadel and Citigroup journalism prizes.
So it’s no surprise that his first book, The Mavericks, takes a closer look at the country’s biggest names in asset management.
In it, he digs into the stories behind Coronation, Ninety One and Allan Gray - firms that have shaped the industry and built their reputations on strong partnerships and long-standing relationships with asset consultants.
Cranston doesn’t just chart their rise; he also asks whether these giants can keep growing in a sluggish economy, and what the future might hold for local fund managers trying to break through.
At the heart of the book, he takes a look at the crucial concept of partnerships, a notable feature of the Big Three firms, and details that the key to their success can be traced back to the solid relationships that these companies have established with asset consultants.
“If there is one single explanation for the dominance of the CIA, or Big Three, it is the relationships that they built with the ‘consultants’. These are not the men in suits from McKinsey and Bain, but the powerful group of asset consultants who were, and remain, key gatekeepers for money management shops. The domination of the Big Three owes a lot to the trust and credibility that they built up with consultants, perhaps no one more than Ant Lester, whose business started as Old Mutual Actuaries and Consultants (OMAC) before splitting to become Fifth Quadrant and eventually,” he writes.
Looking back at these companies' backgrounds, he notes that Allan Gray's early days as a partnership established a standard for its business culture. However, Coronation has distinguished itself by sustaining this culture of collaboration even after going public in 2003.
Meanwhile, Ninety One, which was formerly a member of Investec, is changing its model to resemble successful collaborations by taking cues from Baillie Gifford and its own history.
“One common denominator between Coronation, Ninety One, and Allan Gray is that all three refer to the partnership concept. Allan Gray, in its early days as Allan Gray Investment Counsel, was a partnership. Coronation also likes to use the term, though it has been a listed company from day one, initially as part of the Coronation Holdings conglomerate and, from 2003, in its own right as Coronation Fund Managers,” the book reveals.
Cranston additionally takes into account what happened to the once-dominant Syfrets and BOE, whose fame faded in the late 1990s, as well as other independent fund managers like RMB Asset Management and African Harvest, who failed to achieve comparable success.
His study includes observations from seasoned professionals in the field, such as Delphine Govender and Peter Major, who draw attention to the difficulties the industry faces, particularly its growing complexity and the slowing down of its dynamic nature.
According to the book, Major asserts that from the late 1980s to the early 2000s, South Africa's financial markets had international acclaim, attributing this impression to the partnership model that was common among leading independent managers at the time.
Cranston further highlights the understanding of the dynamics between large players and independent managers, which he says illuminates the challenges and opportunities within South Africa's asset management industry.
He then also studies the current state of growth within the industry, noting that economic stagnation and rising unemployment could pose significant challenges for large asset management firms.
In his writing he warns, “But what about the future of the CIA themselves? All three are mature businesses in South Africa with negative net client cash flows every year. Unless economic growth recovers to at least 3% and unemployment falls, this is likely to continue. The CIA certainly has a great deal more potential internationally. Coronation is barely out of the starting gates, except in its Global Emerging Markets and Africa Frontiers strategy.”
He does, however, bring up an important issue about the lack of diversity and representation in the industry, suggesting that diversity should be defined more broadly than just demographics.
Cranston comes to the conclusion that building credibility and trust among asset consultants, some of whom have influenced the financial environment for decades, is another factor contributing to the Big Three's dominance.
Saturday Star