MoneyMarketing March 2019

31 March 2019 | www.moneymarketing.co.za

@MMMagza

First for the professional personal financial adviser

WHAT’S INSIDE

YOUR MARCH ISSUE

MoneyMarketing's guide to investing offshore in volatile times

page {I}

DIY NOT ALWAYS SIMPLE FOR COMPLIANCE

THREE THINGS EVERY EARLY EARNER NEEDS TO KNOW

Making use of an external compliance practice could address the compliance responsibilities businesses face.

Protecting your young clients’ ability to earn an income should be the foundation of any financial plan.

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What Budget 2019 means for investors

T

he 2019 National Budget will forever be remembered as ‘the Eskom Budget’ – and with good reason. It contained the largest bailout in South Africa’s history as it announced a government injection into troubled stateowned Eskom of R69bn over three years.

The National Treasury now expects widening deficits, resulting from the support to Eskom being greater than under-spending elsewhere.

The main fiscal deficit is seen as widening to 4.7% of GDP in FY19/20, before narrowing to 4.3% in FY21/22.

The spending ceiling will be breached and the debt-to-GDP ratio has been elevated slightly to 58.9% (58.5% previously) and is expected to peak at 60.2% in 2023/24. Government also experienced a pronounced deterioration in contingent liabilities.

The amount of cash injections to Eskom “was broadly in line with our initial thoughts for 2019, although the increase in the expenditure ceiling by R16bn to meet needs over the next three years came as a surprise,” say

the deficit and a worsening of the debt burden, we believe SA is likely to face a ratings downgrade in the medium term.”

Bank of America Merrill Lynch economists, Rukayat Yusuf, Gabriele Foa and Ferhan Salman.

Ratings agencies The question on the lips of many analysts and investors is: How will the ratings agencies view Budget 2019?

In the press conference on the day of the Budget Speech, the Minister of Finance, Tito Mboweni, remarked to reporters: “Treasury has been having difficult conversations with the ratings agencies and we’ll be going on a roadshow next week.”

Stanlib Chief Economist, Kevin Lings, expects that the budget may buy South Africa some time with these agencies, “in particular Moody’s Investors Service, which is the only ratings agency to maintain the country on an investment grade, with a stable outlook. It is likely that Moody’s will downgrade the outlook to negative in March and will make another assessment later of how the government is fulfilling its promises.

If there is no growth, an increase in

Budget 2019 from an investing perspective “Widening deficits are normally seen as being more equity than bond friendly, but this budget is neither,” says Chantal Marx, Head of Research at FNB Securities. “Spending is being cut back so the economic environment will remain challenged from a risk asset perspective, while borrowing requirements have gone up, keeping bond supply under pressure.”

Marx lists some of Budget 2019’s more specific impacts on South African equities: • While there were no changes to income tax brackets, there were also no adjustments made for bracket creep. This, together with higher ‘sin taxes’ and fuel levies, will have a negative impact on the consumer – offsetting this somewhat will be a longer list of zero-rated VAT items (but this was already known prior to the speech). Medical aid tax credits have not been increased. Grant payments were increased by approximately 5%.

from 1 January 2013 to 31 January 2019 18 %

CAGR

12 % 10 %

Laurium Market Neutral Prescient (RI) Hedge Fund (MN)

4%

Fund

Laurium Long Short Prescient (RI) Hedge Fund (LS)

8% 6%

1 Year Annualised

Laurium Aggressive Long Short Prescient (QI) Hedge Fund (ALS)

14 %

2% 0% 0%

Launch

High %

2%

4%

6%

8%

10%

Finance Minister, Tito Mboweni

Don’t let the equity markets get you down!

•

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MN

01/01/09

22.8%

-1.9%

LS

01/08/08

34.5%

-5.5%

ALS

01/01/13

55.1%

-8.8%

We know Hedge Funds

12%

Volatility

T +27 11 263 7700

Continued on page 3

Low %

Alsi TR (Equity) ALBI TR (Bonds)

STeFI (Cash)

Pressure could translate into top-line pressure for consumer stocks.

• Specific to ‘sin taxes’, excise tax on beer/cider, wine and spirits is to rise by 7.4%, ahead of CPI. This will be negative for the likes of Distell.

• Sugar tax was adjusted for inflation.

This will have a marginally negative impact on food and beverage producers.

• Moving forward with proposals from the 2012 budget, government intends to publish draft legislation this year on a proposed 1% gambling levy to fund rehabilitation and awarenessraising programmes. This could have a medium-term impact on the likes of Tsogo Sun and Sun International.

It’s Time to Consider Hedge Funds

Risk Return Scatterplot 16 %

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E laurium@lauriumcapital.com

Source: Morningstar, Laurium Capital (31/01/2019)

W www.lauriumcapital.com

Annualised performance shows longer term performance rescaled to a 1 year period. Annualised performance is the average return per year over the period. Actual annual figures are available to the investor on request.Collective Investment Schemes (CIS) should be considered as medium to long-term investments. The value of your investment may go up as well as down as past performance is not necessarily a guide to future performance. CIS’s are traded at a ruling price and can engage in script lending and borrowing. Performance has been calculated on the C1 class using net NAV to NAV numbers with income reinvested. The performance for each period shown reflects the return for investors who have been fully invested for that period. Individual investor performance may differ as a result of initial fees, the actual investment date, the date of reinvestments and dividend withholding tax. A schedule of fees, charges, and maximum commissions is available on request from the Manager. There is no guarantee in respect of capital or returns in a portfolio. A CIS may be closed to new investors in order for it to be managed more efficiently in accordance with its mandate.

Prescient Management Company (RF) (Pty) Ltd is registered and approved under the Collective Investment Schemes Control Act (No.45 of 2002). Laurium Capital (Pty) Limited, Registration number: 2007/026029/07 is an authorised Financial Services Provider (FSP34142) under the Financial Advisory and Intermediary Services Act (No.37 of 2002). For any additional information such as fund prices, brochures and application forms please go to www.lauriumcapital.com

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31 March 2019

Continued from page 1

• The introduction of carbon tax on 1 June 2019 will be negative for large emitters like Sasol, the steel industry, and other manufacturing groups.

Sasol has previously estimated the impact on its income statement specifically at between R700m and R2bn a year.

• The higher fuel levy will be negative for logistics companies, although many operate on a passthrough basis.

• Because of the way ad valorem excise duty is calculated, vehicles produced locally are taxed at a higher rate than imported vehicles.

To remove this anomaly, government proposed to align the tax treatment. This could provide some support to the local vehicle manufacturing industry along with motor vehicle retailers and they could use this opportunity to restore margins, which have been under immense pressure over the last few years.

• Lower capital expenditure near term by government will be a net negative for infrastructure players – specifically in the construction space. A commitment to longer term support for the infrastructure fund will be positive.

• An additional R3.5bn has been made available to improve non-toll roads. This is expected to be positive for the likes of AECI and Raubex.

• There was no new information provided on the NHI. Although probably marginally positive (it seems as if government will delay implementation), the overhang for SA hospital groups will likely persist.

He reminds investors that they qualify for the following investment-related tax breaks: • Marginal tax – Individuals pay a lower marginal tax rate on capital gains (18%) and dividend income (20%) compared to interest, rental and salary income (45%). This means that investors not using tax-advantaged vehicles are, all other things being equal, better off holding equities in their portfolios than other assets.

• Tax-free investments – Tax-advantaged contributions to a tax-free investment accounts remain at R33 000 per year. This arguably remains the best tax break available to individual investors with long-time horizons at the moment. While you use after-tax money to invest in a tax-free investment, all income and growth earned from the underlying funds are tax free, and all proceeds at the time of withdrawal will also be untaxed.

There are also no investment restrictions for tax-free investments. Just do not over-contribute – contributions in excess of the annual R33 000 limit are taxed very punitively.

• Retirement funds – Tax-deductible contributions to retirement funds remain at 27.5% of taxable income (excluding retirement benefits and capital gains) or R350 000 annually. Your capital and reinvested income will grow tax free while it remains in the retirement fund, and you will only pay tax on the way out when you start to withdraw from your retirement fund (at the thenprevailing tax rate). Your underlying investments must comply with Regulation 28 of the Pension Funds Act, which sets a limit on the level of exposure you can have to equity, property and offshore assets.

Meanwhile, it’s encouraging that Budget 2019 has • Interest exemption – The general interest not placed any limitations or constraints on South exemption remains R23 800 for investors under Africans’ ability to invest internationally, says Erik 65, and R34 500 for investors over 65. At the Olwagen, Provincial Head, Standard Bank Wealth current yield of around 8% on managed income International, Offshore Services South Africa. funds such as Coronation Strategic Income and “South Africans will continue to be allowed to utilise Coronation Money Market, this means that you their annual R1m discretionary allowance, and up can invest approximately R300 000 if you are to R10m foreign investment allowance – with tax under 65 or R430 000 if you are over 65 before clearance. These remain very generous allowances in starting to pay tax on interest earned. a fiscally constrained environment,” Olwagen adds. • Capital gains – The annual capital gains exclusion of the first R40 000 of gain is unchanged. This No changes to taxes exclusion makes it more efficient to stagger the impacting investors realisation of capital gains over different tax years.

In his Budget Speech, Minister Mboweni did not • Endowments – Endowment policies also remain announce any material changes to the key taxes attractive for certain long-term investors. impacting investors. “The rates for marginal income Individual investors in these investment policies tax, dividend tax, capital gains tax and VAT all currently pay effective tax rates of 30% on rental remained unchanged,” says Pieter Koekemoer, Head income, 20% on dividend income and 12% on of Personal Investments at Coronation. capital gains.

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NEWS & OPINION

EDITOR’S NOTE

I

attended the Budget 2019 media lock-up session in Pretoria at 7am on the 20th of February. I’ve lost count of how many times I’ve been to the lock-up, rising from my bed at the crack of dawn to drive down the N14 from the West Rand to Pretoria. I prefer to study the budget documents at leisure and discuss them with media colleagues over the seven-hour duration of the lock-up – and I’m also able, unhurried, to produce content for the MoneyMarketing website, publishing it only when the budget speech begins in Parliament and the embargo is lifted.

This year was a little different. Journalists are usually ‘locked up’ in the historical Treasury building at 40 Church Square that used to house the Reserve Bank. This year, the air conditioning wasn’t functioning optimally there, so we were moved to the more modern Treasury building over the road. As usual, the Treasury staff were helpful and hospitable, generously providing us with breakfast, tea and lunch.

The lock-up press conference – in which the Pretoria journalists participate via video link with Cape Town – was a bit longer than usual. Finance Minister Tito Mboweni, spoke very sincerely about the budget that he was about to table and the challenges facing the country. He was – and with good reason – a little perturbed by views expressed in the media that he had little to do with Budget 2019 and that is why he began his speech with his oath of office. While there is speculation that the ‘hard to handle politically’ Minister Mboweni won’t be in his position after the May election, he told us that he’d be around “for a while” and that we should not ask him about this again. The fact is we need more people like the Finance Minister who speaks the truth – and who says what President Cyril Ramaphosa won’t say.

Budget 2019 itself was, I think, a successful attempt to balance the needs of Eskom with the protection of the country’s credit rating. Minister Mboweni and his team at the Treasury have done a good job of trying to moderate expenditure by trimming the wage bill and insisting that any funds for Eskom will need cost savings. I don’t expect the ratings agencies to downgrade us.

Janice janice.roberts@newmedia.co.za @MMMagza www.moneymarketing.co.za

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NEWS & OPINION

PROFILE

31 March 2019

VERY BRIEFLY

ALBERT BOTHA HEAD: FIXED INCOME PORTFOLIO MANAGEMENT, ASHBURTON INVESTMENTS

How did you get involved in financial services – was it something you always wanted to do?

You hear about families where the family business is becoming a doctor or lawyer. In my family, financial services just seems to be our family business.

