RYK VAN NIEKERK: Ninety One Hall is South Africa’s largest asset manager and the group today announced its fiscal year results for the end of March 2022. Assets under management increased by 10% to £ 144 billion or about R2.7 trillion during this period. This means that Ninety One manages more money than the Public Investment Corporation or PIC, which manages about R2.4 trillion.
NineT One’s revenue rose 2% to R13.5 billion during the period, post-tax profits rose 23% to R5.4 billion, and the board announced a final dividend of around 7.7p or R1.52 / share.
Join me now Hendrik du Toit. He is the chief executive of Ninety One. Hendrik, thanks for your time. How much is R2.7 trillion still in South Africa?
Hendrik du Tait: Good day, Rike and the audience. It’s nice to talk to you from London today. I just want to say one thing – PIC is much bigger than us in South Africa. We are a very different business. Most of our money or funds we manage, the capital we manage, is provided by international clients, but we still have a significant business in South Africa. It depends – part of it is obviously invested internationally; But [that] Up to a total of about £ 50 billion received from South African or African client groups.
RYK VAN NIEKERK: So it’s still very, very significant – about one-third.
Hendrik du Tait: South Africa is a very important market for us, although obviously most of that wealth and a large part of it is also invested in the domestic market.
RYK VAN NIEKERK: Well, last year was a good year for you. Assets under management have increased by 10%, as I said before, or about £ 5 billion in net inflows. Where did this money come from? Is it just an increase in the value of assets? Is it the client moving their funds? And how much of that comes from South Africa?
Hendrik du Tait: The net will flow – now obviously we are getting a lot more gross business, but some clients take their money back, use it for pensions, etc., or they do something else with the money – it’s the net, and the net is about R100 billion, of which approximately one third comes From the African market where South Africa is dominant, we have good business in Namibia, Botswana and elsewhere in Africa.
RYK VAN NIEKERK: When we talked last year, you said you saw China as a potential growth market. You further say that Ninety One is about to expand in the United States, which is obviously a huge market; But it is a mature market.
Much has changed since then. The United States has a significant inflation and interest rate problem, Europe has a war and China has a big coward problem and a significant part of the economy is in a severe lockdown. Have these events corrected your strategy?
Hendrik du Tait: They did. But we’ve come from a year where revenue in the Sterling position has increased by 10% and management fees have increased by 13%. This happens if you have a reasonably good market.
If we look at the picture we see here today, if it continues, next year we will have more difficult times, not only because there are so many problems around, but also because there is a lot of volatility that makes investors less risk-prone then. And [they are] So sitting on cash, so it’s hard to get the flow.
But we are long-term investors. We look through it, or we see the coming year as a year of big investment opportunities. I think the story of China will take a turn. The U.S. economy and U.S. markets have been exceptionally good for a long time. Once interest rates are adjusted, that path will continue. So, be careful in the near term, but definitely no panic.
RYK VAN NIEKERK: You say this is a year for a great investment opportunity. Have you changed your investment strategy, maybe to withdraw money from the table and look for new opportunities now, or how do you approach these investment opportunities?
Hendrik du Tait: In many of our expert strategies we can’t, because clients tell us to invest in a certain way. We are in a very good position in our multi-asset portfolios and have a significant ability to actually take risks. So it actually depends on which strategy. But, from a business perspective, our business strategy has not changed. We are pursuing clients in large markets who want to invest globally and internationally, including emerging-market lending.
We specifically think that the effects of the Ukrainian war will flow to emerging markets once they are over, but this coming year is going to be tough.
So I feel quite comfortable and we specifically encourage our clients to invest in high-quality, powerful companies that will survive in an environment where their balance sheets are strong, and we think theses are going to pay off nicely for years to come.
In the near future, however, who knows where the prices will be at the end of next month or next quarter?
RYK VAN NIEKERK: I was in Nampo harvest day [agricultural trade show harvest day] There was a lot of discussion yesterday in Bothaville, and in the world about what is happening and how it is affecting South African agriculture. The number one item on the agenda was the war in Ukraine, and obviously the high cost of fuel flowed from that conflict. So we certainly live in a global village and I think with the war it actually got smaller. How big a risk do you think the war in Ukraine is for the world market, especially now that Sweden and Norway want to join NATO, because it could escalate the conflict?
Hendrik du Tait: Ryke, I was the wrong person to ask because I was absolutely sure that the Russians would not invade Ukraine and disrupt an entire system with their own access to the market for their power. I’m not the right person to ask.
My senses are the biggest influence There is Felt and, unless it is nuclear, what happens now is less relevant because the world is already changing, already adapting.
The impact of food prices – such as Ukraine is an important food producer, and so is Russia – leading to serious political instability in the emerging world.
In the Western world, when fuel and food prices continue to rise for a long time, the government may collapse, because it will disappoint investors, [with] Voters are creating significant political uncertainty.
So we’re in a world where things are going to get tough and in fact South Africa is a port in a storm – not necessarily. [for] The boys in Nampo, but the production of goods, the distance from those places and the fact that South African government debt is replacing the Russian government debt in the portfolios of global emerging markets.
So distorted South Africa has become a less volatile place than many others as a result of the Ukraine war.
RYK VAN NIEKERK: Yes, but I’m sure it’s still one of the biggest risks we’ve seen in decades, perhaps with the US inflation situation.
Hendrik du Tait: Exactly. I mean, we’re in a world where financial markets are busy with a painful adjustment because central bankers were too slow to see the threat of inflation, and the Russians fueled the fire, mainly through the invasion of Ukraine.
RYK VAN NIEKERK: Hendrik, thanks for your time. That was Hendrik du Tait. He is the chief executive from Ninety One.