The union between CoreShares and 10X Investments was officially introduced to IFAs and intermediaries on August 25 when Michelle Noth (Client Coverage Executive) and Gareth Stobie (Managing Director) of Coreshares and Tobie Van Heerden (Chief Executive Officer) and Anton Eser (Chief Investment Officer) from 10X jointly hosted a webinar to answer questions from advisers.

The online discussion unpacked the motivation behind the acquisition, the overall proposition for intermediaries and IFAs, as well as giving some insights about the new combined investment philosophy.

“This transaction has many synergies, certainly at the investment philosophy level,” Gareth explained. “Both businesses followed a similar journey. Both as challenger brands and contemporary businesses that had [a] low-cost investment approach.”

Anton summarised the underpinning credo powering the move. “Ultimately, we believe in index and active worlds co-existing.”

The speakers also took questions from the audience, which ranged from understanding the impact of this move on clients and the industry to getting some insights from 10X about how its new executive team aims to steer the business toward collaborating with intermediaries.

A reset for 10X

“It’s a brand new executive. Our board and shareholders are very much aligned with our strategy of supporting the IFA network,” said Tobie. Noting that his background included many years of active fund management, the 10X CEO went on to give more insights on 10X’s plans for building relationships with advisers. The scope of this collaboration includes products as well as technological support through tools that enable advisers and IFA businesses, he said. “Take us to task on this, please do. We’re happy to engage about it.”

Tobie expanded on 10X developing tools for advisers, as well as making changes to the platform to accommodate them. “It won’t just be 10X products [in exchange] for our tech. [We want advisers] to build the best solution for your client, and we cannot restrict you.”

Anton further emphasised that the aim of these solutions would be to blend active with passive management, before underscoring that 10X was not planning on venturing into the active space or multi-management.

Beyond how 10X plans to engage and enable intermediaries, further changes are expected in the integration of CoreShares with 10X Investments.

Scaling and broadening horizons

At the time of the webinar the two companies accounted for a combined AUM of R32 billion. While the financials behind the merger were briefly highlighted, it was the operational plan to integrate the two businesses that was unpacked at greater length.

“The plan is for the CoreShares brand to hang around for 6 months after we achieve regulatory approval,” Gareth said, before shedding light on the entrance into the multi-asset space. “We’re going to be inviting IFAs to a series of workshops and events early next year taking you through the methodology of these products, their pricing, and making them broadly available to the IFA market. Naturally LISP access is key requirement.”

ETFs are still very much in focus despite some of the friction these products face on LISPs. “We want the ETF side of the book to be more accessible,” Gareth highlighted. “How we take that to the advice market is a challenge.”

The investment philosophy

According to Anton, the business bases its investment philosophy on three core principles: “Firstly, we believe in the value of a long-term strategic asset allocation. Secondly is this obsession with costs. And finally, diversification across securities, asset classes, and markets.”

In the pursuit of striking a balance between active and passive strategies, Anton explained the team keeps sight of, and aligns itself with, global standards in order to stay ahead of the curve in South Africa.

“You have huge firms like Vanguard and BlackRock which have really championed the move toward index [investing], very established and large institutions which have been marketing, educating and informing the public around index management. It’s important that we get behind that.”

As passive strategies lead the Environmental, Social and Governance (ESG) revolution, Coreshares and 10X are also primed to embrace ESG investments in the next 12 months. “ESG is a relatively small market,” Anton explained. “But we do absolutely believe in providing ESG products and integrating it into what we do. I see it as a great opportunity in the South African market, we have to just design it right.”

The next phase

Despite all of the changes set to take place, both entities aim for end-clients and the IFA market to experience as little disruption as possible. When advisers asked about whether there will be any changes to how they can be contacted they were assured that the channels will remain as is with Gareth and the CoreShares team. “We will make sure that we are highly visible and readily available,” he emphasised.

Nonetheless, we can expect to see the next phase of the integration by the start of 2023. The promise of a fresh start will touch on different facets of the new business, with achieving genuine diversity at all levels being a key objective spotlighted in the discussion.

“We are a South African business, and we represent this on our board” Tobie emphasised. “We are starting to transform top-down, and vice versa.”

Another key factor in the way the new business will engage with the wider market is through education.

“Both companies have a strong culture in multimedia and wanting to educate [people] around index investing,” Gareth said, in support of a point by Tobie that the only way to move the needle from 6% of South Africans retiring comfortably would be by focusing on education.

Other questions and answers covered in this discussion included clarification about the relationship between 10X Investments and Old Mutual, competition between funds and businesses possibly affecting the merger, 10X adopting the Vanguard growth model, financial literacy and more.

In this recording, Michelle Noth, Tobie van Heerden, Anton Eser and Gareth Stobie unpack the rationale for the move, and discuss what it means in the marketplace, to investors and IFA’s in particular.

Watch the recording:

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