My father, mother and brother have been involved in this sector for a long time. I initially thought about becoming an accountant, but I quickly realised that my passion leaned towards the more quantitatively intensive disciplines. I also had a strong interest in current affairs and geopolitics.

Fixed income with its mix of macro and quantitative demands seemed particularly interesting.

What makes a good investment in today’s economic environment?

I am tempted to say cash is king, but what makes a good investment depends entirely on what your goals are. Defining what you want from an investment, how long you are willing to hold it and what risks you are comfortable with should always be your first step.

A good investment is one that meets these criteria. The problem many investors face is that they lose sight of their goals, they look over the fence to their neighbours and think the grass is greener on the other side. Warren Buffet has said repeatedly that “it is not greed that drives the world, but envy.”

What was your first investment, and do you still have it?

The investment bug bit me in 1997 when I made my first investment. I invested in a local small cap fund, which subsequently doubled my money within 12 months. I eventually held on too long before I sold, but I was hooked. I will never forget that feeling of seeing my money grow before my eyes, seemingly without any effort – and I have spent a lot of my time since then learning about and understanding the market. I have realised that my initial strike was more luck than skill and that success in this industry is very hard to achieve. I spend every day trying to get just a little bit better at it.

What have been your best – and worst – financial moments?

My worst financial moment occurred at the time of the Taper Tantrum in 2013. For my entire investment career up to that point, yields were on a steady downward trend and while I knew intellectually that yields could rise, I kept being surprised about both the rate and severity of the increases. The recurring concern in financial markets, whenever a new crisis is on the horizon, is the lack of experience of the current crop of analysts and portfolio managers who, at the time of writing, could have been in the market up to nine years without seeing a major crisis.

My best financial moment was without a doubt the three months post the firing of the then Finance Minister Nhlanhla Nene. There was significant fear in the local and the international markets, but in my opinion the unification and show of strength by civil society more than justified confidence in the self-correcting mechanisms of the country. Having a high allocation to local bonds at that time added significant value to the portfolios.

What’s the best book on investing that you’ve ever read – and why would you recommend it to others?

This is an almost impossibly difficult question for me. There are a number of thoughtful people in this industry, which is made clear by the abundance of extremely insightful books. Being pressed to pick just one is almost painful.

The best I can do is to direct people to the road of lifelong learning and the best book in that space is Poor Charlie’s Almanac. It is a book filled with the collective writings and speeches of Charlie Munger (Warren Buffet’s business partner). He has made merging knowledge from distinct disciplines into an art form and his reading suggestions and learning philosophy will help most investors to better understand complex systems and interactions.

UPS & DOWNS

The world’s top ten highest-earning hedge fund managers made a whopping $7.7bn in 2018, according to Bloomberg’s inaugural ranking of hedge fund managers.

James Simmons was top of the list, earning $1.6bn in additional income in 2018, which saw his net worth climb to $16.55bn. His hedge fund, Renaissance Technologies, is one of the

largest by assets under management, with over $80bn in assets as at the close of 2018. Others making the top five on the list were Ray Dalio (Bridgewater Associates, $1.26bn), and Ken Griffin (Citadel, $870m).The fourth and fifth highest earners were Two Sigma founders John Overdeck and David Siegel. Their fund saw each of them earn $770m in remuneration last year.

4 WWW.MONEYMARKETING.CO.ZA

A Canadian court appointed Ernst & Young as monitor for the cryptocurrency exchange QuadrigaCX, after the company sought protection from creditors following the death of its CEO, the Financial Times reports. Gerald Cotten died in India late last year taking with him clients’ access to almost $150m in digital assets. He took sole responsibility for the handling of exchange

assets and passwords were stored in an encrypted laptop to which he alone had access.

This has left customers unable to reach $150m in cryptocurrencies. The personal keys that gave them access to their coins were stored in ‘cold wallets’, encrypted hardware that is not connected to the internet.

Only Cotton could deencrypt the cold wallets.

The Nedbank Private Wealth App has been ranked second overall in the 2018 Mobile Apps for Wealth Management benchmarking report. This globally relevant research report documents the findings of in-depth research

by Cutter Associates into 22 of the world’s leading wealth managers. The report also ranked the Nedbank Private Wealth App highest out of all South African participants in the research. According to Andrew Westaway, Head of Business Innovation at Nedbank Wealth Management, the second place international ranking is an exceptional achievement, not least because it represents a jump of five places from the 7th position the Nedbank Private Wealth App achieved in the 2017 report. “The second place ranking of our App in this latest report validates the effectiveness of Nedbank Private Wealth’s commitment to innovation as part of our comprehensive, integrated digital strategy,” Westaway says, “and while our focus on continuously innovating to expand and improve our app has seen it steadily climbing the user ratings in the various app stores, this latest ranking is invaluable external recognition of our innovation commitment by our industry and peers.”

MMI Health, the combined healthcare administration division of the Momentum and Metropolitan Health brands, was awarded the prestigious Golden Arrow Award at the PMR. Africa Business Excellence Awards last month. PMR.Africa annually asks respondents from large and smaller businesses to rate their experience in the category ‘Medical Scheme Administrators’. The survey is very in-depth and involves ratings across 37 different criteria. MMI Health scored very favourably in all categories and received an overall rating of 8.15 out of 10. Damian McHugh, Head of Health Sales and Marketing at Momentum, says, “Group effort is the reason behind this achievement. It is always about a collective effort that produces excellence in the work that we do and deliver to our members. We couldn’t be more proud of our team.”

Medical scheme Profmed has announced the appointment of Craig Comrie, as the business’s new Principal Officer and CE. Comrie is succeeding Graham Anderson, who has been at the helm of the organisation since 2003 and has grown the scheme’s membership to 34 000.

Known as ‘the CA with a difference’, Comrie’s financial and auditing experience has provided a foundation that stretches into both corporate and consumer solutions. Comrie, who joins Profmed with over 18 years’ experience in the medical scheme industry, has always admired its culture. “Graham and the team have built quite a reputation of excellence in a tough medical scheme environment where members are under pressure financially. Medical schemes are consolidating as there is no growth in member numbers, but Profmed bucks the trend and grows steadily year after year,” says Comrie.

Anderson will continue to assist Profmed in an advisory role if required.

31 March 2019

Expat tax is coming South Africans earning an income abroad need to consider their options.

A

n amendment to the SA Income Tax Act becomes effective in March 2020, and has hard-hitting consequences for South Africans working outside SA. It requires that SA tax residents spending more than 183 days abroad (of which 60 days are consecutive) pay SA tax of up to 45% of their foreign employment income once it exceeds R1m per annum. And, although this threshold may seem generous, employment income for this purpose includes allowances and fringe benefits like the provision of housing, security and flights, among other things. It is also likely that pension contributions will be included in the threshold.

Living in Dubai, for example, is expensive. How do you maintain a standard of living and also pay tax on your foreign income? Bryony Oostingh, Consultant at Sovereign Trust SA, says that you have only a few options: • Do nothing (which isn’t advisable) • Move back to SA • Set up a structure to limit your liability and protect your foreign income and assets • Financial emigration.

Financial emigration is the formal process of cutting all ties with SA and informing SARS and the SARB that you will no longer be ‘ordinarily resident’ here. Formal emigration can impose a lot of restrictions on assets remaining in SA as well as assets that you might want to acquire in SA, and can have significant capital gains tax repercussions.

Oostingh notes that someone who has been an expatriate for a long period and who ‘emigrates’ just before March 2020 must expect their action to be viewed with suspicion. However, it may still be a good option for someone who has been living abroad for the last 15 years, has acquired citizenship abroad, and has no intention of returning to SA. Likewise for someone who expects to inherit more than R10m, as this may enable the inheritance to be paid to them directly rather than having to obtain SARB approval and tax clearance to get the funds offshore using their foreign investment allowance (only R10m per year).

As for creating compliant tax-efficient structures to preserve offshore assets and income, Oostingh recommends an offshore investment portfolio housed in a Sovereign Conservo International Retirement Plan (Guernsey 40ee) – especially if retirement contributions fall into the threshold. “Rather minimise your tax exposure than be completely exposed. The Guernsey-based Conservo is exempt from capital gains tax on the initial capital invested, there is no income tax levied on interest earned and, potentially, no estate duty, which makes it an efficient succession planning mechanism. Another alternative to creating an international retirement plan is to consider setting up a professional services company in a tax-friendly jurisdiction which could invoice an international employer.” However, careful consideration needs to be given to the new substance requirements introduced in most of the offshore jurisdictions.

“Basically,” says Oostingh, “South Africans have less than twelve months to decide whether they will formally emigrate or not, and if not, they need to ensure that they have legallycompliant tax structures in place if they want to maintain the lifestyles they are accustomed to.”

Bryony Oostingh, Consultant at Sovereign Trust SA

PROFESSOR DAVID WARNEKE Head of Tax Technical, BDO South Africa

NEWS & OPINION

Venture capital investments and tax risk

The Income Tax Act (ITA) introduced a Venture Capital (VC) Company (VCC) incentive in 2009 to stimulate small and medium enterprise (SME) investments. The VCC incentive is extremely popular as it grants an unlimited income tax deduction for investment in VC shares issued to a taxpayer by a VCC, subject to certain caveats.

The incentive has unfortunately been subject to abuse by a number of taxpayers, which necessitated substantial amendments to its tax treatment in 2018.

The Tax Administration Act (TAA) contains a Reportable Arrangement regime that requires reporting to SARS by a ‘Participant’ of various types of ‘arrangements’. The Participant must make disclosure within 45 business days of the arrangement becoming a Reportable Arrangement, or within 45 business days of becoming a Participant. A Participant is exonerated from the reporting obligation if another Participant disclosed the Reportable Arrangement.

Not reporting a Reportable Arrangement results in severe penalties in terms of the TAA, which can be as high as R3.6m, depending on the nature of the Reportable Arrangement, quantum of the ‘tax benefit’, duration of non-disclosure, and whether the Participant is a ‘Promoter’. Non-disclosure is subject to penalties imposed for every month that the Reportable Arrangement remains undisclosed, up to a maximum of 12 months. Tax benefit for purposes of the Reportable Arrangement regime is wide and means “the avoidance, postponement, reduction or evasion of a liability

for tax”.

Reportable Arrangements include an ‘arrangement’ that gives rise to an income tax deduction but is not disclosed as an expense for financial reporting purposes. Excluded from the disclosure obligation (by Government Notice 140 of 3 February 2016), is an arrangement in this category if the aggregate tax benefit (which is, or may be) derived by all Participants does not exceed R5m. Disclosure is also not required (in respect of this specific category) if the tax benefit is not the main or one of the main benefits of the arrangement.

VCC Investors who are obliged to produce financial statements (such as corporate investors) appear to fall into this category as invariably the VCC investment will be disclosed as an asset and not an expense for purposes of financial reporting standards, albeit that it should qualify for an income tax deduction. If the tax deduction exceeds R5m in aggregate (for all Participants) or the tax benefit was the main or one of the main benefits of the arrangement, monthly penalties will generally be triggered within 45 business days of the arrangement having been entered into for up to 12 months until the arrangement is reported to SARS by every Participant, except if the Participant obtains a written statement as per above.

VCC Investors should carefully consider whether they are Participants in a Reportable Arrangement and should meticulously manage their disclosure obligations.

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NEWS & OPINION

31 March 2019

Raging Bull Awards for

T

2018

he annual Raging Bull Awards gala dinner took place on 30 January 2019 at the Cape Town Convention Centre. These awards were presented to the best-performing South African ASISA registered Collective Investment Schemes and Management companies for the period ended December 2018.

The Profile Group and its subsidiaries, ProfileData and PlexCrown Fund Ratings, are proud to have been selected as the data providers for the awards.

