Good afternoon, ladies and gentlemen, and thank you very much for joining us on this call. I'm joined today by our Group Finance Director, Abigail Mukhuba, the Group Executive for Strategy, David Marshall, and the Head of Investor Relations, Grant Davids. This morning, we announced that Sanlam and Ninety One have agreed to establish a relationship whereby Ninety One will become the primary active investment manager for all single-managed assets to Sanlam for South African and global products. Ninety One will take ownership of Sanlam's single-managed active asset manager, Sanlam Investment Management, once this business has been restructured, as well as part of Sanlam Investments UK in-scope assets via an investment management agreement. Assets under management of around ZAR 400 billion are expected to be transferred to Ninety One. The intention is to enter into a relationship for an initial term of 15 years.
However, both Ninety One and Sanlam believe that this will be a powerful partnership that will endure for the long term. Ninety One will issue shares to Sanlam and Sanlam Investment Holdings, giving Sanlam and Sanlam Investment Holdings a combined stake of about 12% of Ninety One's enlarged share capital. Sanlam is not divesting from active asset management. Rather, we want our active asset management activities housed within a leading global asset manager. Sanlam will retain its other existing capabilities within Sanlam Investment Group, such as Satrix, Sanlam Multi-Manager, Sanlam Alternative Investments, and Sanlam Private Wealth. Sanlam will not play a role in Ninety One's governance or operations because their long-term investment success requires their full independence, in our opinion. Moving on to the rationale for the transaction, Sanlam is a waterfront asset manager that provides optimal investment solutions to a wide variety of customers.
Single-managed active asset management is a key building block for our solutions and represents a sizable portion of our assets under management. An increasing portion of our single-manager active assets are international assets rather than SA assets. While Sanlam Investment Management has historically been a strong South African asset manager, our international capabilities have been more limited. Sanlam has therefore been looking to strengthen its international asset management, ideally in a manner that looks at South Africa and global assets in a consistent fashion. We recognize that over time, international asset management will be even more important to our clients. By moving our single-managed active asset manager into the business of the market leader, we're able to strengthen the scale and the quality of the capabilities upon which we build our client solutions.
Success in active asset management is important because it is being increasingly complemented by other asset classes in which Sanlam already has strong market-leading positions. Sanlam wants to be able to offer the best possible solutions for our clients in all product lines. Our demand for international private credit assets is also increasing, and we are unable to meet all the demands for these assets through our current capabilities. We're therefore looking for a partner in the space to complement our own private credit strategies. So, in this context, Sanlam has been searching for a strategic partner to strengthen our international active asset management capabilities, our South African active capabilities, and our private credit strategies. Through an extensive process to identify suitable partners, we established that Ninety One would be the very best partner for Sanlam to achieve our objectives.
If I talk a little bit now about why, in particular, we selected Ninety One, Ninety One is the leading South African and global fund manager in Sanlam's view. Some of the key attributes we see attributable to Ninety One are a very strong investment culture pervading the firm, a high level of ownership by the management and investment professionals in the business, an excellent long-term investment track record, seamless investment processes for South African and international assets, a common South African heritage and cultural alignment to Sanlam. Ninety One are also busy developing international private capabilities, much in the same way that Sanlam is. These are very important to Sanlam and help us to meet the demand we have for this asset class.
Active asset managers have been under pressure for the last few years globally, to some extent because of the large global technology stocks that have driven indices and therefore passive asset class performance. However, we do believe that Ninety One will be a long-term winner in the industry and that the cycle will turn back in favor of high-quality and scaled active asset managers. We also believe that a strategic partnership with Sanlam will be meaningful to Ninety One, and therefore both parties will be naturally incentivized to work together for the benefit of our clients. I'm going to address the very simple question next of what will change for Sanlam clients. Of course, until the closing of the transaction, nothing at all will change for our clients.
