Retirement funds: the end of the ‘black discount’ at last?
Transformation scorecard means black asset managers may no longer have to cut costs to compete for business
The retirement funds representative body recently joined the financial sector’s transformation watchdog, the Financial Sector Transformation Council (FSTC). This means the retirement industry will now also account for empowerment progress or lack thereof.
The Batseta Council of Retirement Funds for SA says it will push for compulsory reporting of annual transformation scorecards in the industry. It promises to track the transformation progress of at least 100 big retirement funds, which represent 85% of assets under management.
Batseta represents principal officers and retirement fund trustees of most of the large retirement funds.
It is laudable that it finally has a seat in the FSTC given the power that its members have. Batseta members appoint asset consultants, asset managers and administrators. The fact that less than R500bn of the R5-trillion managed by private sector asset managers in SA was in the hands of black-owned firms in 2018 shows that it is going to take more than the existing BEE Act to change the way retirement funds invest workers’ money.
Making publication of BEE scorecards voluntary hasn’t worked in the retirement funds industry. Asset managers have undisputed bargaining and buying power. Yet as the Financial Sector Conduct Authority pointed out at the recent Pension Lawyers Association of SA’s annual conference, they are largely price takers.
Pension funds tend to use service providers they have historically worked with instead of looking to use black businesses, which according to 27four’s latest BEE.conomics Survey are disadvantaged by “black discount”. The discount implies that black businesses are riskier.
Skeptism about investing people’s money with newcomers is justified, but many black-owned asset managers and administrators have proven their worth by generating good returns for decades.