The data includes both straight performance over three years for individual funds and calculates the risk-adjusted performance for the management company awards over five years.

“In the tough economic conditions we have faced, both in South Africa and globally in recent years, the investment selection process for both investors and fund managers remains as difficult as ever and our congratulations to the Raging Bulls and performance certificates winners,” said Ernie Alexander, Executive Chairman of the Profile Group.

“Thank you also to our dedicated team at ProfileData and PlexCrown, our partners Personal Finance, and all the sponsors and contributors for making the Raging Bull Awards what they are today.”

RAGING BULL AWARDS: STRAIGHT PERFORMANCE OVER 3 YEARS – DOMESTIC BEST SOUTH AFRICAN EQUITY GENERAL FUND RECM Equity Fund BEST SOUTH AFRICAN INTEREST-BEARING FUND Sasfin BCI Flexible Income Fund BEST (SA DOMICILED) GLOBAL EQUITY GENERAL FUND BlueAlpha BCI Global Equity Fund

STRAIGHT PERFORMANCE OVER 3 YEARS – OFFSHORE BEST (FSCA-APPROVED) OFFSHORE GLOBAL EQUITY FUND Contrarius Global Equity Fund

RISK-ADJUSTED PERFORMANCE OVER 5 YEARS – DOMESTIC BEST SOUTH AFRICAN GENERAL EQUITY FUND ON A RISK-ADJUSTED BASIS Fairtree Equity Prescient Fund BEST SOUTH AFRICAN MULTI-ASSET EQUITY FUND ON A RISK-ADJUSTED BASIS Sanlam Multi Managed Conservative Fund of Funds BEST SOUTH AFRICAN MULTI-ASSET FLEXIBLE FUND ON A RISK-ADJUSTED BASIS Long Beach Flexible Prescient Fund

RISK-ADJUSTED PERFORMANCE OVER 5 YEARS BEST (FSCA-APPROVED) OFFSHORE GLOBAL ASSET ALLOCATION FUND ON A RISK-ADJUSTED BASIS Investec GSF Global Multi-Asset Income Fund

MANAGEMENT COMPANIES OF THE YEAR - DOMESTIC SOUTH AFRICAN MANAGEMENT COMPANY OF THE YEAR Allan Gray

MANAGEMENT COMPANY OF THE YEAR – OFFSHORE Nedgroup Investments International

SPECIAL RAGING BULL AWARDS

CHAIRMAN’S AWARD FOR THE BLACK MANAGER OF THE YEAR Kagiso Asset Management EXECUTIVE EDITOR’S SPECIAL AWARD Vunani Limited

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Sanlam shows breadth of skill at Raging Bulls

S

anlam walked away with two certificates and one Raging Bull Award at the 23rd annual Raging Bull Awards Ceremony held at the CTICC in Cape Town last month. This prestigious event honours the star managers in the South African unit trust industry, measured on their longterm performance.

Certificates for asset-specific funds are based on straight performance, calculated by Profile Data for the three-year period to end 2018. The winners for straight performance were the Sanlam Investment Management (SIM) Enhanced Yield Fund and the Sanlam Global Property Fund. It was a repeat victory for both these funds.

For risk-adjusted performance over the five years to end 2018, the Sanlam Multi-Managed Conservative Fund of Funds scooped the much coveted Raging Bull Award for Best SA Multi-Asset Equity Fund, outperforming all other multi-asset funds across the low-, medium- and high-equity categories on a risk-adjusted basis.

Consistency is the name of the game “What makes the win of the SIM Enhanced Yield so exceptional is the consistency with which it remains at the top,” Nersan Naidoo, CEO of Sanlam Investments, says. It’s been named the best SA Interest-Bearing Short-Term Fund at four of the past five years’ Raging Bull Awards ceremonies, receiving the honour of being first in its category for the three years to the end of 2014, 2016, 2017 and 2018 respectively. The SIM Enhanced Yield Fund is actively managed by Melville du Plessis.

Naidoo says the track record of the fund demonstrates its ability to outperform during increasing and decreasing interest rate cycles, as well as in favourable and unfavourable credit market environments. This fixed interest fund invests in cash, government, corporate and inflationlinked bonds, looking to offer investors a better return than that of a money market fund over 12 months or longer.

Offshore expertise pays off For the second year in a row, the Sanlam Global Property Fund scooped the certificate for the Best FSCA-approved Offshore Global Real Estate General Fund. Another global property fund, the Catalyst Global Real Estate Prescient Feeder Fund, won a certificate for Best SA-Domiciled Global Real Estate Fund based on risk-adjusted performance. Sanlam Investment Holdings owns a 69% stake in Catalyst Fund Managers.

THIS PRESTIGIOUS EVENT HONOURS THE STAR MANAGERS IN THE SOUTH AFRICAN UNIT TRUST INDUSTRY Protecting clients’ capital The Raging Bull Award winner on the basis of its risk-adjusted performance is the Sanlam MultiManaged Conservative Fund of Funds. It is managed by Paul Wilson and the Sanlam Investments Multi-Manager team, and aims to protect capital and provide stable growth at low levels of risk.

“All multi-asset funds across the low-, medium- and high-equity categories were considered for this award. In other words, the fund came first across the three industry categories in which the bulk of the retail industry’s retirement money is invested – a phenomenal achievement,” Naidoo says. “Our win showcases both our multimanager skill in selecting the right blend of managers across Sanlam and third-party funds, and our ability to protect clients’ capital in volatile times.”

Nersan Naidoo, CEO, Sanlam Investments

KINGJAMES 46898

We’ve been proving ourselves for many years.

The Raging Bull Awards judges agree.

At Sanlam Investments, we know that consistency, hard work and exceptional talent can achieve great results. Which is why we are pleased to announce that the Sanlam Multi Managed Conservative Fund of Funds was awarded for its performance at the 2019 Raging Bull Awards. The Sanlam Investment Management Enhanced Yield Fund and Sanlam Global Property Fund were awarded certificates in their categories at the awards. When it comes to consistently managing risk for investment success, our team’s expertise is hard to match.

Our expertise includes:

Investments www.sanlaminvestments.com

Sanlam Collective Investments (RF) (Pty) Ltd is a registered and approved Manager in terms of the Collective Investment Schemes Control Act 45 of 2002 (CISCA).

A schedule of fees can be obtained from the Manager. Full details and the basis of the awards are available from the Manager.

The Sanlam Multi Managed Conservative Fund of Funds was awarded the Best South African Multi-Asset Equity Fund, for risk-adjusted performance over five years to 31 December 2018, at the Raging Bull Awards on 30 January 2019. The Fund is a conservative fund, which aims to protect capital at low levels of risk. Maximum fund charges include (incl. VAT): Advice initial fee (max.): 3.45%; Manager initial fee (max.): 0.00; Advice annual fee (max.): 1.15%; Manager annual fee (max.): 1.09%; Total Expense Ratio (TER): 1.12%.

The Sanlam Investment Management Enhanced Yield Fund was awarded the Best South African Interest-bearing Short-term Fund, for straight performance over three years to 31 December 2018, at the Raging Bull Awards on 30 January 2019. The Fund is a conservative fund, which aims to offer a higher yield than a money market fund by taking advantage of the higher yields offered by a wide range of debt instruments including corporate bonds. This fund will have no equity exposure.

Maximum fund charges include (incl. VAT): Advice initial fee (max.): 0.34%; Manager initial fee: N/A; Advice annual fee (max.): 1.15%; Manager annual fee: 0.48%; Total Expense Ratio (TER): 0.49%.

The Sanlam Global Property Fund was awarded the Best (FSCA-Approved) Offshore Global Real Estate General Fund, for straight performance over three years to 31 December 2018, at the Raging Bull Awards on 30 January 2019. This is a Section 65-approved fund under the Collective Investment Schemes Control Act 45 of 2002. The Fund is a sub-fund of the Sanlam Universal Funds plc. The Fund is managed by Sanlam Asset Management (Ireland) Limited. Sanlam Collective Investments (RF) (Pty) Ltd is the South African Representative Office for this fund. Maximum fund charges include: Investment management charges: 1.07%; Advice charges: 0.00; Administration charges: 0.00; Effective Annual Cost (EAC): 1.23%.

NEWS & OPINION

31 March 2019

Morningstar Winners for 2019 SA Fund Awards

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orningstar Research, a subsidiary of Morningstar, Inc. a leading provider of independent investment research, last month announced the winners of its 2019 South Africa Fund Awards.

The annual Morningstar South Africa Fund Awards recognise funds and fund houses that added the most value for investors within the context of their relevant peer group in 2018 and over longer time periods.

Morningstar selects the finalists using a quantitative methodology with a qualitative overlay that considers the one-, three-, and five-year performance history of all eligible funds, and adjusts returns for risk using Morningstar Risk, a measure that imposes a higher penalty for downside variation in a fund’s return than it does for upside volatility.

“The winners of this year’s South Africa Fund Awards demonstrate there are still opportunities for patient investors despite slow domestic

growth and trade risks affecting global emerging markets,” says Tal Nieburg, Managing Director for Morningstar South Africa. “The winning funds and fund houses relied on skill, experience, and solid fund management strategies to deliver strong returns for investors.”

The winners for the 2019 Morningstar South Africa Fund Awards are: FUND CATEGORY AWARDS:

WINNERS:

Best Aggressive Allocation Fund

Aylett Balanced Prescient

Best Bond Fund

Allan Gray Bond

Best Cautious Allocation Fund

ABSA Inflation Beater

Best Flexible Allocation Fund

Platinum BCI Worldwide Flexible

Best Global Equity Fund

Melville Douglas SFL Global Equity

Best Moderate Allocation Fund

NFB Ci Managed

Best South Africa Equity Fund

Aylett Equity Prescient

FUND HOUSE AWARDS:

WINNERS:

Best Fund House: Larger Fund Range

Nedgroup Collective Investments

Best Fund House: Smaller Fund Range

NFB Asset Management

Platinum Portfolios a winner at Morningstar Awards

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he annual Morningstar Awards recognise funds and fund houses that added the most value for investors within the context of their relevant peer group in 2018 and over longer time periods.

Morningstar selects the finalists using a quantitative methodology with a qualitative overlay that considers the one-, three-, and five-year performance history of all eligible funds, and adjusts returns for risk using Morningstar Risk, a measure that imposes a higher penalty for downside variation in a fund’s return than it does for upside volatility.

The Platinum BCI Worldwide Flexible fund was the winner of the best Flexible Allocation Fund.

Experienced team with a long track record The Platinum BCI Worldwide Flexible Fund was launched on 1 July 2011. The portfolio is managed by Mel Meltzer and Charolyn Pedlar at Platinum Portfolios (Pty) Ltd. They have managed the portfolio since launch and have a combined experience of more than 50 years.

Flexible mandate allowing us risk-adjusted returns in the portfolio, to find the best investments we focus on two main areas, which regardless of asset class or are process and quality. Firstly, we geography operate a systematic and disciplined The Platinum BCI Worldwide Flexible investment process. This process has Fund can invest in a wide range of been developed and tested over many asset classes, including equities, fixed years. Secondly Platinum’s stockincome, property and money market selection methodology focuses on instruments, and the portfolio has finding the quality companies that we the maximum flexibility to vary prefer to invest in”, says Pedlar. investments between local and The portfolio currently has 72% of offshore asset classes. its investments offshore “Platinum’s primary and a large portion of the WE FOCUS ON focus is to own good local investments are in businesses anywhere fixed income instruments, TWO MAIN in the world. We are providing the AREAS, WHICH which prefer companies portfolio with returns of ARE PROCESS with strong brands between 7% and 8% per that have a durable annum with considerably AND QUALITY competitive less risk than local equities. advantage, sustainable debt levels, Over the next few years, investment strong free cash flow and a growing returns will ultimately be driven by dividend”, says Mel Meltzer, “We aim our stock selection process. to buy these companies at a discount “As long-term investors, we do not to fair value and hold them for the buy companies based on how they long term”. are going to perform in the next six or twelve months. Having a longerRisk is top of mind term view allows us to buy companies “As with all Platinum’s portfolios, based on their fundamentals and wait risk is top of mind. To produce good out periods where markets might

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Mel Meltzer and Charolyn Pedlar, Co-Owners, Platinum Portfolios

be mispricing them”, adds Meltzer.

