Leon Campher has been a fixture of South Africaâs asset management industry for decades. George Mitton
meets the charismatic chief executive of the countryâs fund industry association in Cape Town.
After a career working for several South African fund managers, Leon Campher stopped working in 2002. Or at least, he thought he had. Only the next year, he came out of retirement to help set up the Investment Management Association of South Africa, where he served as chief executive.
Soon, there were calls for the association to band together with three other industry bodies to create a unified group. In 2008, the Association for Savings and Investment South Africa (ASISA) was created. Campher became chief executive of the merged group, a role he has occupied ever since. Far from complaining about the burdens of such a workload, he says he relishes it. And his family don’t mind either. “My wife is happy,” he says. “She says she married me for better and for worse but not for lunch.”
I meet Campher at the ASISA headquarters in Newlands, a suburb of Cape Town, on a sunny day in February. With his experience and position, Campher is understandably regarded as a kind of elder statesman for the asset management industry. Having begun his career at Old Mutual, he has been a founding member of two asset managers, Syfrets Managed Assets, established in 1985, and Coronation Fund Managers, begun in 1993. He is a charismatic and recognisable presence in South Africa’s asset management industry.
ASISA was formed to represent the interests of asset managers and insurance firms. Its members manage nearly eight trillion rand ($500 billion) and include the major South African managers such as Investec, Old Mutual and Allan Gray. As its website says, this means the association is “a formidable partner around government’s negotiation table”.
Since the financial crisis, there has been plenty to do. South Africa’s regulator, like those elsewhere, has been active in seeking to prevent the kinds of reckless behaviour that led to the crisis. However, asset managers have not always appreciated its efforts, tending to fear unintended consequences of regulations that will affect their business.
One of the latest battles is over South Africa’s version of the retail distribution review (RDR), a piece of legislation modelled on UK legislation of the same name that seeks to make the cost of financial advice transparent by banning commissions for advisers. ASISA was involved early on in the process, reflecting Campher’s view that the RDR was “a hell of a big thing”. The association persuaded the government to create a steering committee the industry could participate in, to ensure the main issues were dealt with.
“Elements of RDR are a good thing,” says Campher. “Professionalising the industry, abolishing commissions, negotiated fees. These are all good things. What we’re grappling with are the unintended consequences.”
One of Campher’s concerns is that many investors will be left without financial advice after the regulation comes into force, because independent financial advisers will be incentivised to concentrate on their most valuable clients, the rich. “If I’m a 200-million-rand client and you’re a 2 million client, where is the adviser going to spend their time?” asks Campher. If, as is feared, many advisers rebrand themselves as wealth managers, concentrating only on high-net-worth investors, the middle market will go unserved. The problem may be exacerbated if, as is expected, many of the smaller financial advisers either disappear or migrate to being tied agents after the RDR comes into force.
“We don’t have a solution, but it’s something we’re collectively debating,” he says. “There’s a lot of work to be done.”
Another battle concerns the Financial Sector Regulation Bill, known as the ‘twin peaks’ bill because it seeks to set up a dual regulatory structure consisting of a Prudential Authority, which will oversee regulated financial institutions, and a Financial Sector Conduct Authority, which will protect customers by supervising market conduct. The structure is intended to create a more resilient and stable financial sector in South Africa and has been influenced by the experiences of the 2008 financial crisis.
Naturally for such an important piece of legislation, ASISA has sought to be involved. Though the association supports aspects of the legislation, Campher has identified some problems with it, “which we didn’t believe would stand constitutional muster”. The association engaged law firm Edward Nathan Sonnenbergs and appointed a constitutional expert as a senior counsel. The association’s legal team is now working with lawmakers to fix the problems.
“South Africa has its problems, but it is a constitutional democracy,” says Campher. “The constitution is important.”
Another regulatory debate concerns a planned solvency regime, which is intended to bring South Africa’s insurance industry in line with international standards. The regime is based on the Solvency II standards in Europe, which put in safeguards to prevent systemic risk among insurance companies.
Campher wants to ensure the regulation is adapted to meet local requirements and not merely imported wholesale from Europe. A feature of the South African economy is the need for infrastructure spending, notably in the energy sector, and he believes insurance companies must help finance these projects.
“I’m not saying it will happen, but what if somewhere in this regime, it turns out that solvency requirements are so onerous that insurers can’t fund infrastructure? That would be a problem.”
Indeed, there are many fronts on which ASISA is battling on behalf of its members. One trend Campher is watching is the rise of passive investment products and the challenge asset managers face in adapting to changing customer tastes. “Indexation is in its infancy here and where it is present, it’s too expensive, but it will come,” he says.
Campher also predicts a difficult future for medium-sized asset managers, which lack the distribution networks and brand recognition of the big names, but are not as agile as the small boutiques. “My view is you’ve either got to be really good as a little boutique and attract money that you manage with low overheads, or you’ve got to be bigger, either with a big distribution network or huge brand recognition. The guys in the middle go nowhere.”
In fact, there is plenty to keep the industry busy and to keep its association, ASISA, occupied. It seems as though Campher’s wife will continue to eat lunch without him for some time.
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