an edited version of Abedian’s keynote speech at the 2019 Raging Bull Awards Ceremony on 30 January 2019.could not be more proud of his impressive, if not prophetic, insights into the reality of the workings of the so-called American Dream — essentially characterised by a blend of crass individualism and crude materialistic pursuit.
The world over, Financial Gatsbys are real. Their parties are as glamorous, their control over resources are considerable and restrictive, their decisions more often than not based on axiomatic beliefs, assumptions or rumours — and not on facts. And the more they follow the same template the less diversity and competition obtain. The markets move and fall together.
Whether on the equity investments or fixed income side of the financial markets, the fact is that hundreds of billions were channelled through this industry into the National Treasury, Eskom, Transnet, the African Bank, Steinhoff, Resilient Reit, Fortress Reit, NEPI-Rock Castle, EOH, NET1 and many other such entities.
At the same time, with the help of the PIC Commission of Inquiry, presided over by Justice Mpati, we are getting some facts and insights into the manner in which asset managers in the PIC exercised control over the largest pool of the country’s savings. As it is commonly acknowledged, perceptions matter and reputation is critical in the financial and investment sector. The developments to which I alluded, and the details are already common cause in the public domain, call for urgent corrective actions. A systemic overhaul of the capital market legislative and prudential oversight infrastructure is required.
The rising complexities within the financial sector have reached an all-time high. A powerful blend of globalisation, financialisation of economic structures worldwide and digitalisation has transformed the financial sector itself. The emergence of cryptocurrencies is just one case in point. Significantly, there has emerged a marked decoupling of the financial sector from the real economy. And the process is not yet complete.
Two features stand out immediately. First, the percentage of these “progressive investments is negligibly small. Second, and as a corollary, the culture of “socially irresponsible investments’ or “low and/or no impact investments” still dominate the asset management industry. I can attest to this particular aspect based on my own experience as the chairman of the board of directors of Fortress Reit Ltd. The manner in which some of the large and reputable asset managers in this country entered into a collective, potentially collusive and flawed process during August 2018, demanding a set of actions from the board was astonishing and disappointing.
If it were not so tragic and so detrimental for the retail shareholders and pensioners, in particular, it would have been comical. Not only was this a poor and disappointing case of shareholder activism, but it was also a questionable mix of asset managers with potentially very conflicting motives. Bear in mind that in the mix of the “concerned shareholders”, you had “short sellers”, long-term institutional investors, fixed income investors, and a bank with active scrip lending business.
Putting it bluntly and possibly controversially, at present the practice and the governing regulations are stacked up against the investors, be it in the asset management segment of the industry, or be it in the insurance and retirement ends of the market. The consumers are taken for a ride and the value generation in relation to value appropriation favours the asset management industry.
As a result, the risk-return ratios and the value split between the industry and the masses of investors are unjustifiably in favour of the industry. This has a major socio-political outcome insofar as the patterns of income and wealth distributions are concerned. All said and done, this pattern of value extraction leads to further impoverishment of many retail investors.
The failure of African Bank and Steinhoff with Deloitte as their auditors, the shambolic financial status of South African Airways and Eskom with PWC andas their auditors, the heist of VBS Mutual Bank with PWC and KPMG involvement, and of course the unprecedented failures of KPMG in connection with the notorious SARS Report and even more pitiful failures in connection with the Gupta Group of companies are cases in point.
4 someone who chaired a co whos corp governance at best left lots 2 b desired u certainly have a lot to say