“Looking forward, the portfolio has been re balanced to only have an exposure to what we consider to be lower risk companies”.

Pedlar believes the fund should provide clients with a good real return for those who remain invested during the next five years. She cautions that the volatility going forward will be high and that investors will have to focus on the quality businesses held by the fund, instead of the behaviour of the market.

For more information, go to www.platinumportfolios. com/investment-solutions/unit-trusts/the-platinumworldwide-flexible-fund/

With over eighteen years of discipline, focus and a commitment to long term performance behind us, our clients believe in the consistency of our investment process and performance.

Platinum BCI Worldwide Flexible fund wins Best Flexible Allocation fund.

Platinum Portfolios was also nominated as a finalist for the best fund house – small fund range.

The annual awards recognise funds and fund houses that added the most value for investors within the context of their relevant peer group in 2018 and over longer time periods. Morningstar selects the finalists using a quantitative methodology with a qualitative overlay that considers the one-, three-, and five-year performance history of all eligible funds, and adjusts returns for risk using Morningstar Risk, a measure that imposes a higher penalty for downside variation in a fund’s return than it does for upside volatility.

T. 011 262-4820 | Block F, Pinmill Farm, 164 Katherine Street, Strathavon, 2031 PO Box 782755, Sandton, 2146 | www.platinumportfolios.com

Platinum Portfolios (Pty) Ltd is an authorised Discretionary Financial Services Provider (FSP No. 641).

NEWS & OPINION

31 March 2019

Melville Douglas Global Equity Fund wins prestigious Morningstar Award for South Africa’s Best Global Equity Fund

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he Melville Douglas Global Equity Fund has been named South Africa’s Best Global Equity Fund by the internationallyrespected investment research house Morningstar.

Melville Douglas, the boutique investment company within the Standard Bank Group, was considered for the award alongside major South African fund managers.

This award follows its rating late last year as the Best Boutique Asset Manager South Africa from Global Brands. Melville Douglas also made the finalist shortlist last year as a top four wealth manager in the UK for the best overall medium firm at the Citywire Performance Awards.

The prestigious Morningstar

Awards are based on research into fund and fund managers that have added the most value for investors.

Selections are made following intense quantitative research covering periods that investigate a fund’s performance for periods of up to five years.

“Morningstar’s research recognises not only the returns achieved for clients but also a fund’s strong stewardship of shareholder capital.

We are humbled to have won the award and it is a credit to the strength of our team, our unique investment approach and relentless commitment to consistency and quality,” says Bernard Drotschie, Chief Investment Officer, Melville Douglas.

Melville Douglas, established

Nedgroup takes top honours at Morningstar Awards

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t the Morningstar Awards held in Cape Town last month, Nedgroup Investments won the key award of the evening, namely the Best Fund House, Larger Fund Range.

This follows on January’s announcement that Nedgroup Investments was the Offshore Management Company of the Year for the 4th year in a row at the Raging Bull Awards.

Nic Andrew, Executive Head of Nedgroup Investments who was there to collect the award says: “We are very proud of these awards.

These rankings measure the riskadjusted performance of the entire range over the medium term and they are therefore a reasonable proxy for our investors’ experience. It is also particularly pleasing to see the consistency of this performance.”

This is the eleventh year in a row (2008, 2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017 and 2018) that Nedgroup Investments has been placed either in the top

three of SA fund managers or the top offshore manager by Morningstar and/or Raging Bull. In several years, Nedgroup Investments achieved both accolades.

Andrew says Nedgroup Investments remains focussed on delivering good long-term performance for investors. “We are also acutely aware that these awards measure relative performance and that the absolute returns achieved across most growth asset classes in the short (2018) and medium term have been below long-term expectations and the significant strain this puts on both our clients and their advisers. We will continue to try to communicate clearly and honestly to assist our clients and the greater investment community in making the most appropriate longterm decisions.”

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in 1983, manages investments on behalf of a wide range of endowments, charitable trusts, and retirement funds, institutional and private clients.

Investors can access domestic and international markets through their comprehensive SA and Jersey domiciled fund range.

Headquartered in Johannesburg with a presence in Cape Town, Durban and Jersey, they also provide high net worth and institutional investors with the opportunity to establish bespoke portfolios.

“We believe that our investment philosophy and approach contributed to us being able to meet the stringent requirements and

research conducted by Morningstar when considering candidates for this award. We remain firmly focused on fundamental research, underpinned by decisions based on balance and guided by a long-term view on investments. This approach has helped us deliver outstanding risk-adjusted returns by doing things our way,” says Drotschie.

Bernard Drotschie, Chief Investment Officer, Melville Douglas

NFB Asset Management wins Morningstar Awards

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FB Asset Management won Best Fund House: Smaller Fund Range for the first time, while maintaining their status as Best Moderate Allocation Fund (NFB Ci Managed Fund) at the Morningstar South African Fund Awards last month. This comes after successfully defending their three-time title for Best South African Multi-Asset Low Equity Fund (NFB Ci Stable Fund) at the Raging Bull Awards in January.

According to Paul Marais, Managing Director and Portfolio Manager of NFB Asset Management, the fund’s investment philosophy is based on three key beliefs: that asset allocation drives a significant proportion of overall investment returns; that markets are inefficient and swing between periods of overand under-valuation; and that NFB can exploit these circumstances to the benefit of investors.

“Investors in the NFB Ci Managed Fund will have benefited from

significant exposure to funds such as the Coronation Strategic Income Fund and the Investec Diversified Income Fund which returned 7.8% and 9.5%, respectively, for 2018 and 8.5% and 8.3%, respectively, per annum for the last five years,” says Marais.

Investors would also have gained from exposure to the Prescient Income Provider Fund, which was present in the managed fund almost throughout the review period; only being replaced by the SIM (Sanlam Investment Management) Active Income Fund right at the end of 2018.

“All of these are low-heartbeat funds that would have contributed handsomely to the Managed Fund’s low risk-adjusted return profile.”

Marais adds that lower-than-peer average exposure to the South African equity market and foreign currencies further contributed to the Managed Fund’s performance. It will also have benefited from tactical trading opportunities which were successfully executed, including reducing offshore exposure when the rand went through R15 to the US dollar and increasing local equity exposure when the JSE All Share Index fell to 50,000 points.

LEGISLATION AND COMPLIANCE FEATURE

PATRICK BRACHER Director, Norton Rose South Africa

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Insurance law during and after 2018

018 literally produced a sea change in insurance law because the market is faced with a sea of new legislation. The Financial Sector Regulation Act (Twin Peaks), the Insurance Act and a mountain of Prudential Standards, along with the remaining parts of the Long-term and Short-term Insurance Acts and their rules and regulations, have drowned the industry in compliance. On the positive side, the emphasis is on maintaining the prudential integrity of the insurance industry and producing fair outcomes for customers. But neither the Regulator nor the industry is coping and the promised action under the new laws has not taken place (such as the relicensing process, which should have produced results already). Focus on innovation in a fastchanging world is a challenge for insurers and brokers overwhelmed by compliance.

2019 will add to the burden. The draft Conduct of Financial Institutions Act has been published, which will more than double the amount of new legislation affecting insurers and brokers.

The word on everybody’s lips is ‘tech’. There are a growing number of insuretech solutions being offered, with many clever ideas about the marketing, underwriting and performing of insurance policies to meet the needs of the modern

RICHARD RATTUE Managing Director, Compli-Serve

31 March 2019

world. In South Africa, the online products are slowly growing but the mass market is not yet accustomed to buying financial services online.

On the other side, the big risk for businesses is cybersecurity and the number and scope of cyberrisk policies is growing by the month, including cover for business interruption losses resulting from computer-related events. It is a far cry from the year 2000 when every insurer was excluding cyber-risk for the millennium bug that NEITHER THE never emerged from REGULATOR the pupa. Insurance will have to be NOR THE careful with existing INDUSTRY IS open-ended wording for cyber-risk limits COPING because this risk can have almost unlimited losses.

Two big current issues are transformation and inclusion. It is difficult to get new serious players into the insurance market because of the weight of compliance. It is also difficult to include large numbers of people as buyers of insurance because the acquisition costs of persuading a sceptical market to insure often overprices the product.

However, those consumers who are persuaded

to insure are now much better protected by the new laws against bad deals and bad claims experience. It will be interesting to see what impact microinsurance will have on inclusion.

The year has seen, internationally, massive losses from natural disasters, with the reinsurers reporting heavy financial consequences. There has not been talk yet about increasing reinsurance premiums in what is still a competitive market, nor increasing insurance premiums in South Africa for the same reason. Competition will probably temper this outcome.

The ability under the Insurance Act for foreign reinsurers to register branches in this country will integrate us better into the international scene. The stronger restrictions on anyone doing insurance business in South Africa unless registered here will help the local market retain premiums.

We are only indirectly affected by the consequences of Brexit but, whatever the deal, our relationships with the London market and the European market will need more careful managing than in the past.

South Africa will still, however, have a sophisticated insurance market backed by competent intermediaries who will cope well with all the challenges.

Days numbered for entirely unregulated cryptocurrency marketplace

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he inevitable reality of well, with new over-arching legislation cryptocurrency regulation is for the entire financial services gathering pace. With the draft industry via COFI and related conduct proposals opened to public comment standards. While a process, it’s a great closing last month, the initial steps are opportunity to bring crypto-assets in process to bring some formality to into the mix as well, which covers the this growing and popular asset class. proposed second phase of the potential It is vital crypto-assets become more regulations. regulated than is the case at present, to align with TCF and thus, consumer The train is moving – as well as stakeholder – protections.

– all aboard This will allow for crypto-assets Appetite for crypto-assets will result in to be used in the financial system them becoming just another financial properly as we avoid the current product that FSPs can be authorised scenario, which essentially bypasses for, before they can trade or place key regulations cryptocurrencies such as FICA into client as any efforts to ONE THING IS FOR SURE, portfolios. identify a source Taxation issues CRYPTOCURRENCIES of crypto-funds will come to the ARE HERE TO STAY is currently fore as well. virtually While there impossible. A phased approach to are a few exceptions, many countries regulation is proposed, with the first are struggling to find money for their phase focussed on getting everyone fiscus. As plenty of upset already ‘on the books’ – I would agree this is a exists around cross-border taxation good place to start. and companies moving profits into Current regulatory change at the low tax jurisdictions, global tax FSCA lends itself to this process as authorities are looking to clamp down

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on companies not paying their fair portion of tax. I believe with certainty that cryptocurrencies will be taxed eventually, as it would be unaffordable for government not to do so.

There is speculation that if you transact in an unauthorised cryptocurrency, you will be contravening SARS rules, but it remains to be seen exactly how this – and other regulations – will play out.

Challenges and opportunities The outdated market rules and legacy infrastructure already in place do seem to indicate slow adoption to change by top level, and skills or system shortages contribute as well.

There may be some stakeholder resistance, but I believe that overall, many stakeholders will want the regulations to come in, to encourage protection for all.

Regulation could even bring stability to the cryptocurrency marketplace and should not be a reason for its value to fall through the floor. Once regulated, it will become just like any other investable asset.

Crypto compliance The role of the compliance officer will not change once crypto-assets’ regulations are in place – it will simply be another asset with rules to address.

It will expand the compliance officer’s scope, but not change the game.

What will change the game, however, is the bigger shift towards artificial intelligence and the Fourth Industrial Revolution impacting financial services, but that is a story for another day.

