South Africa’s asset management industry is among the most sophisticated in the emerging-market world. More than R8.2 trillion is stewarded through professional investment managers. Beneath this depth lies a structural feature that has barely shifted in over two decades: concentration.
Today, roughly 60% of assets are controlled by just ten houses. Despite regulatory reform, market cycles, and industry growth, this dominance has proven remarkably persistent. It raises a question that sits at the intersection of investment outcomes and economic development: does size genuinely confer an advantage, or has it become a proxy for comfort rather than capability?
Why concentration matters more than it appears
Large managers such as Ninety One, Sanlam, Allan Gray, Coronation, Old Mutual, and STANLIB dominate institutional portfolios not only because of performance, but because scale reinforces itself. Size attracts flows, flows reinforce scale, and scale entrenches incumbency. Each year, more than three-quarters of new industry inflows accrue to the top ten firms, regardless of whether smaller managers deliver comparable outcomes.
But concentration carries costs. As assets pool into a narrow group of firms, portfolios increasingly converge around the same liquid large-cap shares. This means the same 25–40 stocks dominate institutional portfolios, with nearly 90% of large managers’ domestic equity exposure overlapping materially with ALSI and SWIX benchmarks.
The market consequences are visible. JSE liquidity has declined by roughly 15% over the past five years. Smaller companies struggle to attract institutional capital, research coverage thins, and delistings accelerate. In 2024 alone, new listings fell by about 25%. At the same time, valuation gaps have widened: Top-40 shares trade an estimated 10–15% above long-term fair value, while mid- and small-cap segments remain structurally undervalued.
Capital is also flowing offshore. By 2025, average offshore exposure in balanced portfolios approached 38%, contributing to roughly R1.2 trillion leaving SA since 2020. Offshore diversification is sensible, but at this scale it reduces the pool of domestic capital available to fund local businesses – particularly SSMEs that generate more than half of GDP and the bulk of employment in an economy where unemployment exceeds 30%.
A forgotten truth: Today’s giants were yesterday’s boutiques
Twenty-five years ago, firms now regarded as institutional stalwarts were themselves small, high-conviction boutiques. Allan Gray managed roughly R20 billion in 2000. Coronation managed closer to R44 billion. Investec Asset Management and Futuregrowth were niche players competing against insurance-owned giants.
Their edge is not branding; it is mechanics. A R1–5 billion equity manager can realistically invest across more than 120 locally listed shares. A R100–200 billion manager is constrained to fewer than 40. Liquidity thresholds and ownership limits narrow the opportunity set as assets grow.
Agility compounds the effect. Smaller managers can rotate portfolios in weeks rather than months. Trading-capacity analysis suggests a billion-rand portfolio can reposition fully in roughly 40 trading days, compared with close to a year for the largest funds. During periods of stress or sharp valuation reversals, this speed matters.
The industry has also grown more conservative. Active share across South African equity managers declined from roughly 60% in 2016 to just over 40% by 2023. Fear of short-term underperformance and benchmark scrutiny has pushed many managers closer to index-like portfolios – often described as “closet indexing.”
What the data actually shows on performance
None of this implies that boutiques always outperform. Performance leadership rotates. In domestic equities, boutiques typically show wider dispersion – periods of strong outperformance and periods of lag – reflecting genuine active risk. Large managers tend to deliver more stable but increasingly benchmark-aware returns. Neither outcome is inherently superior; they serve different portfolio roles. In balanced funds, the picture is clearer still. Over the past decade, returns across large and small managers have converged.
The implication is important: the perceived structural disadvantages faced by smaller firms have not translated into systematically poorer outcomes.
So, if performance is broadly comparable, why do boutiques remain under-represented?
The answer lies less in investment merit than in structure. Distribution networks favour incumbents. Consultant frameworks reward longevity. Large firms absorb underperforming mandates through mergers, smoothing historical records. Smaller firms face higher commercial hurdles to access the same pools of capital, even when outcomes justify inclusion.
The evidence challenges a persistent misconception: boutiques are not inherently riskier. They are simply different. They introduce uncorrelated outcomes into portfolios, helping manage risk at total strategy level.
History shows that backing skilled boutiques has never been reckless. The greater risk has been ignoring them – and discovering too late that tomorrow’s leaders were already visible, just smaller.
