The survey results of the first-ever South African Investment Management Index released by Ernst & Young on Tuesday reveal that 71% of investment management companies rated prevailing business conditions as satisfactory during the third quarter of 2003 compared with only 40% in the second quarter.
The survey indicates that this boost to industry confidence follows a third-quarter recovery after losses suffered by markets in the first half of the year.
Funds under management contracted significantly in the second quarter, according to the survey, rebounding strongly during the third quarter.
The experience of the smaller investment managers has been stronger than their larger counterparts through the year.
“The third-quarter turnaround in funds under management provided welcome relief,” said Lesley Harvey, director of asset management at audit and business advisory firm Ernst & Young.
She said small firms (with funds under management of less than R10-billion) experienced a rise in total funds under management throughout 2003.
By contrast, large firms (with funds under management in excess of R10-billion) encountered declines during the first half of 2003, but a recovery during the third quarter.
Small firms probably gained market share at the expense of the large firms during the first half of this year.
According to Harvey, the shift away from larger to smaller investment managers can be explained by increased demand for specialist products offered by the smaller boutique managers.
“Moreover, empowerment credentials of the smaller firms have positioned them for growth,” she said.
More than 80% of investment management firms operating in South Africa participated in the Ernst & Young investment management survey.
The survey was conducted between August 5 and September 2 by the Bureau for Economic Research at Stellenbosch University.
The index is the first survey of its kind outside the United Kingdom.
At present the Confederation of British Industries in London conducts the only financial services survey that includes investment management.
In South Africa, surveys of the investment management industry tend to focus only on the investment performance of funds managed.
This survey focuses on the investment management business, including funds under management, income and expense levels and ratios, capital expenditure, demand for new products, and compliance with regulatory and industry standards. — I-Net Bridge