Not just a phase The authorities are on the right track in taking a phased approach to applying regulation to cryptocurrencies, keeping a keen eye on how other jurisdictions are dealing with the process. While it will take time, the reality is clear: we will see regulations for governing cryptocurrencies down the line, and it will be interesting to see how the ‘powers that be’ determine what these will look like.

One thing is for sure, cryptocurrencies are here to stay.

31 March 2019

RICHARD RATTUE Managing Director, Compli-Serve

LEGISLATION & COMPLIANCE FEATURE

DIY not always simple for compliance

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he financial services industry is changing keep the doors open, let alone tackle reams of rapidly – from the impact of technology compliance requirements. (and, subsequently, FinTech and RegTech becoming more commonplace), to the overhaul Should you DIY? of the industry through COFI coming in, the Being tempted to keep administrative costs down potential impact of the RDR and a general move by trying to do compliance yourself does present away from simply ticking boxes. some danger, particularly as big changes are Financial advisory practices face a myriad ahead in the industry. If something slips through of compliance requirements in addition to the the cracks, the financial impact on your business various financial legislations governing their could be detrimental, with costly fines that the businesses (or those still to FSCA could levy on your business come). Being confronted for non-fulfilment of an obligation MAKING USE OF with a list of different imposed by law. deadlines, reporting To be aware of new and everAN EXTERNAL requirements, as well as changing legislation, as well as COMPLIANCE a host of administrative understanding the impact of PRACTICE COULD obligations, can be any changes, is onerous on a overwhelming to manage. small business. Missing updated ADDRESS THE For smaller practices, amendments or conduct standards COMPLIANCE or those consisting of places a business at risk, where RESPONSIBILITIES in the worst-case scenario, your a single key individual, staying compliant can licence could be lost. Receiving BUSINESSES FACE be very challenging. On penalties also puts your reputation any given day, it can be demanding to make at risk through negative publicity – all of which time to see numerous clients, run the business could easily be avoided by seeking professional operationally, and make enough money to compliance support.

Peace of mind meets professionalism Making use of an external compliance practice could address the compliance responsibilities businesses face. Compliance officers are professionals equipped to focus on what needs to be done to stay compliant; they should be aware of all the pertinent reporting obligations and due dates, and endeavour to ensure they, and their clients, are informed on relevant industry and legislative changes.

There are of course numerous aspects to running a business successfully over and above staying compliant – from adequate IT and data solutions, to sufficient insurance cover and working capital. But with so many elements to consider in financial services regulation, having a strong compliance resource and support in place can certainly help to remove some business risk and stress.

It pays to be working with a prepared team.

FINANCIAL SERVICES PROFESSIONALS www.compliserve.co.za / 0861 273783 / info@compliserve.co.za

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LEGISLATION AND COMPLIANCE FEATURE

LUCKY BUSIZI Head of Risk & Compliance, INN8

31 March 2019

Being compliant is a sure way to get a good night’s sleep

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FAs are burdened with compliance and must retain meticulous records (e.g. evidence of discussion notes, client emails, instructions and agreements) in order to avoid coming unstuck when being audited.

Compliance works best when it is systematised and part of an everyday routine for both the adviser and the adviser’s assistant. However, all firms have different needs and, with that, different options for handling compliance, some more time-consuming and costly than others.

Let’s take a look at ways in which your firm can streamline your compliance processes to be more cost-effective and seamless, making life easier for you and giving you peace of mind.

Compliance implementations Having an in-house compliance officer or department can be very useful as they know your business better than an external option. To ensure success, it is important that they keep their qualifications up to date and stay in touch with changing practices in the market, e.g. moving from wet signatures to electronic consent.

Other firms choose to outsource their compliance function to a compliance consulting firm. While this gives access to more breadth of experience and expertise, outside consultants often do not know your firm as well as an inhouse team might and it can be expensive. Also, it’s important to remember that the compliance risk still remains with the adviser, as the actual risk cannot be outsourced.

Some firms may already be part of a network that provides compliance services alongside many other business practise support services.

Whichever your preferred business model, from time to time it is worth re-evaluating the efficiency of your processes.

Adopting tools It can be difficult for smaller businesses to decide on the best business tools for them. They often rely on what they know to be the compliance record, which is usually a Client Relationship Money_Marketing_Quater_Page_220x80mm.pdf 1 2019/02/21

Management (CRM) tool. However, not all CRM Different types of permissions may be set for tools are built with compliance in mind and specific people in your firm and these services are choosing the right CRM tool can be a minefield accessible remotely via the internet, so you will of choice and cost. It may make sense to augment have access to your client records via your preferred your existing record-keeping processes with an device. Once you start exploring the add-ons, like online file-sharing platform. integration with your email inbox and calendar, is Before choosing a PoPI compliant, file-sharing when things really get interesting – and efficient! platform, it’s useful to use a digital tool such as Keep in mind that adopting a consistent, Sweet Process to systematise systematic record-keeping processes. This assures you process within a business can FROM TIME TO and your compliance officer reduce overheads. that a standardised method for More advanced firms are TIME IT IS WORTH maintaining compliance records using Snagit or Microsoft’s RE-EVALUATING is followed. By systematising the OneNote to reduce the processes, it means anyone in THE EFFICIENCY OF email load and record their the practice can do the job by interactions with clients. Some YOUR PROCESSES following the steps. cloud-based tools are emerging, A cost-effective practice is to employ a such as Glasscubes, which keeps discussion notes consistent format across the firm for storing and documents all in one place and provides a all client communications and mandates. A client extranet that can be white-labelled. simple electronic file-sharing platform such as Box, Sharepoint or Dropbox, according to PoPI Holistic platform providers considerations, works best: create a file per client For more insight into which practices and and replicable sub-files for mandates, review processes are right for your business, many meetings and minutes, investment proposals, independent platform providers are a great FICA documents and other ad hoc info. source of support and guidance, although as mentioned previously, no third party can assume the risk on the adviser’s behalf.

More than that, they sometimes provide online digital repositories for client documents so that they’re easily accessible for both the adviser and the client. This means that correspondence is secure, accessible with the right permissions and stored in a secure cloud environment that is protected from physical damage such as flood and fire.

And did we mention allowing documents to be held electronically reduces your work load?

While each advice firm is unique and adopts its own practices, there is a certain peace of mind knowing that you have a partner that understands your business and can help you navigate your process choices. Compliance is always easier with collaboration!

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EARLY BIRD PRICING NOW AVAILABLE FOR THE FPI 2019 CONVENTION 2019 marks the 30th FPI Professionals Convention, themed “Adding Value” which takes place in Johannesburg on the 17th and 18th July 2019 at the Sandton Convention Centre. Our line-up this year offers some of the best local and International thought leaders and speakers.

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Why you need to attend this year’s FPI Professionals Convention?

• Access tools and practical insights to build business and promote your self-development.

• Learn industry trends and how they are implemented.

• Meets experts and influencers face-to-face.

• Input to questions posed panellists.

• Network with like-minded professionals and top speakers at the FPI Awards Ceremony Gala Dinner.

WHO TO CONTACT? Adele Whyte / Bhavisha John

Email: adele.whyte@fpi.co.za / bhavisha@fpi.co.za Telephone: 011 470 6000

March 2019 | VOLUME 19

OFFSHORE INVESTING SPECIAL

BEST VALUE REMAINS OFFSHORE PAGE I V

SEVEN REASONS TO GET AN EU PASSPORT PAGE VI

W H AT G L OB A L I N V E ST OR S SHOU L D L O OK OU T F OR PAGE II

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OFFSHORE IN VESTING SPECIAL

DAVE CHRISTIE Offshore Product Specialist, Ashburton Investments

ASHBURTON INVESTMENT’S MULTIASSET GLOBAL GROWTH FUND SEES INVESTORS THROUGH TOUGH 2018

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he Ashburton Global Growth Fund is a dollar-based fund designed to provide superior returns over the long term. Last year it performed better than many of its peers in very volatile markets.

2018 was a tough year to invest money. There was uncertainty created

by US President Donald Trump’s trade wars, the ongoing Brexit drama, an economic slowdown in China, as well as many other factors.

Markets dropped dramatically at the end of 2018, but the Ashburton Global Growth Fund managed to protect clients’ assets better than most. Negative returns are never easy to bear, but given heightened market volatility and the fact that all major indices (both equity and fixed income) finished the year in the red, the Ashburton Global Growth Fund managed to protect wealth for our clients and outperformed its major competitors.

Where does this leave us for 2019?

‘Markets rotate’ is one of the great maxims of our industry. While we remain cautious, we see current global equity valuations on balance as fair value to cheap. We have used our cash position to move our underweight equity allocation back to neutral by adding exposure to the United States, United Kingdom, Japan and some emerging markets.

This doesn’t mean indiscriminate buying – rather it is part of our active approach to asset allocation to where we feel the value lies.

We believe the Fund is well placed to capture market movements to the upside through the next economic cycle and to continue to achieve superior returns.

The Fund has a flexible asset allocation across a diversified range of asset classes, regions and currencies, without exceeding a maximum equity exposure of 75%.

An advantage of offshore investing Looking at how global markets can change overnight, an investor’s portfolio is not complete if it does not have some offshore exposure.

Not only for capital protection, but for investors to be able to tap into other markets where there is potential for growth and also to hedge against unforeseen risks. The Ashburton Global Growth Fund is the fund to consider when looking to diversify your portfolio with direct offshore exposure.

Issued by Ashburton (Jersey) Limited which has its registered office at 17 Hilary Street, St Helier, Jersey JE4 8SJ, Channel Islands. Regulated by the Jersey Financial Services Commission. Ashburton Investments is a registered trading name of Ashburton (Jersey) Limited.

The value of investments and the income from them can go down as well as up, is not guaranteed, and you may not recover the amount of your original investment.

Past performance is not necessarily a guide to future performance. Where an investment involves exposure to a currency other than that in which it is denominated, changes in rates of exchange may cause the value of the investment to go up or down. This article is for information purposes only and does not constitute advice in respect of any financial, investment, trading, tax, legal, accounting, retirement, actuarial or other professional advice or service whatsoever. The Global Growth Fund is a sub-Fund of Ashburton Investments SICAV, a Luxembourg registered collective investment scheme approved by the Commission de Surveillance du Secteur Financier (CSSF).

31 March 2019

WHAT GLOBAL INVESTORS SHOULD LOOK OUT FOR The US Federal Reserve’s dovish take on monetary policy in late January was unexpected. In one statement, it said rates were on hold until further notice and in another statement, it described its willingness to re-examine how quickly it will sell its bond holdings. The move saw US stock markets rebounding. We spoke to John Stopford, Head of Multi-Asset Income at Investec Asset Management, about what global investors should look out for in the coming months.

Is the Fed’s stance a sign that the clouds have cleared?

The Fed have shown they are responsive to market pressure and will not tighten policy, regardless of its impact. This helps to reduce market downside risks, but suggests policy may tend to cap the upside as well, as the Fed is also likely to feel more able to continue tightening after a pause if growth and markets recover.

Can we expect another extended bull run?

If growth stabilises and policy remains helpful, the bull market can extend, but it looks too late in this cycle to be strategically bullish. The best environment is probably moderate growth, which can support earnings, but keep the Fed on hold for now. Growth that is either too fast (encouraging more tightening) or too slow (risking recession) would be more challenging.

Are the trade wars, Brexit and China’s slowdown risks that investors should watch out for?

Getting the policy mix right to extend the cycle is hard to do, so uncertainty is likely to remain high and increase over time. After the January rally, markets look more balanced in terms of upside versus downside, and there are plenty of potential events that could either dissipate or increase further volatility.

