Laura du Preez | 04 April 2025
Laura du Preez has been writing about personal finance topics for more than 20 years, including eight years as personal finance editor for two leading media houses.
You may in future be investing in a more personalised risk-managed portfolio accessed directly from a stock exchange. You will probably also enjoy greater exposure to foreign markets and unlisted equity and debt.
At a recent Actuarial Society of South Africa Investments Seminar the chief executive officers of four asset managers and an expert in listed products revealed how the local investment industry is evolving and what it means for your portfolios and future returns.
Larger managers are enhancing their foreign and private market expertise to improve investors’ exposure to offshore and unlisted investments. They said the increase in offshore allocation to 45 percent of portfolios under regulation 28 under the Pension Funds Act has given them a global focus.
Meanwhile, listed product expert Roland Rousseau suggested that traditional unit trust or mutual funds and investment platforms are rapidly losing investors globally to portfolios listed as actively managed exchange traded funds and actively managed certificates on stock exchanges.
Managers also said investors should expect artificial intelligence (AI) to improve the cost and efficiency of investing, while Rousseau said the use of AI to construct customised risk-managed portfolios from new listed products would upset traditional fund management.
Here are the trends that you should expect to influence your investments in future:
All four investment company CEOs who addressed the seminar agreed that the increase in offshore allocations to 45 percent of the portfolios that comply with regulation 28 of the Pension Funds Act was significantly changing the local investment industry.
Carl Roothman, chief executive of Sanlam Investments, said the change led to the deal between Ninety One and Sanlam Investment Management (SIM) that proposes Ninety One take over the management of SIM’s R400 billion’s worth of actively managed local and offshore portfolios.
Roothman said SIM realised that despite established local and UK-based management teams, its active asset management was not as strong and competitive as it wanted it to be. An advisory firm identified Ninety One as a good partner with a strong performance track record to take over the active management.
Ann Leepile, chief executive officer of M&G Investments South Africa which is part of M&G plc, one of Europe’s largest active investment managers, said being with a large offshore manager provides access to research and capabilities that the South African business could not afford on its local profit margins.
The increase in offshore allocations had forced all local managers to create more global businesses that attract clients in other parts of the world instead of only focussing on the shrinking savings pool in South Africa, she said.
Product providers are focussing more on how they diversify into different asset classes and combine these for investors. Roothman says offshore allocations are no longer just providing some diversification from emerging markets – now the larger allocations make portfolio construction more important.
In addition, Sanlam has recognised the need to integrate passive investments and alternative investments into portfolios and has developed expertise and scale in these areas, Roothman said.
Thabo Khojane, managing director of Ninety One SA, says fees for active management have come down and will continue to reduce. Artificial intelligence (AI) is a game changer and estimates suggest it may save 15 percent of investment costs if deployed correctly not only in investment management, but in managers’ sales, client services and operational costs.
In the face of cost pressure, Khojane said asset managers have three ways to respond:
Khojane said Ninety One has chosen to remain an active manager and to introduce private market investments for its investors, while Sanlam has chosen to do both.
Roothman said Sanlam is seeding infrastructure and climate change projects using its insurance business’s investments that have long investment terms as private equity investments are typically illiquid and long-term. These investments can generate good returns of 20 to 25 percent a year, he said.
Ockert Doyer, head of credit at Sanlam, explained how Sanlam is also actively creating private credit assets by setting up non-bank loans that are not traded publicly.
He says private credit is more liquid than other private markets and offers greater diversification into, for example, agribusiness, small and medium enterprises and infrastructure. In addition, the yields are two to four percentage points higher than that of listed corporate bonds, he said.
Delphine Govender, chief executive officer of boutique manager Perpetua Investment Managers, said Perpetua is a focussed active manager that uses its small size to focus on delivering market-beating returns from shares beyond the top 25 shares.
Govender said local managers with large capital bases are confined to investing in 25 shares on the JSE that represent 75 percent of the FTSE/JSE All Share Index. The threat they face is that passive and rules-based investment providers can provide market returns or beta at low cost. A smaller manager like Perpetua, can, however, provide market-beating returns by investing in other smaller shares on the market, she said.
Perpetua also manages a global equity portfolio from South Africa. The fund is also attracting overseas investors because of Perpetua’s unique investment capabilities, Govender said. Perpetua uses its emerging market experience and understanding of markets that are largely cyclical, that have commodity cycles, young consumers and large multi-nationals and local companies to choose shares and other securities in global markets, she said.
Artificial intelligence (AI) has also helped small managers compete with larger managers as it helps the investment team to process massive amounts of data and generate better insights, she said.
Rousseau says internationally and on the JSE locally, the fastest growth in funds is in listed actively managed ETFs that can be bought through a trading platform. Investing this way eliminates the need for an investment platform and associated fees and enables fund managers to 
sell their products to anyone – not just to list them on platforms and sell through advisers or funds of funds, he said.
Actively managed ETFs also allow anyone from a financial adviser, a wealth management business, to a boutique or traditional manager to create new investments that can have 100 percent exposure to offshore markets, Rousseau said.
Already 26 actively managed exchanged traded funds and 60 actively managed certificates have been listed on the JSE, he said. Some of these ETFs and certificates have been listed by traditional unit trust managers.
Rousseau told the conference he believes AI tools will in future construct portfolios to manage investment risk. Currently managers use past returns to determine their allocation to different asset classes and aim to deliver returns above a benchmark. But 
many managers fail to beat their benchmarks consistently leaving investors questioning their performance, he said.
AI, however, can be used to construct customised balanced funds with mandates aligned to the risk investors want to take throughout their investment journey, Rousseau said.
Reducing risk in a portfolio and compounding the more stable returns over time is a proven investment strategy, Rousseau say. The world’s largest investment company BlackRock has developed a sophisticated risk management tool known as Aladdin and other large global investment companies including JP Morgan and Goldman Sachs are working on similar tools, he says.
The Aladdin technology is being used by one local discretionary fund manager.
AI-enabled advice will allow investors, and their advisers or managers, to view the risks their portfolio faces and offer them the option to take the investment risk, rebalance or hedge, he said. Specific mandates, such as, “don't ever lose me more than five percent of my fund value in any 12 months” or “track the market with 12 percent less volatility”, can be achieved, he added.
