10X is building South Africa's passive champion

In 2023, passive assets under management (AuM) surpassed active AuM in the US for the first time. This milestone underscores the relentless global growth of passive investing, driven by younger investors demanding greater choice, lower fees, and digital-first experiences. As this trend goes global, South Africa emerges as a prime opportunity, with passive AuM projected to triple over the next decade.

South Africa's pension market offers attractive opportunities for passive asset management due to its size, sophistication, and growth potential. 10X is emerging as the leader in the passive market in South Africa and is rapidly evolving into a tailored solutions business with a scalable investment engine with ~$3bn in AuM. Enabled by its tech and business infrastructure, the company is able to address the needs of a wide range of customers across South Africa, from retail to corporate, to serving intermediary asset managers.

10X leading the passive wave in South Africa

As Africa's largest pension market, South Africa boasts a savings pool exceeding $700 billion, providing significant scale for index-based investments. The market is underpinned by a robust regulatory framework, including the Pension Funds Act. Recent reforms, such as the implementation of default investment strategies, have increased demand for low-cost, passive investment options.

Passive investments have grown by more than 20% annually in South Africa since 2022, increasing from 6% to 10% of total AuM in South Africa. The passive market is expected to continue its historical growth rate of 20% over the next five years to reach ~20% market share of total AuM, providing a unique opportunity to scale for existing passive players in South Africa.

10X continues to gain market share, capturing 50% of net flows into passive investments in South Africa for the 12 months ending on 31 March 2024, and ranking second among active and passive asset managers in South Africa in terms of net flows over the same period. Their flagship fund, the 10X Your Future Fund, has evolved to become the third largest index multi-asset fund in South Africa, providing exposure to local and offshore assets.

The company addresses the needs of retail and corporate customers, offering a suite of low-cost, long-term savings solutions tailored to diverse needs. For retail customers, 10X provides an easy-to-use interface for managing retirement savings, tax wrapper accounts, and other investment products. Corporates benefit from 10X's comprehensive employee benefits solutions, which streamline the administration of retirement funds and other savings schemes.

Acquiring a young customer base that will drive AuM growth

South Africa is a young country with an average median age around 27 years old (1), compared to 41 years old in Canada (2) and 38 in Australia (3). In line with global trends, the younger population in South Africa prefers a digital-first experience, with 59% preferring mobile apps (4). Many are also looking for lower fees, with only 37% satisfied with their current investment fees (5).

10X's unique offering of simple, digital, low-cost retirement products has accumulated 23k customers, with the vast majority below the age of 45. Most of the customers are acquired directly through digital channels, but some are referred to the company through 10X partner advisors. Rupert Sully, who heads the company's D2C channel, commented, "being data-driven allowed us to focus on acquiring customers with limited marketing spend, and we are building very long-term relationships that extend over the lifetime of our customers". The company offers its customers a fully digital onboarding experience with an automated and personalised investment plan. It also provides its customers with access to dedicated wealth experts when needed.

The company has a leading NPS score of 55 in the financial industry, a reflection of the company's unique and superior offering to its customer base. This ability to overserve its customers has helped develop a channel to capture some of the 45k customers it serves through its umbrella offering to corporates in South Africa as retail customers.

Evolving beyond just passive, to an investment solutions provider

At the heart of 10X's success lies its highly scalable investment manufacturing engine that is powered by a strong digital and business infrastructure. Creating tailored solutions is only possible by addressing the passive market.

Anton Eser, who is the CIO of 10X, has seen the evolution of investment solutions market in the UK during his time at LGIM. "There are many parallels in the South African market today, to when client-driven investment solutions took off in the UK".

10X's wide range of capabilities allows it to tailor to the exact client needs. Powered by a wide range of fund rule-based 'manufacturing' capabilities, 10X combines its beta blocks that covers everything from multi-assets to income to international exposure to create tailored and white-label investment products for Discretionary Fund Managers (DFMs) and Independent Financial Advisors (IFAs). It has the infrastructure to create ETFs, with 10 already listed on the JSE.

Looking ahead: A bright future

Tobie van Heerden, the CEO of 10X sees the company perfectly positioned to become the leader of passive investment in South Africa “South Africa is one of the most exciting markets for asset management, it offers the demographics of a developing country with a highly developed market regulatory regime”. The company has already accumulated a very strong management team that is well positioned to drive the company’s growth over the long term.

10X is focused on scaling its offering as it evolves its technology to the next level while maintaining its focus on low-cost, high-performance and long-term investment solutions. Tobie further commented, “With our robust growth, scalable platform, and clear vision for the future, we have everything we need to be the leader in South Africa passive market”.

10X is not just riding the wave of passive investing – it's shaping the future of asset management in South Africa. As the market continues to expand, 10X's commitment to accessibility, performance, and customer satisfaction sets it on a trajectory to become the dominant force in South Africa's passive investment landscape.

1. South Africa - average age of the population 2020 | Statista
2. Canada Population (2024) - Worldometer (worldometers.info)
3. Canada Population (2024) - Worldometer (worldometers.info)
4. South African Investment Management Outlook (ebnet.co.za)
5. South African Investment Management Outlook (ebnet.co.za)