However, at closing, the Sanlam Investment Management investment professionals, as well as those from the U.K., will move from Sanlam to Ninety One, and Ninety One will become responsible for managing the underlying assets. So, post-closing, third-party institutional clients will become Ninety One clients. Sanlam's unit trusts will be managed by Ninety One, and funds may, if it makes sense, be merged with Ninety One funds. Sanlam's clients within Sanlam Life will continue to have Sanlam-branded solutions, but the assets under active mandates will now be managed by Ninety One. We expect no adverse impacts for clients, and over time, we expect that clients will enjoy improved investment performance and a wider range of solutions as Sanlam collaborates with Ninety One to design new products. I'm going to talk very briefly now about the financial effects from Sanlam.
We have been asked by the legal people not to give precise numbers, but I will give you a sense of the situation. So, regarding the financial impact, Sanlam has taken a long-run view of this transaction, and we believe that the strategic benefit of improved returns for clients over time are likely to create a significant uplift in the value for Sanlam. In the early years, we expect earnings and dividend impacts to be very slightly dilutive at a group level, but these are expected to turn positive after three years as Sanlam continues the streamlining of its remaining asset management business. The earnings of Ninety One are also likely to grow more quickly than that of the current trajectory of the businesses being sold. It's a much more diversified business than ours. The transaction will slightly improve the solvency of the group as well.
I should add that none of these impacts, in my opinion at least, are very material. Regarding the timeline of the transaction, Sanlam and Ninety One have signed a binding Framework Agreement. This specifies that operative arrangements and agreements need to be finalized and signed before the end of March 2025. There are also relevant shareholder approvals required from Ninety One and from Sanlam Investment Holdings shareholders. So, that's Sanlam, African Rainbow Capital, and Absa. Also to note is that we need to establish Sanlam Investment Management as a clean entity with just those activities that Ninety One is taking on board before the effective date of the transaction. This is expected to take us some six to nine months, including obtaining competition approval. So, thank you now, and I will hand over to Grant Davids, the Head of Investor Relations, who will facilitate questions.
Between myself, Abigail, Grant, and David, we'll endeavor to answer your questions. Thanks very much.
Thanks very much, Paul. I'll just remind all the participants that there is a webcast where you can post your questions, and we also have an audio line where you can ask questions. There are currently no questions on the audio line, so I will take some questions that have come through on the webcast. The first question comes from Baron Nkomo from JP Morgan. His question is, "Please walk us through why the deal will be dilutive to earnings and dividends in the initial years."
Okay, Grant. So, and Baron, thank you for your question. I think that if you think about us acquiring equity in a listed company, Ninety One, even if the earnings were not dilutive, dividends would be because there's a retention of dividends in the listed Ninety One, whereas in our own world, we tend to dividend out the full profits. So, you know, that explains why there's a slightly bigger dilutive effect on dividends than there is on earnings. On earnings, there's a very small dilution effect because we're moving across just the investment professionals and the assets and respective revenue fees to Ninety One, and we will be left initially with some overhead and support costs on our side, which we will need to restructure. So, it'll take a little while for those to be eliminated and for the earnings to grow back up, but it's really very marginal, as I said.
Thanks, Paul. The next question is from Louis Kruger, and Louis' question is, "What does the deal do with regards to the BEE status of the SIM business sold? Would there be a risk of assets leaving due to a lower BEE level?"
So, our remaining business, of course, at Sanlam remains, you know, Black-owned. The business being transferred out and moving to Ninety One, Ninety One, you know, has a Level 1 rating, but of course, is not Black-owned. So, you know, that will be a factor for particularly, I guess, third-party institutional clients. It could be a factor, but you know, this is a situation that both parties will manage very carefully. And clearly, Ninety One has been very successful in any event as a fund manager without being fully Black-owned. I think it's also worth pointing out that because of the ownership credentials of Sanlam Investment Holdings, it will, in any event, lift the ownership score for Ninety One themselves a little bit because we'll be 12% shareholders in that business.
Thanks, Paul. We have a follow-up question from Baron. Baron's question is, "Sum has AUM of close to ZAR 900 billion disclosed in the results pack, but only ZAR 400 billion will transfer to Ninety One. Can you help understand what the remainder of the assets within SIM relate to?
