Investing is a world where investment managers claim to be terrific and where they can typically back it up with some or other performance analytics. However, most investment managers actually underperform the market, making active management a losers’ game unless you have the skill to select superior investment managers and furthermore blend them in an optimal and cost effective manner to provide superior risk adjusted returns.

One of our clients comments as follows –

When prospective new investment managers made presentations, GraySwan had more knowledge of their history than the presenters. Consistent evaluation of investment managers was done and acted upon even when changes in teams dealing with our mandates were not reported by the relevant investment manager to us. GraySwan ensured that we were educated regarding all the investment terms and products.

I honestly believe that GraySwan has set a new necessary standard for investment consulting in South Africa. This has not only enabled us to take informed decisions regarding investments, but also ensured that we remained in the top quartile since your appointment.

We are one of the most experienced independent investment advisory and wealth management businesses in South Africa in terms of assets under advice, the wealth of our investment experience (more than 110 years) and the depth and strength and stability of our investment team. The core of our team has been working together for more than 10 years and has an average investment experience of 17 years per team member. Our superior track record is proof of a successful and robust investment process that has been developed and enhanced over the past two decades of advising to many of the most prestigious investors in South Africa. Our clients are top performers and are the ambassadors of our business.

Our unique investment manager research and selection advisory offering centers around a deep understanding of the investment manager industry, which we have gained over the past two decades. We have gained our competitive edge not only from our wealth of investment consulting experience where we advised to most of the largest institutional investors in South Africa but also from our offshore investment management backgrounds. Clients require advice that is based not on a theoretical and academic basis but on proven investment management principles. Investment advisors that have institutional investment management backgrounds such as us have an advantage to meet any institutional or private client demands.

We have an internal Investment Committee, Wealth Management Committee and a Responsible Investment Committee at which our proprietary research is discussed and where we formulate our investment manager and product recommendations to our clients.

Our proprietary investment manager database encapsulates more than 1000 institutional mandates. Further, we also have access to the South African Unit Trust database of more than 1300 unit trusts and another offshore database comprising of more than 5000 investment products.

We offer the widest and most comprehensive investment manager Peer Group Surveys (we call these “ScoreCards”) in the industry. Our investment manager ScoreCards are detailed versus the industry standard of two to three pages and we cover track records typically as far back as 10 years whereas our competitors only show the past 3 years in their Surveys. Our risk statistics are based on long term statistics whereas our competitor surveys typically use the last 3 years. We do not believe that a 3 year period is adequate because the analyses then excludes the credit crisis of 2008 and also that is not possible to separate luck from skill when assessing investment managers over such a short period of time. Therefore we base all our analyses on longer term results. We publish a summary ScoreCard every month which encapsulates a summary of 8 of the more than 32 ScoreCards that we produce on a monthly basis. Our clients have access to any of the ScoreCards we produce.


We believe that there is a place for both passive and active management in portfolio construction. It’s not about one or the other. Academic research suggests that 85% of investment managers have and will continue to underperform the overall market. The problem is not that investment management is not done well, the problem is it is done well and by many and the active investment management universe thereby becomes the market. The issue is simply that selecting superior active investment managers in certain asset classes is a low probability and low conviction decision.

Our various local Equity ScoreCards (we conduct 5 different local Equity ScoreCards) as well as our offshore Equity ScoreCards shows that the average local and offshore active equity investment manager has underperformed the respective local and offshore equity markets on an after fee basis.

Our proprietary optimisation and portfolio construction investment manager research proves that the more active investment managers are selected the larger the role of a passive investment manager in the total portfolio construction. We have conducted a detailed research study which incorporated more than 70 investment manager’s local equity track records (those with track records longer than 8 years) and have found that as soon as more than 3 active investment managers are selected then a passive or tracker mandate becomes relevant.

Outperforming equity benchmarks after fees consistently is not an easy task but it is possible and has been achieved by a select few investment managers. It is therefore crucial for investors to identify the handful of truly exceptional investment managers for potential inclusion in their investment portfolios.


We recognize that our local equity market is extremely concentrated with a small number of shares making up the bulk of the market. The top 20 shares make up more than 65% of our market. If some large investment managers want to invest 5% of their assets in a smaller company listed on the JSE would they own the entire companies’ share capital. An investment manager that manages about R50 billion of South African equity assets only have approximately 40 shares in which to invest as much as 5% without owning more than 10% of the issued shares. The risk is therefore not only a potential missed opportunity for investors but also the illiquidity or difficulty of the investment manager to trade out of a share in which they have a material allocation which could be detrimental to your performance.

We also recognize that smaller investment managers are more flexible to exploit opportunities across the smaller shares in the investable universe and thus the need to potentially incubate smaller investment managers. Our research however shows that even the smaller investment managers, despite being able to invest into the smaller shares, still invests a large portion of their assets to the Top 20 shares which is in contradiction to what the various smaller investment managers “markets” to investors. The question remains whether incubation is the answer to access opportunities in the mid and small cap equity sectors rather than to invest in a mid and small cap fund managed by a larger investment manager.


The South African investment industry is currently highly concentrated with the largest 5 investment managers accounting for more than 60% of the total market share. Fortunately some of the many young firms that won mandates from the PIC back in 2008 have now build a solid footprint in the industry and can now compete with the larger investment managers. Albeit that transformation has happened very slowly do we believe that because Regulation 28 requires Trustees to formally apply their minds to consider transformation when appointing service providers, that the market share of smaller investment managers should therefore grow from its current low base.


Trustees do not have one single ‘fiduciary duty’ but rather a number of distinct duties including to act in the best interest of all members, to treat all beneficiaries impartially and to avoid (rather than to manage) conflicts of interest. Yet conventional understanding view ‘fiduciary duty’ as a single “duty to maximise returns”. Responsible investment (RI) offers the opportunity to rethink fiduciary duty in light of long-term, sustainable returns, although this may challenge conventional thinking.

GraySwan was the second investment consultant in South Africa to subscribe to the United Nations Principles for Responsible Investment (UNPRI). We have also been awarded as the Responsible Investment Consultant of the Year by BATSETA (our industry body).


We always count. We test, we test and we test again. We don’t trust, we verify and then we conduct extensive investment and operational due diligence and then only do we advise our clients to potentially invest. Our clients are the ambassadors of our proven investment manager selection approach which have empowered them to yield superior risk adjusted performance over the long term.

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