Manager Research

Catalyst Fund Managers announced that Sanlam Investments will be buying a 69% stake in the business. Johnathan Broll and Royden du Plooy, who helped seed the business back in 2001, will be selling their combined 59% stake, while founder and CIO Andre Stadler will reduce his shareholding from 32% to 6%. This takes Andre’s share to the same level as the other senior staff members, which include portfolio managers Jamie Boyes, Zaid Sulaiman and Paul Duncan, and CEO Michael Arbuthnot.

There will be no change to the day to day operational or investment processes in the business. Catalyst will retain the Claremont office and the brand, while Prescient will continue to be the management company (manco). Importantly, investment decision making will remain autonomous. The only change from a business management perspective is that Sanlam will get board representation and quarterly meetings.

The new structure allows for broader shareholding, with an additional 6 staff members buying into the business, resulting in 85% of the staff being shareholders. The transaction ensures that current senior staff remain in the business through lock-ins, and measures have been put in place to ensure Andre remains in the business post his share sale for at least the next 4 years. Lastly, Sanlam’s shareholding improves Catalyst’s BEE rating to Level 2 which should help significantly in attracting assets in the institutional market in South Africa.

We believe that independent, owner-managed asset managers tend to remain better businesses over time, so would have preferred Catalyst to remain so.  However, given the transaction, we believe that the measures put in place are sound and the conditions governing the transaction are sensible. Sanlam holds a majority stake in other boutique managers, like Denker Capital, where it has proved to be a supportive shareholder. Broader staff shareholding and lock-ins should ensure that the transition is smooth, and that the investment process is uninterrupted. Sanlam has a strong distribution mechanism which combined with the higher BEE rating is expected to be supportive of flows going forward.

We retain our Tier 2 ratings across the Catalyst funds.