Alexforbes launches new transformation policy

19th May 2022 By: Darren Parker

Alexforbes launches new transformation policy

Alexforbes Investments CEO Ann Leepile

Financial services company Alexforbes Investments launched its new transformation policy on May 19.

The policy launch took place in conjunction with the publication of the company’s new Transformation Survey, which helped inform the policy.

The new transformation policy will be implemented from July 1, whereafter all asset managers working with Alexforbes will have to meet the more stringent new transformation targets within three years or be terminated.

“By July 1, 2025, we won’t have asset managers in our portfolio who do not meet our transformation requirements,” said Alexforbes Investments head of manager research Lebo Thubisi.

Alexforbes Investments CEO Ann Leepile said the aim of the new policy was to make a more impactful contribution to the sustainability and relevance of the asset management industry in South Africa.

She added that accelerated transformation benefitted Alexforbes as well by helping the company win more business and attract better talent.

Leepile cited research that highlighted the benefits of diversity in the workplace, such as a 19% improvement in revenue for companies with above-average leadership diversity; a 36% greater chance of outperformance for top-quartile ethnically diverse companies; and a 57% increased likelihood that the reputation will be improved through a more inclusive business culture.

The new policy sets transformative criteria for supporting and selecting asset managers and stockbrokers with an emphasis on gender diversity to ensure more black females are included in critical strategic and investment decision roles.

Leepile said progress in transformation had been evidenced by the latest Alexforbes Manager Watch report, which showed that seven out of the ten largest managers were now rated as Level 1 broad-based black economic empowerment (BBEEE) providers.

However, Leepile maintained that more needed to be done about gender diversity and female representation across investment specialist, management and ownership positions.

Larger asset management companies had yet to significantly transform their investment teams, she noted, while, over the past ten years, emerging black-owned companies had struggled to accumulate assets in an industry dominated by ten companies accounting for up to 79% of total assets under management.

Leepile said that while Alexforbes had been supporting fledgling black businesses, particularly from a gender, race and diversity perspective, it had decided to accelerate the transformation process through its new transformation policy.

“This policy is an extension of our overall commitment to the transformation of the South African economy through BBBEE. We are convinced that this is the right way to go because it has been proven that diverse teams lead to better results. We are encouraging and improving the diversity of investment teams in the interests of our clients and broader society,” Leepile said.

Thubisi believed that the pace of transformation in the asset management sector needed to be accelerated, with Alexforbes playing a leadership role.

“Our policy clearly stipulates minimum representation of females required in investment teams because we believe that, in any investment decision, diversity is important.

“If we want to make the transformation policy impactful, we need a strategic emphasis made by the larger asset management firms to have a truly broad-based transformation focus and make a strategic decision, for example, to have black females involved in decision-making relating to investments,” Thubisi said.

The policy outlines that Alexforbes will support and identify start-up and emerging black asset managers, allowing them to build appropriate records and provide them access to investment opportunities that may otherwise be inaccessible.

Thubisi said the start-up and emerging black asset managers had a strong ability to outperform. Therefore, supporting these black asset managers should provide compelling outcomes for clients.

Alexforbes will focus on start-ups that have assets under management of less than R2-billion at appointment; meet an acceptable manager rating, as determined by the company’s manager research team; and are capable of meeting mandate requirements based on either a record as a portfolio manager, or as key members of an investment team who have evidenced successful and verifiable records with previous asset management firms.

Alexforbes said that attaining a minimum BBBEE level 3 contributor status; having a minimum 40% representation of black investment professionals of whom 40% – or 16% of the total – of their total investment professionals must be black women; and achieving a minimum 40% representation by black individuals in senior management, would guide the selection criteria for asset managers within a three-year phased improvement of financial sector code scorecard points.

In terms of stockbrokers, the new policy states that Alexforbes will require asset managers who have existing contractual agreements in its portfolios to allocate an increasing portion of their brokerage services to black-owned stockbroking businesses, considering the principles of best execution, value-added services and data to benefit the client.

“We will allocate and direct our own brokerage to black-owned stockbrokers by allocating 15% to black-owned stockbroking businesses within the first year, increasing the allocation to 30% within three years and at least 40% within five years,” Leepile said.

Thubisi said the period between the launch and the implementation of the new policy on July 1 would be a period of engagement with stakeholders whereby challenges could be addressed.