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					Slow Progress

Financial Mail

10 October 2008

By Stephen Cranston

Many blacks hold senior jobs but developments at black boutiques are sluggish.

The past year has proved to be a year of consolidation in the fund management industry's long road of

It was a year with few notable moves. One of the most important was around the time that the FM published
the feature a year ago - the move of Romeo Makhubela from Stanlib to take over as chief investment officer
(CIO) of Metropolitan Asset Managers (MetAM). Soon after that Craig Whittle left the Old Mutual Investment
Group (OMIGSA) value boutique to join Makhubela's equity team, to run small-cap funds and other portfolios.
And more recently Ameer Amod moved to MetAM from Futuregrowth to beef up its quantitative management

Metropolitan already had Rejane Woodroffe on board. She is by far the most prominent black fund manager
of international assets. She regularly appears in surveys such as "the young South Africans you have to take
to lunch" and she was a rated economic analyst at Merrill Lynch (remember them?)

She has stayed loyal to Metropolitan partly because it has accommodated her unusual lifestyle, which
includes spending two weeks a month at her husband's guest lodge in the Transkei.

Some moves have been out of the industry. Imtiaz Ahmed, the chief investment officer (SA) at Investment
Solutions, left to join stockbrokers Macquarie First South as chief investment officer - though he might soon
be bringing Macquarie buy-side products onto the market.

John Oliphant, the head of quants at Stanlib has moved to become head of actuarial and investments at the
Government Employees Pension Fund (GEPF) - making him a kind of glorified internal consultant. This has
intriguing implications in the power struggle between the GEPF and its asset manager, the Public Investment
Corp (PIC). It allows the GEPF to do more asset management in-house if it wants.

Stanlib has a great depth of black (and other) talent and the quants team will now be run by Teboho Tsoletsi
and Bonolo Zwane under the watchful eye of chief investment officer Patrick Mamathuba. Ashraf Mohamed
has taken Makhubela's place in the Stanlib Multi Asset team.

Patrick Ntshalintshali left Old Mutual, where he was cohead of Core Equity, to join Circle Capital, a private
equity firm spearheaded by former UCT vice-chancellor Mamphela Ramphele.
With markets being so volatile, private equity, where you do not have to worry about quarterly performance,
looks like a refuge. Others have looked for a time-out in their careers, such as Kelebogile Moloko, who left

Another top industry job went into black hands when Hugo Nelson took over the CEO's chair at Coronation
from Thys du Toit.

Nelson, a medical doctor who won awards as manager of the Coronation Resources and Top 20 funds, had
been earmarked for the position since February 2007. It is certainly an important measure of progress that in
the 11 managers that make up the Large Manager Watch (LMW), seven now have either a black CE or chief
investment officer.

The largest manager, Old Mutual Investment Group, has Thabo Dloti as CEO; Sanlam Investment
Management's CEO is Armien Tyer; Mamathuba rose to become Stanlib CIO from being a personal assistant
to then CIO Sidney Place, not an easy boss.

At Investec, Thabo Khojane now has more than a year as CEO, though the Black Management Forum would
be disappointed to see that John Green has maintained what looks like an oversight role as head of Investec
Pan Africa.

Oasis is the only LMW to have been black controlled and managed since inception. Adam Ebrahim, who was
the first black portfolio manager at Allan Gray, has been the dominant influence on the investment process
and he is now CEO, with brother Shaheen running the business as chairman.

Tyer says to build the next sustainable generation of black fund managers it is important to build up talent
from scratch.

"We are very proud of the people who have joined us at the beginning of their careers and who are now
among the best analysts in their sector, such as resources analyst Shoaib Vayej, construction analyst Michael
Canterbury and Munaar Khan in small caps.

"We have also been prepared to increase the responsibility of the people who we hire such as Natasha
Narsingh and Nigel Sulaiman, who joined us from Metropolitan where they were resources analysts. Natasha
now runs balanced and equity funds, Nigel is a key member of the team that runs the Sanlam Life money."

Patrice Rassou, a Mauritian who is an award winning manager of the Old Mutual Mining Fund, has evolved
into a key member of the equity team's model portfolio group.

Old Mutual is also maintaining a pipeline of black managers. Under Dloti, one of the handful of executives at
the corporate centre is Derrick Msibi, who ran private investments such as private equity and infrastructure
funds before becoming director for sales & marketing. If you talk to him it is clear that private equity remains
his passion, but he is also ambitious and keen to get well-rounded management experience.

"I get a bird's eye view of the business from here," he says.
Msibi blazed the trail for alternative investments, which is perhaps the most transformed part of OMIGSA,
with portfolio managers such as Makole Maponya and Ismail Matthews.

Under the boutique structure, adding a new person to the team adds to the overheads of the boutiques
concerned and can be justified only when extra capacity is needed.

There are two black boutique heads, Ben Kodisang - a veteran of old black economic empowerment (BEE)
boutiques Prodigy and African Harvest - who runs the R26bn property boutique and Tendai Musikavanhu of
index boutique Umbono (which, like Futuregrowth, was once a BEE business in its own right.)

Godwin Sepeng, who used to run the Top Companies unit trust has moved to Johannesburg and now runs the
Community Growth Fund and some specialist large equity mandates, including R18bn for the PIC.

On the unit trust side another rising manager is Mandla Mapondera who runs the Old Mutual gold fund and
works closely with head of resources Anwaar Wagner.

And one of the handful of black actuaries in SA, Tassius Chigariro, is the investments structuring actuary who
developed new hedge funds and structured products. He was a pension consulting actuary at Alexander
Forbes (UK).

There is also a pipeline of trainee portfolio managers such as Verusha Daljee and Feroz Basa in the value
equity franchise; Mila Mafanya (appointed just in August) at the Core Equity team; Jacob Chacko in the
infrastructure team; and Farhad Khan in private equity.

