Will Sygnia remain listed?

With such a small free float, Sygnia prime mover Magda Wierzycka is often asked if there is much point in maintaining the group’s JSE listing.

“On a delisting, one can never say never,” she tells the FM, “but at the moment we are maintaining the status quo. It means more administration and cost, but if we are to expand we will need access to capital.” 

Wierzycka says what she wants to move away from is a strategy of pure organic growth. Given the economy and the impact on savings, the opportunities lie in consolidation.

There was market talk about two consolidations. One involved the takeover of Old Mutual’s multimanagement assets and operations, which would have been reversed into the Sygnia listed vehicle.

That would have made sense as the Green Machine doesn’t have any exchange traded funds (ETFs), and in one fell swoop it would have become almost the size of archrival Sanlam’s Satrix business. 

It would also have ended market confusion about whether the Old Mutual brand in the investment arena stands for single management (via the Old Mutual Investment Group) or multimanagement — Old Mutual Multi-Managers, previously known as Symmetry.

There would have been rationalisation too — no need to keep separate Sygnia and Old Mutual linked investments service providers (retail platforms) or umbrella funds.

There have also been several rumours of a takeover bid from Alexforbes, allowing it a series of bolt-on acquisitions, as well as access to Sygnia’s relationships with independent financial advisers, and an expansion into ETFs for the first time. 

The speculation sometimes follows the line that Alexforbes wants to hang on to Wierzycka, for her entrepreneurial skills and creativity, while others maintain that she would have to go, as she is a strong personality.

But is Sygnia a “one-woman band”?

“I wouldn’t call Sygnia a one-woman band by any means,” says Wierzycka. “I think however smart or hardworking someone is, it is impossible for one person to run a medium-sized company single-handedly.”

She adds: “I also don’t think I am autocratic. In fact, I would say that I am oversharing.  Just in the past few months there have been several instances involving serious decisions where I was told by executives that the ultimate decision must be made by me alone and that it is not as collective a decision as I would like it to be.”

Wierzycka notes that she is not in South Africa that much, and has another business, the Braavos private equity business, to run in the UK. That specialist business was set up in 2019. 

I wouldn’t call Sygnia a one woman band by any means. I think however smart or hardworking someone is, it is impossible for one person to run a medium-sized company single handedly

—  Magda Wierzycka

Even though Wierzycka has been semi-detached, Sygnia has been growing by almost every metric. The Sygnia share’s total return over a five-year period is the highest in the asset management subsector at 29% annually to June 30 this year.

Since the IPO in October 2015 at 840c a share there has been an annualised total return of almost 20%. What’s more, Sygnia has distributed R10.35 a share in total dividends with the annualised dividend growth rate sitting at a nifty 19.4% over three years and 28.8% over five years.

Sygnia bought the db x-trackers ETF business from Deutsche Bank in February 2017. Wierzycka says one of the reasons for listing is that Deutsche was only prepared to sell db x-trackers to a listed company.

At the time it had assets under management of R11.3bn and that’s grown to R45.2bn. There were just five funds in db x-trackers (now called Itrix); now there are 14 Itrix funds and just one focuses on domestic markets, the Sygnia Itrix top 40 ETF.

Sygnia executive Andrew Steyn says the group remains the largest international equity ETF provider, and — unlike Satrix, for example — directly owns the underlying share portfolios of its global ETFs. Itrix has no feeder funds.

Sygnia’s total assets under management and assets under administration stand at R341bn — which is 34% annualised growth since inception in September 2006, from the initial R2bn in the old IQVest, or 12% annual growth for the past 10 years.

Financial services aren’t highly rated at the moment. In spite of the halo effect of its billionaire founder, Sygnia still trades on a single-digit earnings multiple and a dividend yield of 10.4%. 

Alexforbes — the market leader in multimanagement and vying with Old Mutual to be the largest umbrella fund player — has a better rating but still looks undervalued on a p:e of 12.2 and a 7.8% dividend yield.

The fee income of these businesses in the asset management subsector is linked directly to the level of the JSE, which has been a pedestrian performer over the past few years though that might not be an indicator of the next three to five years.

Smalltalkdaily analyst Anthony Clark says the next set of results of businesses such as Sygnia, Alexforbes and Coronation Fund Managers should look better as the higher the level of the JSE, the higher their revenues.

Family dynasty

Though Sygnia is a public company, family ties are still relatively strong at the financial institution, points out Smalltalkdaily analyst Anthony Clark. Magda Wierzycka’s sister Ashka Corelli returned from New York to become head of marketing and a main board director. Their brother Wojtek Wierzycki is head of systems and cybersecurity.

But there won’t be a Dallas-style dynastic succession. Wierzycka’s husband, co-founder Simon Peile, is no longer on the main board. His chief interest is birdwatching in Prada-free zones such as Papua New Guinea.

Their two sons, who recently graduated from Ivy League universities, show no interest in coming back to South Africa, though one or the other could play a role in the international expansion from the London office.

Ironically, Wierzycka is the unintended victim of the changes in UK tax law designed to bring oligarchs into the tax net. And these super-rich people’s wealth makes Wierzycka look like a church mouse.

Nonetheless, Wierzycka’s current arrangement to live 50:50 between Cape Town and London could end. She might be spending more time haunting the corridors of the Sygnia head office from 2025 onwards.

The next Sygnia CEO is likely to be a professional manager, home-grown in the organisation and from a younger generation. Group executive Andrew Steyn is the same age as Wierzycka. They are Gen Xers in late middle age, though Steyn would almost certainly run the business tomorrow if Wierzycka were to become unavailable suddenly.

The front-runner looks like head of institutional business Iva Madjarova, who, apart from an uncanny physical resemblance to Wierzycka, shares her “can do” approach. She is already the face of Sygnia’s market-leading exchange traded fund business, Itrix, and has led its substantial growth.

And she has the traditional training of a large proportion of the institutional executive as a former Alexander Forbes retirement consultant.

Madjarova, like Steyn, is based in Joburg, where a sizeable majority of clients and potential clients are located, though perhaps that doesn’t matter in the age of MS Teams.

But among the young pretenders Trisha Jorge, the head of retail, can’t be ruled out. She has worked at Sygnia for almost 11 years. Unlike many of her colleagues she isn’t a Forbes alumna, having spent the previous 11 years at Informa Telecoms & Media. But the difference in experience, and therefore in perspective, could count in her favour.

It would be a sad day if there were to be no room for a medium-sized player in the employee benefits industry. With 320 staff members Sygnia is neither a small consultancy nor a multimanager, and it can also not ever realistically aspire to the scale of Alexforbes, never mind the life offices.

But ultimately, its fate is in the hands of its high-profile founder.