Yeah, so Baron, you know, as we've explained on the call, we're transferring the active asset management business, the single-manager active business, across to Ninety One. We've got, I think you could think of about, you know, several big building blocks. One is the single active asset manager called Sanlam Investment Management, but we also have a very big passive business called Satrix. We have a very, very big and very fast-growing multi-manager business, Sanlam Investments Multi-Manager. And then, of course, we have an alternatives business, which is growing, and that remains at Sanlam. And we have a very big private wealth business as well that remains on our side. So, the reality is that about 30% of the assets under management are actually moving across in this transaction. It is one specific sleeve of assets, a type of assets that's moving across.
Thanks. A follow-up question from Louis Kruger. "What has the flow experience been in SIM lately? Ninety One has seen relatively consistent outflows recently. On the face of it, it seems like a good business is swapped into a relatively weaker business.
Yeah, so I look, again, as I mentioned in the call, active asset management globally has been, I guess, under some pressure. So, even Sanlam Investment Management, the active-only business, has also experienced outflows. So, Sanlam Investments, at a total level, has had extremely strong cash flows, but that's because those cash flows have been going into predominantly multi-management solutions, alternatives, and to a lesser extent, passives. So, we actually think that the Ninety One business is a very strong business. It's a much more diversified business. Remember, 2/3 of their business is non-SA, whereas the bulk of what we're sending across, I think about 80% of what we're sending across is South African business. So, it all depends on relatively how their international business does against SA.
If you were on their investor call this morning, you would have heard quite a number of their investors actually regarding their stock as highly undervalued currently, clearly with a lot of upside. And that's certainly how we would see it. So, yeah, we think the prospects for their business are good. You know, far be for me to tell you as an investor how markets work, but things do go in cycles, and we do think, you know, things will turn for them.
Thanks. I believe there is an audio call that has come through. Operator, could we go to the audio call, please?
Michael, you can go ahead.
Yes, hi, guys. Thanks for the time. Thanks, Paul. So, three questions from me. Just in terms of the way this is going to be accounted for, am I right in saying you'll only be able to account for the dividend that comes out of the Ninety One shares in your earnings? And that's the large reason why it will be dilutive. So, if you can answer that, the first question. The second question, you haven't spoken about whether or not this is GEV- accretive. Obviously, we don't know the makeup of the GEV between the businesses that are moving across and those that aren't, but I mean, can you talk at all about whether it is or isn't accretive? It does seem like it might be, but I can't. If you can confirm, that would be great.
And then just trying to understand the, you know, obviously, you've got a big competitor who uses Ninety One to manage all of their active management as well. Does this pose some form of sort of, I don't know, competitive issue? Like, what differentiates if I buy the Sanlam Equity Fund as a unit trust, for example, versus if I buy the Discovery Fund? Can you talk a bit about how that plays out? Thank you.
Thanks, Michael. Thanks for that. I'm going to give Abigail - she gave me a lesson the other day in the accounting, so I think it's better that she should give you the lesson than me. On GEV, it's obvious that the parameter that we're moving across is a different one to the one in which we calculate GEV ourselves and publish GEV for. So, it's a little bit difficult for us to do a comparison at this stage as well. If you - when I was answering Baron's point on dilution, I was explaining that actually what we're moving across is the revenue and the costs of the investment professionals, but that leaves behind some other costs. So, the answer to the GEV, I think it will be - I'm not even - David's probably going to wrap me over the knuckles.
The lawyers may wrap us over the knuckles because they've asked us, please, not to give any numbers, but I think it's fair to say that the GEV will probably be slightly accretive, but depending on how quickly we flush costs out and the extent to which we are able to do that, it may become fairly GEV-accretive to us, and on the last point, you know, it's all a question of mandate, so, Discovery, obviously - well, I don't know, obviously, but they have their own mandate on their unit trusts. Our intention is to use Ninety One's own funds and distribute those and not to create more confusion by having multiple brands. So, there should be one on the unit trust side, one mandate, and one fund in each space out there, so, ultimately, you'll merge the Sanlam unit trusts into this.
Hi, Michael. So, from an accounting perspective, we would be moving, obviously, from a subsidiary accounting to an investment accounting. So, yes, from a P&L perspective, you would then account for the dividend that goes into the P&L. But I would not necessarily say that that is the driver why it's slightly dilutive. Obviously, you would need to see what the impact is depending on the performance of that investment going forward. But the significant difference is that you're moving from what you were 100% consolidating, and now you're just investment accounting.