And, of course, the largest fund manager in SA, the PIC, has an entirely black top tier. It is hard not to choose
its CEO Brian Molefe as the most influential person (black or otherwise) in the fund management industry.

Molefe was part of the treasury dream team that brought public finances from a hefty deficit to a budget
surplus. When he joined the PIC in June 2003 he had been head of asset & liability management
(responsible for issuing government bonds).

He has been most famous for putting pressure on companies to transform their boards, resulting in public
humiliation for companies such as Sasol and Barloworld.

Ironically, he has been slow to transform the PIC's line-up of external equity managers - the asset
management arms of the top life insurers of 1996 still run this money.

Only one of its five managers, Futuregrowth (which inherited the money from the defunct Southern Life), was
majority black-owned. But this year, even Futuregrowth has ceased to be a BEE fund manager, after OMIGSA
bought Wiphold's two-thirds share of the business. The PIC has undertaken a long tender process, hiring
multimanagers Advantage to reallocate R90bn of equity assets on a specialist equity basis, including sector
mandates such as property.
Raymond Ndlovu, head of BEE stockbrokers Noah says that this reallocation was an ideal opportunity to kick-
start the black-owned fund management sector.

"It is difficult to see long-term transformation until a significant amount of assets moves to black-owned

Apart from Oasis, the only other black-owned managers with more than R10bn are Taquanta and Kagiso. The
R34bn-strong Taquanta is predominantly a cash and quantitative equity manager working on tight margins
(see feature company).

Its top management is still white but there are now key black decisionmakers such as Saleem Gamza, who
runs the Nedgroup Money Market Fund, as well as Manas Bapela and Ahmed Manjoo on absolute return and
equity funds.

Kagiso began at the passive management arm of Coronation Fund Managers (they cut equity ties four years
ago). But under CEO Roland Greaver it has evolved into a broader product set. Some people believe that
Greaver, an experienced business manager at Sanlam, Gryphon and Coronation should have had the top job
at Coronation, given his much greater general management experience than Nelson.

But even Kagiso has not been able to grow over the past two years, remaining at the R12bn assets mark.
Many black managers have already picked the low hanging fruit of the sympathetic public sector, municipal
and union funds but are finding it tough to win mandates from corporate pension funds.

Ndlovu says the current environment is not good for boutiques in general as investors see safety in large
managers with at least R100bn under management. Pickings have been slim for even high profile black
managers. Argon and Renaissance, for example, are both equipped to compete effectively for mainstream
equity mandates but remain small. Argon has R4,6bn under management, Renaissance R3,3bn.

The Renaissance team - with Khaya Gobodo as head of equity, Nothando Ndebele as head of research and
Khulekani Dlamini as portfolio manager - inherited a gift for self-promotion from their days at Investec, and
they are naturally articulate (perhaps sometimes a little bit too much so). CEO Tebogo Naledi has been at
pains to say that Renaissance does not want to be pigeonholed as a BEE manager but it is still seen to be in
this niche by most consultants and trustees.

Mothobi Seseli at Argon, which has a six-month head-start on Renaissance, has built up a wider range of
products, including bonds, cash and absolute return funds. It is hard to avoid Seseli, who seems to be waging
a one-man campaign to bring kipper ties back into fashion.

His investment colleagues may not have the decibel count of the Renaissance team but they have a strong
pedigree: as well as founder members Duzi Ndlovu and Nazeem Hendricks, the team has been beefed up
recently with the appointment of James Mohlaba, who was a senior fund manager at hedge fund group Brait
Specialised Funds.
After nearly five years, Mergence has R3,2bn under management, but MD Masimo Magerman says it does
not intend to be an asset gatherer. It has a signifiicant hedge fund book and its absolute return fund is in the
middle of the pack of CPI plus 5% funds, ahead of much more established names such as Foord, SIM and
Stanlib. Mergence's head of asset allocation, Fabian de Beer, a former head of multimanagement at the
Eskom Pension Fund, has a rare mix of experience in the BEE category.

Black fund managers have enjoyed support through the 27Four BEE incubator fund, which supports
emerging black managers and also provides a database for investors who want to make their own BEE

The 27Four MD Fatima Vawda was the first black fund of hedge funds manager in SA at Legae Capital, and
will almost certainly be back in that game once her restraint with Legae expires.

"But our business cannot survive on a niche BEE product on its own. We also now compete with
multimanagers such as Advantage and Symmetry with mainstream products," she says.

Vawda says that there is a particular shortage of black fixed-income management skills. But it is emerging,
notably at the quantitative asset manager Prescient. People expecting to see veteran quant manager Herman
Steyn presenting at the Nedgroup Investments quarterly roadshow would have been surprised to see
Rashaad Tayob in his place. But after seven years he has been promoted to senior portfolio manager in the
fixed interest team. The money market funds are run by Farzana Bhayat who has been in the cash team for
five years.

The top black fixed income manager in SA is Victor Mphaphuli at Stanlib, who recently took over from Henk
Viljoen as manager of the bond fund.

Many BEE managers are resigned to remaining in a niche and have moved into hedge funds where asset size
is less important.

Two of these managers have escaped the corporate environment of RMB Asset Management, still the most
centralised of the large managers.

They are Rayhaan Joosub of Sentio Capital and Malungelo Zilimbola of Mazi Capital. Mazi has a strategic
alliance with the secretive, but highly successul Visio Capital group run by Patrice Moyal.

Another niched hedge fund business is QT Capital run by Raphael Nkomo with a former proprietary trading
team from Investec. The most high profile of this group is Asief Mohamed, who has been chief investment
officer of MetAM and now runs his own boutique Aeon Global Capital.

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