Manager Research

In September 2016 Sesfikile Capital announced that they had completed the sale of a 25% minority equity stake in their business to Royal Investment Managers (Royal). Royal was formed in the first quarter of 2016 in a joint venture between Royal Bafokeng Holdings and RMI Investment Managers. It was established to operate as an investor in asset management businesses that required an empowerment partner with a strong knowledge of the asset management sector.

The deal is positive for Sesfikile for a number of reasons. Firstly, it gives the business a minority shareholder with strong BEE credentials which allows Sesfikile to continue to run their institutional mandates that require an empowerment manager. Secondly, Sesfikile now forms part of a larger affiliate network which will give them access to a larger distribution network and resources.

This deal is one of the latest in a series that RMI has done over the past two years. RMI is in the process of building an affiliate model of asset management and they currently directly or indirectly own stakes in nine asset management businesses. They have acquired minority stakes in passive equity (Coreshares), active multi-asset (Truffle, Perpetua, Northstar, Sentio), hedge funds (PolarStar and Tantalum), Fixed Income (RMI Specialist Managers) and now property (Sesfikile) managers. This affiliate structure is similar to that of Affiliated Managers Group (AMG) who have successfully operated the affiliate business model globally for over 23 years.

We like that RMI is helping to support independent managers through this structure, they are identifying potential and stewarding it towards maturity in a market that is currently concentrated. This structure allows the underlying independent managers to continue operating through periods of poor performance without being forced to curtail operations due to business pressures. RMI, as a parent, understands that poor performance over a period is a possibility in asset management. RMI, through Royal, provides a secondary benefit to the market in that they are supporting the growing empowerment segment of the asset management industry. Lack of access to a strong distribution model is often a core issue that independent managers face, a further benefit to the RMI affiliate model is that they are able to give access to their established distribution network to all managers in their stable.