Michael, I think that answers your questions. I'll just come back to the webcast. So, we've got a question from Ellen Ellison. "Has the deal passed through the Competition Commission?"
No, it has not. So, we've made it clear that what we're doing is we're announcing this deal at an early, very early stage of the process. In fact, David will correct me if I'm wrong. I don't think when you announce a deal, it's ever been through the Competition Commission. It has to follow. So, there are a whole number of approvals that are needed, one of which is the Competition Commission. Maybe, Grant, I mean, it'll beg the question of, you know, do people see any obstacles from the Competition Commission? We don't believe there will be. This is an incredibly fragmented and competitive industry, and even with our active assets added on to their existing South African assets, it doesn't change the competitive balance in the market. It's still going to be. There are going to be many players.
The market share of Ninety One will not be excessive in any sense. And, you know, from a public interest point of view, you must remember that this is a massive, Ninety One is predominantly an offshore company, a U.K.-listed company with probably 2/3 of its market cap and business outside of South Africa. This is a massive endorsement and commitment to South Africa. So, very positive for the country to have that happening.
The next question is from Warwick Bam. Warwick's question is, "Which of the remaining asset management businesses will be most affected by the sale, or will Ninety One provide investment support where needed?
No. So, if I talk about our remaining businesses, I did actually unpack them again. I think it was for Baron. So, our multi-management businesses run completely separately. If you think about the task of multi-management, it is completely different to the task of a single active asset manager. So, it did not draw at all upon any of the skills that will be moving out. The Satrix passive business, again, absolutely zero impact. I think it's probably more obvious there that there is absolutely zero overlap. The very point of Satrix is to function in a very different way to an active asset manager. Again, Alternatives, the unlisted business, absolutely no overlap whatsoever. Completely different teams, different way of working in the private markets rather than the public markets.
And then Sanlam Private Wealth, which you may have thought might have drawn, actually, we've run a completely separate research team and portfolio managers, and they remain with us. So, no change at all on that side. So, you know, there is no problem of a loss of skills. We will not be getting any services at all from Ninety One.
The next question is from Maseabi Marageni. "What are the anticipated benefits for Sanlam's clients?"
Okay, so, yeah, we think of ourselves as a solutions business, giving clients, you know, designing mandates and giving clients underlying assets that match that. If you listen to the previous question about the different kinds of assets or different kinds of businesses that we run, when you have an active business in the same portfolio of businesses as a multi-manager, a passive business, I think you can see the inherent cultural conflict. Whereas a company like Ninety One has kept their business incredibly pure, so they have a very focused and dedicated active asset management culture. So, we believe that by moving our people into what is a very pure and good culture, that over time, our clients will, on the part of the building block that's used for active asset management, will get better investment outcomes.
I think all in all, we're trying to improve the scale and the quality of active asset management over time, and that's got to be good for our clients, and there's a leverage effect for our shareholders of that as well.
The next question is from James Shuck. "What is the lockup period on the Ninety One stake? Is there intention to hold it indefinitely?"
So, there is no lockup period at all. So, in theory, we could sell the stock immediately. But as I've said earlier, we're effectively remaining in the active asset management business, albeit via a listed rather than an unlisted investment. And we believe that together, we'll be able to create value with Ninety One.
The next question is from Asanda Notshe. "What percentage of staff will move across to Ninety One?"
Oh, I don't know what percentage of staff it is. I mean, it's 100% of our investment professionals in the active business.
A follow-up question from James. "Is it only the third-party business being transferred?"
No, it's not. So, I think we spoke about this earlier. So, there are different categories of assets. There's the third-party business that will move across, and once it moves across, it fairly and squarely becomes a Ninety One business. But, you know, the unit trusts need to move across at some point. They will be merged in. But all of the on-balance sheet assets of Sanlam that are actively managed and go out under the Sanlam Life wrapper will remain, you know, with us. But the underlying assets will be managed by Ninety One. So, it is not only the third-party assets.
Follow-up, sorry, a question from Janet Houston. "Would you consider increasing your stake in Ninety One to a more strategic level?"
