There is wide
demand for black-owned consulting groups from union funds, parastatals
and many medical aid groups. Sometimes the large institutions have
tried to exploit this market quite cynically by bringing in black
equity partners and giving predominantly white-run consulting
businesses names such as Lekana and Simeka.
Selekane Asset
Consultants is a very different business from these paper black
companies. All the senior staff members at Selekane are black. Old
Mutual has a 26% holding but no operational involvement and it has not
even referred any business to it. In fact as time goes on, Old Mutual
Actuaries & Consultants (OMAC) is competing more and more with
Selekane.
Selekane has had to get business the
old-fashioned way - by earning it. When they started the business in
2006, the three executive directors had already been in leading roles
in the industry.
Its clients on retainer have a total asset base of R22bn and its project clients have R110bn under management.
The firm had a breakthrough in July when the Mineworkers Provident Fund moved its asset consulting to it from Fifth Quadrant.
To
date it has had most success in the medical aid market with schemes
such as Bonitas, Hosmed, Moto and Sizwe. But it has corporate clients
such as Fairheads and Northam Platinum as well as the health workers'
union Nehawu.
CEO Mxolisi Mbekwa, after learning his craft
at OMAC, was a founder member of the two asset consultants that were
finalists in the Principal Officers' Association awards this year -
Fifth Quadrant and Riscura.
Mfisa Masina, after a stint at
Alexander Forbes Asset Consultants, became a portfolio manager at the
multimanager Symmetry. He is now Selekane's head of research. Lindi
Moabi, head of client services, after the classic training at Alexander
Forbes, was head of consulting services at both Brockhouse Cooper and
NBC.
One of Selekane's strengths is its independence from
product providers. Mbekwa says that its target market is funds that are
not convinced about the merits of the one-stop shop model and prefer
focus and specialisation from each of their service providers. It has a
much lower consultant:client ratio than the traditional firms.
Selekane
operates a clean business model with an all-inclusive fee structure. It
does not receive trading commissions or participate in soft dollar
arrangements. Moabi says it would change the nature of the business if
it started to charge performance fees. Selekane's goal is to provide
advice that will position a fund correctly for the next 20 years.
Performance fees lead to much shorter time horizons.
There
are no model portfolios at Selekane, which provides tailor-made
solutions for clients. There are seven different types of service that
Selekane offers. Some of its larger clients, such as the Transnet and
Eskom pension funds, have selected one or two items from the menu and
others all seven.
Selekane helps to develop investment
policy and a strategy that makes achieving these objectives most
likely. The investment policy statement is kept flexible and it
encourages trustees to make changes when necessary.
The
second key service is investment strategy formulation and portfolio
construction. It is critical that funds follow a strategy that is
appropriate to their liability profile.
Selekane partners
Stochastic Solutions for its asset liability modelling. This firm was
founded by James Maitland and it has been advising actuaries and major
pension funds since 1996. It analyses the asset mix and the liabilities
across a range of economic scenarios and helps clients choose the
appropriate strategic asset allocation.
Asset manager
selection might not be as important a source of returns as asset
allocation, but it is nonetheless a core activity of Selekane.
It
has a comprehensive database of investment managers for a wide range of
mandates and products. It uses several layers of quantitative and
qualitative screens to identify the managers most likely to perform
well.
Says Masina: "Too often trustees make decisions based on last year's pain."
For
global mandates, it partners SEI, the US-based multimanager. It does
not invest in SEI's packaged products, but uses the SEI platform to
tailor international strategies to SA clients. It also uses SEI's
global coverage and expertise to help it come up with distinctive
advice.
Selekane offers risk, performance and compliance
monitoring with more focus on actual risk than past performance. It
drills down to the assets that have been brought into the portfolio
rather than aggregate returns.
To ensure that the trustees
are trained enough to carry out their tasks, Selekane offers trustee
training. This takes in such key topics as the principles of investing,
risk management, investment strategy formulation and monitoring as well
as asset management and product selection.
It can also
provide member education, for funds offering individual member choice.
This helps members understand the implications of their fund selections
and the risks of the asset classes concerned.
Selekane
also has a transition monitoring service to ensure that when an
investment manager is replaced, the transfer to a new manager is
carried out in a cost-effective and timely manner.
The
firm is growing and recently recruited a senior consultant, Logan
Moodley, to join the team. Since winning the MWP business, the next
phase of growth has got well under way.
Mxolisi MbekwaMfisa Masina