We are cautiously positioned in the Investec Global Multi-Asset Income Fund going into 2019. The backdrop is messy: growth-linked asset markets have rallied sharply and now price in the somewhat easier monetary policy backdrop. Economic data continues to be poor, consistent with a weak start to 2019, but the risk of recession still looks THE RISK OF before 2020. Any resolution of trade RECESSION STILL low conflict would be helpful for market risk LOOKS LOW appetite, but we think a deal of some sort is largely in the price. Government bond BEFORE 2020 markets are better supported by more dovish central banks, and the dollar may be more range bound with the Fed being increasingly sensitive to downside risks to growth and inflation. If that is the case, it should also be helpful for higher yielding markets, unless growth deteriorates further.

In the Investec Global Multi-Asset Income Fund, we are focused on delivering a defensive return profile as consistently as possible. The return is driven primarily by security selection, emphasising investments capable of generating attractive and sustainable income and with capital upside potential. Building the portfolio from the bottom up is unusual for a multi-asset strategy, but we believe that the huge choice available at a security level gives us a much greater ability to tailor the portfolio towards meeting a particular objective rather than relying heavily on relatively blunt assetallocation decisions. We believe traditional diversification ideas, which rely on whether an asset is a bond or an equity, can prove John Stopford, naïve. Despite the challenging environment, Head: Multiwe still see plenty of opportunities at a Asset Income, Investec Asset security level.

Management

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OFFSHORE IN VESTING SPECIAL

ISLE OF MAN PROACTIVE ABOUT MEETING NEEDS OF BUSINESSES

T

he Isle of Man already has a solid reputation for supporting entrepreneurship, through its comprehensive range of grants and assistance schemes that help to start, grow and develop business, however recent changes have made the Island even more attractive for those looking to relocate their business and recruit talent.

The Island’s global business centre is home to a number of big names and well-known brands, as well as SMEs and start up enterprises.

Though often acknowledged for its long-established financial services and insurance offering, there are a huge number of sectors that are established and experiencing growth, including e-gaming, digital business, fintech, manufacturing, engineering, media, aviation, food and drink, and retail.

The Isle of Man offers a financially rewarding environment with businesses benefiting from no capital gains tax and 0% standard rate of corporate income tax. Personal tax rates are also attractively low, and unlike other jurisdictions there is no stamp duty payable and no restrictions on purchasing either commercial or residential property.

Speaking at an Isle of Man roadshow in South Africa, Nick Preskey of the Isle of Man Government’s Department for Enterprise said: “The strong relationship between South Africa and the Isle of Man started in the late 1800s with many Manx miners being drawn to South Africa. These pioneers made a contribution to the growth of South Africa and in turn nowadays many South Africans contribute to the growth of the Isle of Man. “There is a thriving South African community on the Isle of Man

with strong business connections.

The Island has a stable and safe environment in which entrepreneurs, families and businesses can find a home from home,” he said.

With such strong growth projected in the economy over the next 12 months, the Government is being proactive about meeting the needs of businesses, not only now but well into the future. In his 2019 budget speech last month, Isle of Man Treasury Minister Alfred Cannan MHK announced a new National Insurance holiday for new and returning residents. Under the National Insurance holiday, anyone who moves to the Island for work who has not previously been tax resident within the past five years could be up to £4 000 better off in their first 12 months of employment. This is an agile and timely response to the needs of local businesses, which demonstrates the Island’s commitment to attracting skilled workers and professionals.

The Isle of Man is a crown dependency in the heart of the British Isles and is well placed for business, with more than 200 flights a week into the UK, including flights to London which take just one hour, and connections to Europe and international destinations.

For more information on relocating to the Isle of Man, visit www.locate.im or contact the Business Connex team via the Isle of Man Chamber of Commerce: www.iomchamber.org.im

ONE DAY, YOU’LL DISCOVER A WEALTH OF OPPORTUNITY The Isle of Man offers a safe and secure place to call ‘home’.

A world-class business centre combined with a responsive and pragmatic approach to regulation creates a vibrant environment in which individuals, established businesses and entrepreneurs can thrive.

Benefitting from a financially rewarding economy - including no capital gains tax, low personal tax, no corporate tax and no restrictions on purchasing property – and unbeatable quality of life, there has never been a better time to discover the opportunities that await you in the Isle of Man. KEY STATS: • • • • • • • •

Relocation incentives for individuals and businesses Stunning Island location Space to thrive - 40% of the Island is uninhabited High levels of education and healthcare Diverse property portfolio, no restrictions on residential or commercial purchases 86% of businesses offer flexible working Strong community and one of the safest places to live in the British Isles Average commute time just 20 minutes

Visit www.locate.im to start your relocation journey and make your ‘one day’, today.

www.locate.im Nick Preskey, Department for Enterprise, Isle of Man

#LiveTheDream

Image credit: Harold Tower marketed by Chrystals Isle of Man

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OFFSHORE IN VESTING SPECIAL PRESTON NARAINSAMY Investment Professional, Marriott

D

espite a backdrop of robust economic growth in 2018, market returns across the globe were disappointing. The decline was driven by a slowdown in economic activity coupled with investor fears around the possibility of a recession, given US interest rate hikes. Escalating geopolitical tensions, ranging from trade wars between the US and China to uncertainties around Brexit, further dampened investor sentiment.

Best value remains offshore Despite these uncertainties, we continue to believe that the best value remains offshore by investing in blue-chip multinationals that are market leaders in their industries. They are best positioned to capitalise on long-term trends such as consumerism, automation and ageing demographics. They also fare well throughout the interest rate, business and economic cycles, given their defensive characteristics and resilient business models.

2018 saw share prices of the world’s best dividend payers come under pressure. Although the dividend growth outlook of these stocks remains intact, prices still declined.

Table 1 highlights the current yields of a few of these companies versus their historic averages.

31 March 2019

BEST VALUE REMAINS OFFSHORE TABLE 1 Dividend Yield Company

Current

Historic Average

Pfizer

3.3%

2.8%

Unilever

3.2%

2.8%

Medtronic

2.2%

1.3%

Loreal

1.7%

1.5%

3M

2.7%

2.6%

Stock selection We adopt a security-filtering process to identify the companies best positioned to deliver reliable and growing dividends. This process consists of multiple filters, but there are three critical screens, namely economic, industry and company-specific.

Companies that make it through this process have strong brands, pricing power, robust balance sheets and cash flows, and produce goods and services that are integral to their customers. These characteristics are often underappreciated in good times, TABLE 2 Q2’81

Q1’84

-13,1%

-11,8%

Q3’98

Q3’04

-10,3%

-11,2%

but increasingly valued in adverse market conditions.

The price one pays for long-term returns is short-term volatility Such conditions were seen in 2018, where fears around rising interest rates resulted in investors scrambling to sell stocks in order to lock in gains made in prior years. This behaviour depressed markets, particularly in the first world, in sectors usually considered to be safe and steady.

In times like these, emotions can get the better of investors, causing them to doubt their initial investment strategies. Sensationalist journalism and market “chatter” adds to the panic. Consequently, many investors opt for the safety of cash.

With volatility likely to continue in 2019 as markets adjust to a world of higher interest rates, we encourage investors to stick with their financial plan.

Long-term view To avoid hasty decision-making, one must think long term. From this perspective, volatility appears far less daunting.

Look at 3M as an example, one of the world’s premier industrial companies with an enviable track record of growing dividends and shareholders wealth.

Over the last three months, 3M’s price was down almost 10%. When viewed from a short-term perspective, this can create panic. However, from a long-term perspective, such declines are nothing out of the ordinary for 3M investors.

Table 2 highlights 20 quarters when 3M’s price lost more than 10% in value.

Income growth leads to capital growth Although share prices can be volatile, over the long term price growth is ultimately driven by dividend growth.

Thus, large price declines of companies that can reliably grow dividends typically represent good buying opportunities.

Currently, the world’s best dividend payers are trading on relatively high dividend yields and offer good value. Although market Q3’86 Q4’87 Q1’88 Q3’90 Q4’97 Q3’98 Q2’01 Q3’02 volatility is disconcerting, -11.50% -21,3% -10,7% -10.30% -11,2% -10,3% -13,8% -10,6% when viewed from a longer-term perspective Q2’05 Q2’08 Q3’08 Q4’08 Q1’09 Q3‘11 Q2’18 Q4’18 it likely represents a good -15,6% -12,1% -15,8% -13,6% -13,6% -24,3% -10,4% -9,6% buying opportunity.

SIMPLIFYING OFFSHORE INVESTING

“

Over the years, South African exchange control regulations, which limit the amount that you can transfer or invest abroad, have been relaxed considerably, creating more opportunity to take advantage of the prospects presented by investing offshore,” says Julie Campbell, Senior Manager at Allan Gray.

How much can investors take offshore?

South African resident individuals 18 years or older are granted an allowance of R1m per year by the South African Reserve Bank (SARB), namely the single discretionary allowance (SDA), to use for any legal purpose offshore. This allowance includes all foreign expenditure, such as monetary gifts, loans, foreign travel expenses, maintenance and offshore credit and it can also be used for investing offshore.

“If you have more than R1m to invest and are a taxpayer in good standing, you can apply for a tax

clearance from SARS to allow you to invest up to an additional R10m offshore annually. This is called the foreign investment allowance. For amounts higher than R11m, you will need special clearance from the SARB,” explains Campbell.

If you are invested in a local unit trust that invests a portion of its investments offshore, this is not counted as part of your offshore allowance. “These unit trusts use your investment manager’s foreign allowance rather than your own.”

Exchange control regulations only allow 40% of a fund manager’s retail assets to be invested offshore (plus an additional 10% in Africa outside of South Africa). This is termed a manager’s foreign capacity.

“Your ability to invest offshore through rand-denominated offshore unit trusts will therefore depend on how much foreign capacity the manager has available,” says Campbell.

“Given how volatile the rand can be, this route may not always be available.”

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What are the options to invest offshore using an investor’s own allowance?

There are two routes available: Either invest directly with the offshore fund manager of your choice or invest via an investment platform that offers offshore unit trusts.

“Investing via an offshore platform offers a simple and convenient solution if you are looking for one point of contact for the administration and ongoing management of your investments. Withdrawals can also be made into your offshore bank account without any further SA exchange control,” says Campbell.

Meanwhile, being locally domiciled simplifies estate planning for South African tax residents: If you die while invested, your assets will be part of your South African estate and will be dealt with by a local executor.

Allan Gray has significantly reduced the minimum amount required to invest via its offshore investment platform. It has also introduced the

option to use South African rand for lump sum investments in new and existing offshore accounts, if you are using your SDA, with Allan Gray facilitating the conversion to foreign currency.

“The Allan Gray Offshore Investment Platform makes it easier to take advantage of the opportunity to diversify investment risk and to get exposure to unit trusts and offshore managers that are not locally available.

“Consider consulting an independent financial adviser who can help determine an appropriate level of offshore exposure and help select an offshore unit trust suited to your needs and circumstances,” concludes Campbell.

Julie Campbell, Senior Manager, Allan Gray

International Investment Portfolio Personalised Share Portfolio with access to the world’s best companies.

Invest for Income Contact our Communication Centre on 0800 336 555 or visit www.marriott.co.za

OFFSHORE IN VESTING SPECIAL

31 March 2019

SEVEN REASONS TO GET AN EU PASSPORT

H

aving dual citizenship is something that many South Africans want to acquire.

The primary reason is to assure their and their family’s future offshore, by protecting against political risk and economical instability.

An EU passport is the most soughtafter travel document because it gives an individual the unique opportunity to enjoy unlimited access to the whole of the EU and the UK – meaning you have the right to live, work in and travel to all European countries.

Cyprus, an ex-British colony, full EU member and not part of Greece, currently has the most attractive second passport plan on offer: Citizenship is granted in six months via Cyprus’ ‘Citizenship through Investment’ programme. The programme is an investment in real estate; and with Cyprus’ positive property growth, demand for long and short-term tenants, this offers a very attractive investment for the short, medium and long term.