I think that's, you know, that is a question for, you know, another day. Certainly, you know, it's something that somebody can consider at some future point in time. I think at this point, we see our way to really, as I said, improving our offering to customers. But yes, we would accept that there is a degree of optionality built into this transaction.
A follow-up question from Maseabi. "Please comment on the potential risks and challenges associated with integrating Sanlam's operations."
I think that question would be better put to Ninety One than to Sanlam. From our point of view, what we're doing is we're simplifying our business considerably at Sanlam. Actually, for us, the challenge is to make sure that between now and closing, we manage the staff who are moving across, the clients who are moving across, and the funds as diligently as always. I believe that our investment professionals moving across will welcome moving into a very successful and winning team and culture at Ninety One. You know, Ninety One will have the challenge of making sure that they can integrate our people, you know, into that business. By its very nature, that will be a bespoke exercise, I guess, for each investment professional who's involved.
Another follow-up from Maseabi. "How will this partnership enhance Sanlam's ability to compete in the increasingly competitive global asset management market?"
Okay, so we're focused very much on our clients. You know, in South Africa, that's what this transaction is about. It's about South African clients, and it's about making sure that we have great international solutions for those customers. So, in our multi-management business, of course, we already scour the world for the very best fund managers. But in the active space, we believe that Ninety One gives extremely good and competitive product offerings that are open to us and our clients. Sanlam is not in the business of competing for global asset management. I think it's an extremely difficult business to compete in globally. You're talking about really giants that do it, and to be honest, Ninety One is the only South African fund manager who has been successful, and that's because they started more than 20 years ago.
They're, you know, more than 2/3 of their business is now international. It'd be very, very difficult for a South African firm to do what is being suggested in the question.
The next question is from Matthew Pouncett. "How will the distribution work going forward while Sanlam-t ied affiliated advisors need to continue to sell or advise on those funds which are transferring to Ninety One, or will they subsequently be Ninety One-branded?
Look, I think distribution remains under Sanlam's control, and we'll have to have some discussions about branding. But, you know, today, just to be 100% clear, our advisors already sell completely open architected solutions to the market, and we do not, at Sanlam, have any internal targets or mechanisms of steering money towards ourselves. Now, I do understand that most of our competitors, if not all of them, try to do that. We don't. We've taken a stance for many years of letting clients choose, and we'll continue to do that.
The next question is from Xolisa Dhlamini. "What is the view on the compatibility of Ninety One and the outflowing SIM business in terms of investment styles and approach to responsible investing?"
Okay, so I think there might be two different questions in there. So, to be very clear, you know, the mandates will go across as they are. Wherever there's the life wrapper around it, Sanlam is the owner of the mandate, will continue to be the owner of the mandate, and will make sure that Ninety One delivers against whatever the investment mandate is. In the case of institutional clients, those become Ninety Ones. They're taking across our investment professionals, so I think it's more than likely that where there's a particular mandate with an institutional client, that will, you know, be left, you know, will be left in place. I don't think there'd be any logical reason to change it.
The second part of the question, I guess, related to, I think, with the ESG approach. It is true that Sanlam has had a very strong focus in this area, but I believe that Ninety One also will, you know, has a very strong ESG focus in the screening of investments, and we are not going to dictate to them how they should adapt that. They've got, you know, more than 300 clients globally, and I'm sure that their ESG screening processes will be first class.
Two questions from Francois du Toit. "Can you quantify the EV impact at around the current market value of Ninety One?"
Okay, we answered that question to Michael, so I don't think we should repeat that one. Okay.
Does Sanlam foresee holding onto the Ninety One shares over the duration of the contract?
Okay, we answered that as well earlier.
The next question is from Izan Pace. "Could you please confirm the expected order of events to get the deal over the line, obtain shareholder approval, sign the operative agreements by March 25, then Competition Commission approval, and then lastly, restructure the business before handing over?"
Okay, I'm going to suggest that David deals with this. David, are you happy to do it? I can have a shot at it, but I know you'll get it right.
