Seczim bemoans high operating costs for asset managers

THE Securities Exchange Commission of Zimbabwe (Seczim) has bemoaned the high operating costs for asset managers which outpaced growth in revenue in the second quarter ended June 30 with serious implications on their going concern status.

The concern comes after securities investment managers recorded a 1311% jump in operating costs to management fees which the capital markets regulator rated as critical.

The worry comes despite the asset management industry recording aggregate operating profits of ZWG110,51 million for the quarter under review.

Seczim said operating costs were 13.11 times the fees realised by the asset management industry.

“Considering the topline for the industry, which is largely made up of proprietary investment in securities, the unsustainability of profits for the asset managers has serious implications on the going concern status for various entities within the sector,” Seczim said in its Q3 newsletter released last week.

The commission said the industry average capital adequacy ratio stood at 3.30x against the minimum of 1.0x with 25 out of 29 operational asset managers adequately capitalised.

Seczim is in the process of reviewing the capital adequacy framework for investment managers.

“The capital adequacy ratios shall be included once the new capital adequacy framework is approved.OMIG led the investment management firms with the highest FUM [fund under management] share of 49,76% as at June 30, 2024, followed by TN Asset Management and CBZ Asset Management with FUM shares of 8,61% and 7,87% respectively,” it said.

As at 30 June 2024, total assets under custody amounted to ZWG39,50 billion representing a 11,65% quarter-on-quarter increase from ZWG35,38 billion reported on March 31 2024.

Local clients accounted for 64,02% of assets under custody while foreign clients accounted for the remaining 35,20%.

Comparatively, local clients accounted for 85,60% of assets under custody the first quarter of 2024 while foreign clients accounted for the remaining 14,40%.

The total value of securities administered by the transfer secretaries as at June 30, 2024 amounted to ZWG46,89 billion, representing a significant increase from ZWG28,87 billion [ZWL72,18 trillion] reported as at March 31, 2024.

“The increase of ZWG18,02 billion represent a quarterly expansion of the market capitalisation value for listed securities on the Zimbabwe Stock Exchange during the period under review. However, of notable concern is the sluggish increase in US dollar share register value to US$1,25 billion as at 30 June 2024, compared with US$1,23 billion as at March 31, 2024. This is an indication of the slow growth in stocks listed on Victoria Falls Stock Exchange,” it said.

During the period under review, the industry reported a profit of ZWG8,13 million , a significant increase from ZWG3,6 million [ZWL9,24 billion] reported during the previous quarter.

This was attributed to an increase in fees charged on share register value by all the three transfer secretaries.

“All the three firms reported positive earnings during the quarter under review. Staff cost to operating expenditure ratio has remained high with an industry average of 57,63%. ZB Transfer Secretaries and Corpserve Transfer Secretaries had a ratio higher than the industry average. The sector’s capital was rated satisfactory, with all three transfer secretaries adequately capitalised, above the minimum capital requirement of ZWG2,06 million [US$150 000] as at 30 June 2024. The three transfer secretaries reported a capital adequacy ratio well above 2.00x, an indication of ample capital levels above the minimum required,” capital markets regulator said.

During the period under review total turnover for equities, exchange traded funds ands and real estate investment trusts markets on the Zimbabwe Stock Exchange were ZWG185,40 million, ZWG327,830 and ZWG70,18 million respectively.

The Financial Securities Exchange recorded trades worth ZWG889,125 while the Victoria Falls Stock Exchange saw 3,028 trades amounting to US$10,07 million.-newsda