Here are the seven reasons why South Africans desire Cypriot citizenship:

a very limited time. Think of getting dual citizenship as guaranteeing your family’s future.

An astute offshore property investment that works for you in the short, medium and long term is the achievement of a lifetime. In Cyprus, investing in the ‘Citizenship through Investment’ programme not only makes financial sense, but it will tangibly benefit your family for generations to come. Can you afford not to take advantage of this while the programme is still open?

• Visa-free travel to more than an attractive Euro-based income.

Cypriot Realty is a pioneer in actively 169 countries.

Some properties are zero-VAT and consistently promoting property • The programme includes all rated and some come with a rental opportunities primarily in Cyprus. They dependent children up to age 28. guarantee for long-term leases. have successfully been doing this from Your adult children will have the • No need to ever live/stay in Cyprus. their Cape Town and Sandton offices ultimate access-key to travel, live and • No inheritance tax: on your death since 2008. As a result, the company is work anywhere in the world’s largest you can dispose of your assets to recognised and respected as Southern economy: Europe. your loved ones without having to Africa’s authoritative investment • You are investing – not donating – pay the Cypriot government any specialist for promoting Cyprus as your wealth! After three years you can death duty. This is very advantageous an ideal destination for acquiring sell the entire property investment as for legacy planning. permanent residency/citizenship, long as you retain a single property property investment, immigration/ valued at a minimum of €500 000.

Protect yourself, your family and retirement and starting a European• Citizenship is passed on by descent, your assets from unpredictable events based business. offering a real and valuable legacy to by taking advantage of the opportunity Contact us for a confidential meeting future generations. to secure Cypriot citizenship before to discuss how we can help you realise • You can rent the property out to earn the programme closes: it is open for you and your family’s Plan B in Europe.

Nothing is more expensive than a missed opportunity!

2 tours in MAY/JUNE

3 tours in SEPT

For more information, contact Jenn y Elli nas 083 448 87 34 je nny@cypriotr ealt y. com

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OFFSHORE IN VESTING SPECIAL

31 March 2019

RORY SPANGENBERG Director: Global Equities, Northstar Asset Management

Is offshore investing still a good move for South African investors?

A

sk South African investors why offshore investing is so advantageous and you are likely to get two main answers – to shift assets out of the rand and to increase diversification. While these answers have some validity, we would argue that they overlook a far more compelling reason that has a significant positive impact on long-term returns.

As global stock pickers, we at Northstar spend our time looking for high-quality businesses with strong underlying fundamentals capable of sustaining an identifiable strategic competitive advantage. These companies generally display strong free cashflow and superior rates of return on invested capital (ROIC).

While there are a number of companies on the JSE that have proven to be competent allocators of capital over time, South Africa remains an extremely small market in global terms, comprising less than one percent of the MSCI World Index.

The JSE is also overpopulated with the old industry sectors characterised by low ROICs, and underrepresented in the fast-growing sectors with higher ROICs such as software, pharmaceuticals, IT services, technology hardware and healthcare. Limiting your potential investments to only the JSE means missing out on a vastly larger and more varied investment universe of quality businesses. This makes a big difference to long-term returns and is, we believe, the most important reason to take a more global view.

RIGHT FOR THE WRONG REASONS As an example, if you had made the decision to invest in luxury goods, your only option in South Africa would have been Richemont. But with the luxury of real choice, you could have invested your money in LVMH, a holding in Northstar’s global funds, earning yourself an extra return over Richemont of 136% over five years, which is an additional 19% a year.

Had you chosen to put your money into tobacco stocks, your only choice on the JSE is British American Tobacco.

But if you had looked abroad, you could have put that money into Phillip Morris and you would have made 29% more on your money over five years.

Naspers has certainly served South African investors well over the last five years, but all of those gains have been driven by Tencent, its Chinese internet subsidiary. Naspers is by no means unique in the world and has in fact underperformed similar businesses that are not accessible on the JSE, including Facebook (28% outperformance over five years), Apple (47%), Amazon (269%) and Netflix (343%).

These figures also show that even within a favourable sector, returns can vary widely from company to company, so having the ability to pick the best stocks in a sector is also an important factor in generating superior returns.

The Northstar team has a long track record of managing global assets that demonstrates our ability to reliably identify attractively valued quality companies. Putting this experience to work in the global opportunity set has generated returns for our funds that are consistently among the world’s top global funds.

PIETER HUGO MD, Prudential Unit Trusts

OFFSHORE DIVERSIFICATION PAYS OFF IN 2018

I

n 2018, most investors who had offshore exposure in their portfolios would likely have been gratified to have it, since they would have benefited from the diversification it offered. Thanks largely to the much weaker rand, global bonds, global property and global equities returned 15.5%, 6.3% and 11.1% respectively (in rand terms), all beating inflation. This helped to partly offset the shocking -25.3% and -8.5% delivered by SA property and SA equities.

Yet, while the principle of diversification makes sound sense for any portfolio, it should not be done for the wrong reasons. Moving money offshore should ideally never be the result of a reaction to short-term changes in the local environment or a sudden depreciation of the rand. Unfortunately, South Africans have a history of reacting emotionally and taking money offshore after the rand has depreciated significantly, often resulting in subsequent losses. Rather, offshore exposure should be driven by your own investment goals and how best to achieve them within a longer-term financial plan.

How much should you invest offshore? This depends very much on your long-term investment goals. Generally, the offshore portion of your portfolio will be larger the higher your targeted investment return (and therefore the higher the risk required). For example, if you have a more aggressive return target of inflation+7%, you would tend to need between 35%-40% offshore. A return target of inflation+6%, meanwhile, is more in line with a typical ‘balanced’ fund with around 30% offshore. Finally, a more conservative target of inflation+2%-3% would generally dictate offshore exposure of only 10%-20%.

These are only general guidelines, however.

Why invest offshore? Diversification across countries, industries and companies, as well as asset classes and currencies, is the primary benefit.

It reduces the risk of a portfolio for the same expected rate of return, resulting in a more ‘optimal’ portfolio by spreading risk across many different investments.

At the same time, offshore equities help reduce the risk inherent in the local equity market. International markets also offer more growth opportunities. The stocks listed on the JSE represent less than 1% of the world’s total listed equity market capitalisation – so if you invest only in South African equities, you are missing out on 99% of the global equity universe. Finally, you may have offshore goals. If you spend significant time outside the country or buy lots of imported goods, or if you want to retire abroad or send your children to school outside SA, higher-than-average offshore exposure could prove invaluable. Investments in hard currencies like US dollars, euros, sterling and yen act as protection against a depreciating rand and other South Africa-specific risks. This effectively ensures you match your longer-term offshore ‘liabilities’ with equivalent assets.

Closer to the truth

Our obsession with depth and detail brings greater understanding and better performance.

We offer onshore and offshore funds and share portfolio management.

To find out more, visit www.northstar.co.za

Northstar Asset Management (founded 1996) is a licensed Financial Service Provider (FSP 601).

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Why limit yourself to only 1%?

Discover the full picture by investing offshore with Allan Gray and Orbis.

Most investors tend to focus their attention on seeking opportunity locally, but with South Africa representing only around 1% of the global equity market, we understand the importance of seeing the full picture and unlocking investment opportunities beyond the local market.

That’s why Orbis, our global asset management partner, has been investing further afield since 1989. Together we bring you considerably more choice through the Orbis Global Equity Fund and Orbis SICAV Global Balanced Fund.

Invest offshore with Allan Gray and Orbis by visiting www.allangray.co.za or call Allan Gray on 0860 000 654, or speak to your financial adviser.

Allan Gray Unit Trust Management (RF) Proprietary Limited (the ‘Management Company’) is registered as a management company under the Collective Investment Schemes Control Act 45 of 2002. Allan Gray Proprietary Limited (the ‘Investment Manager’), an authorised financial services provider, is the appointed investment manager of the Management Company and is a member of the Association for Savings & Investment South Africa (ASISA). Collective Investment Schemes in Securities (unit trusts or funds) are generally medium- to long-term investments. Except for the Allan Gray Money Market Fund, where the Investment Manager aims to maintain a constant unit price, the value of units may go down as well as up. Past performance is not necessarily a guide to future performance. The Management Company does not provide any guarantee regarding the capital or the performance of the unit trusts. The Orbis Global Equity Fund invests in shares listed on stock markets around the world. Funds may be closed to new investments at any time in order for them to be managed according to their mandates. Unit trusts are traded at ruling prices and can engage in borrowing and scrip lending. A schedule of fees, charges and maximum commissions is available on request from the Management Company.

INVESTING

31 March 2019

PETER ARMITAGE CEO, Anchor

W

A VUCA world

e live in an era of exponential change.

The world around us is evolving at a rapid pace, driven by technological innovation, political and social upheaval, and an ever-morecomplex regulatory framework. While this is a generalisation, it’s a notion we believe is particularly relevant to the South African wealth and asset management industry. The way we manage money, the environment in which our businesses operate, and the needs of our clients are changing. To remain relevant, and to protect against and take advantage of this change, we need to be on top of the major drivers of change.

Anchor has identified this state as a VUCA world. VUCA is an acronym standing for Volatility, Uncertainty, Complexity and Ambiguity. It was first used in 1987 by the US Army War College to describe the state of the world after the Cold War. It has since become widely used in leadership and management consulting. It’s an apt description of the current state of the world. Digitisation, automation, populist politics and global warming are a few of the major themes driving this VUCA state.

As custodians of our clients’ wealth, we’re continually working to understand these themes.

This equips us to nimbly and appropriately respond to the change we’re experiencing. Three of the

major themes are climate change, the politics of resentment and digitisation.

Climate change With progress required over the next 15 years to change the trajectory of climate change, it’s likely investors will need to gradually ‘de-carbonise’ their portfolios and prepare for a world with lower carbon emissions. Crudely, this will mean less exposure to fossil fuels (e.g. coal and oil) and more exposure to disruptive technologies (e.g. renewables, EVs and carbon capture).

Politics of resentment For the first time since the Second World War, there is a noticeable shift in the Western world away from liberal democracy to populism and nationalism. The net effect is that globalisation is likely to continue to slow, as countries focus on economic and social problems at home. Investors should not be surprised by a slowdown in global trade and the potential targeting of multinationals in foreign jurisdictions.

Digitisation The process of shifting business models from analogue (or physical) to digital (or online) has a long road ahead. Investors should position

portfolios accordingly – with further disruption to slower-moving incumbent businesses, and huge opportunities for savvy digital players. This is a theme impacting just about every sector, from mining to retail and even food delivery. Note that South Africa has lagged in the shift to online retail, with only 1.4% of total retail now online, while digitally savvy nations like China are approaching the 20% level. How digitisation changes financial services, retailers and miners will be important for South African investors.

Developing a tech unit within Anchor is part of how we’re staying on top of this constant, exponential change. The unit is a team of analysts and fund managers tasked with understanding the major themes driving technological change and identifying the opportunities to invest in these themes. It also helps to ensure we aren’t caught off guard by the impact of this change on existing investments.

While we aren’t yet certain how these themes will play out in investors’ portfolios, the important groundwork is being carried out to ensure we’re on top of the major themes. Where we see opportunities and risks, we will take appropriate action. We encourage advisers across the board to engage with their clients and stay on top of the exponential change around us.

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INVESTING

31 March 2019

KIM HUBNER Head: Business Development and Marketing, Laurium Capital

T

he past few years have been challenging for the hedge fund industry, with assets declining in 2017 and 2018. Extreme market and currency volatility impacted the performance of hedge funds and they lost favour with investors. However, 2018 was a year that hedge funds came back into their own again and proved why they should be included in part of an overall long-term investment strategy. The All Share Index was down -8.5% last year, while the HedgeNews Africa South African Single-Manager Composite was up 5.2% after fees.

