Edition: June / Aug 2017
Editorials

SASSA DEBACLE

Sygnia’s swipe at Allan Gray

Hardly a ‘passive’ attack on CRISA too.
Is the pot calling the kettle black?

Such is the application of double standards that it would be tempting to dismiss the attack by Sygnia chief executive Magda Wierzycka on investment manager Allan Gray as a blonde joke. Rather, it’s an exercise in “virtue signalling” whereby moral superiority over rivals can be claimed.

Invariably accompanied by a photograph of herself, replete with flowing tresses, Wierzycka has garnered headlines for her allegations of Allan Gray having profiteered from its investment in Net1. The substance of her criticism is that Allan Gray, as a signatory to the UN-backed Principles for Responsible Investment (PRI) and proponent of the activist Code for Responsible Investing in SA (CRISA), should have detected shenanigans in the SA Social Security Agency contract held by a Net1 subsidiary and accordingly have divested of its 16% stake in Net1.

Allan Gray is sufficiently big and ugly to look after itself, and is doing so by having contextualised its interest. More than this, now that the dark sides of the SASSA contract have been exposed – late in the day, once the attempted cover-up had been blasted by financial journalists – it is contemplating a move to have the Net1 board replaced. Thus is an activist approach demonstrated.

Like other investment managers that seek to comply with CRISA, Allan Gray consistently publishes its record of proxy voting and engagements with investee companies.

Like other investment managers that seek to comply with CRISA, Allan Gray consistently publishes its record of proxy voting and engagements with investee companies. Sygnia doesn’t. This, accompanied by the fact that Sygnia isn’t even a PRI signatory, makes Wierzycka’s outrage seem akin to an atheist telling the Pope how to run his church. Sygnia has made zero contribution to the development of CRISA.

Wierzyka . . . the great disrupter

Neither is it in the strongest position to do so because Sygnia is the opposite of an active investor. Its business model claims a competitive edge through low-cost offerings that rely on passive investment; in other words, the tracking of stock-market indices rooted in algorithms. They’re oblivious to the sensitivities of environmental, social and governance (ESG) criteria that lie at the heart of “responsible investment”.

Sygnia is also a multi-manager of investment products. Here it manages its own passive strategies and outsources the active components, according to its latest annual report, to a “wide range of third-party asset managers”.

These managers, it says, are monitored and evaluated in terms of the extent to which they take ESG factors into account. Because one of these third-party asset managers is Allan Gray, it must have passed Sygnia’s requirements for approval. Thus, if Allan Gray is guilty as charged by Wierzycka, then Sygnia is too.

The annual report further reveals: “Managers are encouraged to become signatories to CRISA and this is taken into account in Sygnia’s manager selection process.” That would be difficult. CRISA is a voluntary code to guide investment processes in the same way that King is a voluntary code to guide corporate governance. They don’t have “signatories”.

From where Wierzyka sits, it’s rich for her to belittle CRISA through such statements as “compliance with ESG policies is mere lip service” and these policies being “drafted for PR purposes”. On the first, the dichotomy is in Sygnia’s own operation. On the second, her preemptive strike against Allan Gray – before it knew there was a case to answer – was a masterful exercise in self-promotion.

She’s throwing stones from a glass house, the more so because Sygnia’s own probity might not be entirely beyond reproach. Merely compare the much-vaunted advertising of Sygnia Skeleton Funds “offered at 0,4% p.a.” with the total investment charges shown in the relevant funds’ fact sheets on the Sygnia website.

Try it. Then come to an objective conclusion on whether this is treating customers fairly.

  • This article, by TT editorial director Allan Greenblo, was originally published by Biznews on March 22;
  • Wierzyka was invited by TT to respond to the substance of this article. The only conditions were that her response should be no longer than the original and that it should contain no slander. She declined the invitation: “I do not believe that what you write about Sygnia is objective and hence prefer not to engage or comment on anything that you might write.”
  • The blonde joke was in reference to a Financial Mail interview with Wierzyka. Asked for her one tip in doing a deal, she replied: “Allow people (men) to assume that you are just a dumb blonde. It works every time.”