Consolidation, integration and technology distinguish STANLIB/JPMAM partnership

The strategic investment partnership formed between STANLIB Asset Management and J.P. Morgan Asset Management (JPMAM) almost three years ago embodies the prominent themes in global asset management today: consolidation, innovation and deployment of advanced technology.

Claude Kurzo, JPMAM’s Country Head for the UK and Head of Financial Intermediaries in Middle East and Africa, said in the midst of these trends, there are opportunities for wealth managers and the asset managers with the necessary scale to invest in innovation and technology to gain market share.

“The winners are those that are very focused, on either an asset class or a region,” he said. “JPMAM is the fifth largest asset manager in the world and third largest in active capability, while STANLIB is the largest fixed income manager in SA and the largest manager of domestic assets. This partnership brings together those two winners in the industry.”

Derrick Msibi, CEO of STANLIB Asset Management, said the objective of the partnership was not transactional but strategic: to provide a competitive solution for clients wishing to invest offshore. It brings together JPMAM’s global reach with STANLIB’s depth of knowledge of sub-Saharan Africa.

Kurzo said strategic partnerships are accelerating across the asset management industry and there had been a surprising amount of product innovation and new technology development in a traditionally conservative industry. Technology has become immensely important to provide better data and insights for portfolio managers.

The shortage of talent in this industry is another theme driving consolidation and innovation, Msibi added. In the past the asset management industry had a pipeline of professionals coming through the ranks but they have become more globally mobile.

Kurzo said alpha was one of the most important deliverables for asset managers. JPMAM is an active asset manager only and constantly searches for ways to improve performance. It has more than 360  research analysts in about 13 different locations and invests about$420 million a year in research. As a result, 87% of its strategies deliver above peer median performance.

Instruments such as alternatives, which were previously limited to institutional clients, are being developed to become accessible to retail clients, Kurzo said. One of the alternative themes is infrastructure. JPMAM has, for example, an institutional infrastructure strategy, from which it has created a feeder fund that can be accessed by retail clients.

Another area where JPMAM sees opportunity for innovation is in active ETFs, which are currently about 6% of the global market, but last year attracted about 25% of global flows. After active ETFs, the next wave of innovation is likely to be in separately-managed accounts (SMAs). SMAs are managed like a fund but they allow the individual investor to choose or exclude certain sectors (e.g. exclude nuclear). JPMAM recently bought a company called 55 IP in the US which provides the technology for customisation.

Kurzo said although a lot of the initial hype around Environmental, Social and Governance (ESG) investment has ebbed over the past two years, asset managers have become more alert to the material financial risks in poor ESG practices. Climate change has a big impact on the companies in the portfolios, and has to be considered when investment decisions are made.

Msibi said SA had been more progressive than many other parts of the world in adopting several aspects of ESG investing, with less political involvement. South African asset managers have a good understanding of ESG risks and integrating ESG considerations into investment decisions. However, there was still a long path ahead, and the social goals of ESG are still difficult to achieve in SA.