No, 100% , Paul. Thanks for the question. So, indeed, the sequence is that as of now, the parties are agreeing their operative agreements, and that'll be done by the latest by end of March, hopefully a bit sooner than that, and that is then effectively the signing date when all of the full details, you know, will be available. At that point, it'll be subject to shareholder approval, both on the Ninety One side, but also those minority shareholders in SIH that Paul mentioned. Thereafter is when it'll go to the regulators for approval. There is an element of planning that one can do before closing, so, you know, we'll be planning around the reorganization of SIM, and there's quite a lot of planning that you can do in advance, but the actual implementation of the reorganization would only occur after the competition approval comes through.
So, as I say, that filing will be made after signing, so sometime around March. When the competition approval comes through, it'd be possible to move further into or to move into implementation mode on the reorg. And then there are other regulatory approvals that, you know, will follow in due course. But one can only fully implement upon closing.
Thanks, David. A follow-up question from Warwick. "Can you clarify whether the investment will be accounted for at fair value through profit and loss?"
That's one for Abigail.
Hi, Warwick. Because it's a listed entity, or to the extent that it would be a listed entity, you would be required to look at it at fair value through profit and loss. Then you would have some movements. But you'd also have, depending on how the legal agreements eventually get agreed, that can also have an impact on how you finalize the accounting. Most likely, you have it at fair value through profit and loss.
Thanks, Abigail. A question from Malungelo Zilimbola. "What happens to the allocations to boutique active managers that were supported by Sanlam?"
Is this in the context? I may need some clarity for that question before I can answer it, Grant. If the person wouldn't mind just expanding a little bit.
Thanks, Malungelo. If you could expand, I'll move on to the next question Dudu Tembo. "Please can you elaborate on any changes in capital treatment before and after the transaction? Do you anticipate any capital release?"
Yeah, so again, I can't, I'm apparently not allowed to give you the precise answer, but it is slightly accretive to solvency.
Thanks. Follow-up question from Ellen Ellison. "Has the Absa Asset Management deal been completely bedded down, or is that still ongoing?"
No, that's done and dusted.
Follow-up question from James Shuck. "What are the asset management plans at Sanlam Allianz?"
So we have an asset management business across Africa with Allianz in partnership. We used to get quite a bit of help, actually, in the past from the Sanlam Investment Group in Cape Town. But actually, in the last nine months, we've done away with that. And actually, the Sanlam Allianz business is doing all of its own investment management at this point. They took across a few staff from Sanlam Investments, and so there's no link anymore between the two.
Next question from Maseabi Marageni. "Will Sanlam bear the full costs of giving Ninety One preferred access to its distribution channels without charging a fee for that? How will the mechanics work in reality?
Okay, so again, we, you know, these are some of the details that would need to be finalized in the legal agreements, but the intention is that the economics of the value chain will remain exactly as they are today between our distribution channels and the asset management business. We're not disrupting that in any way.
The follow-up question from James, and I think linked to the earlier Sanlam Allianz question. "Is there anything that can be done with PIMCO?"
I'm not sure.
Next question from Maseabi. "How much of the ZAR 400 billion are you able to transfer and be managed by Ninety One, and how much will remain with Sanlam and only be managed by Ninety One?"
Yeah, that comes down to what the split is between the on-balance sheet. I think David has those numbers somewhere. We have them in a spreadsheet somewhere. I'm not, yeah, if he can find it, we can give it. Otherwise, I'm not sure.
I think we'd have to come back with that, Paul.
Yeah.
Those are all the questions, Paul. No further questions.
Wait, is there any clarification of the boutique question? Because I wasn't quite sure. I can guess what it meant, but I don't want to guess and then give an answer. That's not what the person was looking for.
No, we can get back to Malungelo just to get some clarity on the question.
Okay. All right. Okay, well, Grant, if that's all, then thank you very much to everybody, and thank you for making the time. I think that, you know, from our side, we think that this is a tremendous transaction for us, actually quite transformational. It allows us to simplify our asset management business to focus on making our multi-management alts and passives business absolutely leaders in their area and actually give the active asset management to somebody who is the market leader and deliver better value to shareholders and to customers and make our lives a little bit easier in the process. So thank you very much, and we wish you all a very good evening.