One of the major reasons to have hedge funds as an investment is for downside protection and diversification. One only needs to look at the financial crisis in 2008-2009 to see how hedge funds performed as evidence of this. From 1 August 2008 to 28 February 2009, the FTSE/JSE

KEITH WADE Chief Economist, Schroders

Laurium’s retail hedge funds move to daily pricing and dealing

All Share Index (TR) experienced a maximum drawdown of -32%, versus the average South African General Equity fund maximum drawdown of -26%, and average South African MultiAsset High Equity Fund maximum drawdown of -11%. The average Long Short Hedge Fund, over this same time, limited its maximum drawdown to -9%. Hedge Funds tend to protect investors from themselves – if they choose to sell at the bottom of any crisis, they should limit their losses.

Hedge funds are a lot more complex than traditional long-only funds. The industry needs to educate advisers and investors regarding the value proposition of hedge funds and to dispel the myriad of misconceptions that surround them. In addition to this, for the industry to grow, the Financial Sector Conduct Authority (FSCA) should evaluate amending the CISCA regulations to allow for

traditional unit trusts to invest in Hedge funds are obviously hedge funds. Institutional Pension not without risk, as history funds can invest up to 10% in hedge internationally has shown. funds, and CISCA should be in line Fortunately, hedge fund managers in with this to allow retail investors the South Africa have proven themselves same opportunity. to be more conservative than their Some hedge fund managers have international counterparts – there moved their hedge are some experienced funds from monthly managers that have 2018 WAS A YEAR long, consistent track pricing and dealing to daily pricing records to prove it.

THAT HEDGE and dealing, which Furthermore, hedge FUNDS CAME means that they funds are now much can now be added BACK INTO THEIR more transparent onto LISP platforms and highly regulated OWN AGAIN and included in by the FSCA, which model portfolios, making them more should give investors comfort. In accessible to retail investors. However, time, we hope they will be viewed as what is still missing is a hedge fund another unit trust category that offers classification framework, which will investors diversification, downside assist adding the funds onto platforms. protection and an opportunity This will help advisers and investors to generate real returns where to better understand the investment uncorrelated mainstream long-only strategy of the manager and fund. products fall short.

2

018 was a challenging year for investors, with US equity and government bond markets both returning less than cash.

Two factors were instrumental in delivering this outcome: disappointment with global growth and less cash flowing through the global economy (tighter liquidity).

These factors will continue to influence markets in the year ahead. Here we discuss four ‘black swans’ – events that are plausible but not currently being given much weight by markets. They are the ‘unknown unknowns’. By definition, we cannot anticipate them but we have identified four scenarios that are plausible. We think they are worth consideration.

Black swans: Four events that could take investors 1 by surprise

Another eurozone crisis The first eurozone debt crisis began in 2009 and saw several eurozone member states (most notably Greece) become unable to repay (or refinance) their debts. A number of countries were also unable to bail out over-indebted banks. The European Central Bank (ECB) stepped in, effectively printing money to ensure the markets continued to have access to cash, thereby preventing a suspension in activity and possible economic collapse.

Since then, there has been a call, from President Macron in particular, for the creation of a central fund to support growth should such events arise again. This has yet to be formed. A potential new crisis was only narrowly avoided at the end of 2018 when the spending plans of the new populist Italian coalition government tested the strict guidelines of the European Commission. Such drama is likely to play out again in 2019, given the broader rise of populist politics.

2

No Brexit in Europe This may seem inconceivable given the time and energy currently being poured into sorting a

16 WWW.MONEYMARKETING.CO.ZA

withdrawal agreement. However, ‘no Brexit’ is the only outcome that will not require a vote (apart from ‘no deal’). As MPs have rejected the current deal on offer, and the EU unlikely to concede anything further, there must be a possibility that the government cancels Article 50 and stays in the EU.

3

Military action Sadly, there are plenty of hot spots that could ignite in 2019. The proxy war in the Middle East (being fought in Yemen and Syria) could become an actual war between Saudi Arabia and Iran. China has ambitions for Taiwan and across the region.

The recent departure of defence secretary James Mattis indicates a more isolationist US, creating opportunities for others to fill the void. If President Trump’s dismissal of the UN’s function leads to a less co-ordinated international response to territorial skirmishes, Russian ambitions could re-escalate.

4

Trump does not run for re-election in 2020 Although it is often difficult to read the president’s intentions, he appears to be constantly campaigning and setting himself for a second term. However, he will have to see off US Special Counsel Mueller’s investigation into alleged Russian interference in the 2016 election first. Furthermore, he is already the oldest person to be elected president, taking office at the age of 70 and would be 78 if he served a whole second term.

Health may be a factor. Or, he could simply decide to do something else: there has been talk of him founding a media empire – Trump TV anyone?

Schroders offers offshore solutions for South African investors.

For more information visit schroders.co.za Important Information: For professional investors and advisers only. The material is not suitable for retail clients. We define ‘Professional investors’ as those who have the appropriate expertise and knowledge e.g. asset managers, distributors and financial intermediaries. Schroders Investment Management Ltd is an authorised financial services provider FSP No: 48998, registration number: 01893220

INVESTING

31 March 2019

JACO VAN TONDER Adviser Services Director, Investec Asset Management

How to manage an income strategy for the living annuity investor

PART This article is the third in our series on how to manage a living annuity to provide an inflation-proof income over 3/5

a period of 30 years. In our first and second articles, we introduced some of the key conclusions from our living annuity research, and we expanded on how important volatility is to the long-term success of an income portfolio.

In this article, we take a closer look at one of the other key components of the pensioners’ puzzle: how to manage the income withdrawal strategy for a living annuity investor.

Income withdrawal strategy – two keys to success From our research work we have established that a successful living annuity income strategy contains two key components: • Picking a safe income level at the outset • Adjusting the income every year to reflect investment returns achieved on the annuity, while preserving the real purchasing power of the income.

Below we use the results from our in-house living annuity research model to expand on both these points.

Picking a safe starting income The level of inflation-growing income an investment portfolio can provide has been the subject of a fair amount of academic research over the past 25 years.

The work of Bengen (1994) on sustainable incomes from US equity portfolios represents the starting point for many subsequent research papers into this question. Bengen’s paper concluded that US investors could draw a 4% income from a US bond and equity portfolio for life, with little risk of ever running out of money.

To investigate the question from a South African pensioner’s perspective, we adapted our in-house living annuity model to: • Calculate optimal investment portfolios for a range of living annuity starting incomes (i.e. the best combination of cash, bonds, equities and international assets that minimises the probability of the annuity not producing a 30year inflation-proof income)

• Measure the annuity’s ability to produce an inflation-proof income under different initial income scenarios, as well as different annual income review strategies.

Our starting-point income scenario was the baseline strategy: the pensioner chooses a starting income, and then increases their income from the annuity by exactly inflation every year.

Figure 1 illustrates the failure rates of such an income strategy. From the graph we can see the following: • Initial incomes up to 4% of starting capital result in virtually no failures over the 118 years that we simulated in the model • Annuities start failing from above a 4% starting income, and at a 5% initial income, the failure rate approaches 10% of annuities • Starting incomes larger than 5% experience rapidly increasing failure rates, and at around a 7% income we see failure rates in excess of 60%.

The conclusion from this analysis supports the results from international academic papers on sustainable incomes that a 4% initial income level represents the limit of a ‘safe withdrawal’.

But what about other options? Can a pensioner improve their odds if they approach their income increases in a different way? We proceeded to investigate these questions.

Intelligently reviewing income every year When we evaluated different income review strategies in our model, it became apparent that a pensioner could substantially improve on the fixed inflation-adjusted income scenario. Other than reducing the initial income selected, the simplest way to improve the sustainability of a living annuity is to link the annual income increase to the level of investment performance achieved during the preceding year.

A simple way to link the annual income increase to the portfolio return is the following algorithm: Increase the income every year by

18 WWW.MONEYMARKETING.CO.ZA

the net capital growth in the living annuity portfolio (after income and fees), but keep the annual income increase between inflation minus 5% and inflation plus 5%. Capping the increase above and below inflation smooths the annual increases and is more reflective of the reality that very few pensioners can afford a substantial cut in their income.

If we model this amended income review strategy relative to our first strategy, the results are as illustrated in Figure 2.

Figure 2 shows how our amended income review strategy substantially improves the sustainability of the living annuity, virtually halving the probability of failure in the critical 5% to 6.5% initial income range.

Our original income strategy produced failed annuities as starting incomes moved above 4% p.a. In contrast, our revised income review strategy only starts failing at starting income levels exceeding 5% p.a. The amended strategy delivers a 20% increase in initial income in rand

terms, but still produces a fairly ‘safe’ annuity.

Pensioners and advisers will acknowledge, however, that it is difficult to plan retirement expenses when annual pension increases can fluctuate wildly. It is for this reason that we capped both the minimum and maximum annual increases in our example. A financial adviser can play an important role by guiding pensioners with their pension increases every year.

Conclusion A pensioner’s income withdrawal strategy is one of the key drivers of the sustainability of a living annuity.

A good income strategy achieves the following objectives: • The pensioner chooses a sustainable starting income level (i.e. 5% of capital or less) • The pensioner links their annual increase to the performance achieved on the annuity’s investment portfolio, but the income broadly keeps pace with inflation.

LIVING ANNUITIES

Is your retirement inflation-proof?

One of the biggest risks pensioners face, is running out of money.

To address this age-old problem, our in-house research has created a few important guidelines. They range from how you should invest your capital to what level of income you can afford to draw, what exposure to offshore equities you should consider and the significance of volatility on ensuring a comfortable retirement.

To make the most of your retirement, visit www.investecassetmanagement.com/livingannuities

Asset Management

Unit Trusts

Retirement Funds

Offshore Investments

Investec Asset Management and Investec Investment Management Services are authorised financial services providers.

IAM_MM_E_89870

INVESTING

31 March 2019

WARREN KELLY Business Development, Obsidian Capital

I

n his book, Influence, the Psychology of Persuasion, Robert Cialdini outlines six weapons that compliance professionals (anyone trying to make you do something for their gain) use to butter you up. Each weapon preys on a necessary glitch in the human brain – the tendency to take shortcuts. As an example, you don’t ruminate about the rationality of an approaching stampede, you run because others are running.

The message from the book, however, is that we should and can be more aware of these automatic reactions. This, so that we can question and override them if it would better serve our interests.

Social Proof is one such shortcut, the propensity to look to the behaviour of others for guidance on how we ourselves should be acting.

We believe that the prevailing aversion to South African Hedge Funds is a typical manifestation of Social Proof; there is no shortage of respected names in the industry ascending the rooftops to raze them.

The question is as follows: Are you better served by adhering to the Social Proof shortcut, or is there an opportunity to go against the grain to your benefit?

This makes no sense To answer this question, first notice how SA Hedge Funds are treated in a very peculiar manner. They get stuffed into the same pigeon hole but would appraise each other as a hadeda might an emperor penguin. The stereotype stamped on this pigeon hole is as follows; hedge funds don’t deliver on their promises, they’re expensive, and too complicated.

The crux of our frustration with this view is as follows: Traditional investment products are judged on a case-by-case basis, so why aren’t hedge funds afforded the same opportunity?

The hedge fund industry in SA is

Don’t listen to them

small. We know many of the hardworking, honest and skilled people running these funds. They are not out to pull the wool over your eyes.

There have been cases of nefarious behaviour in the long-only space; should we write off all balanced, equity or income funds as a result?

Of course not.

Proof of delivery Here begins our case as a viable hedge fund provider. Our Multi-Asset Hedge strategy has a track record spanning 11 years. It is overseen by two individuals who have a substantial portion of personal wealth invested in the fund; in our view, there is no better incentive for a fund manager to behave prudently and remain committed.

In addition, these individuals have spent more than two decades together, painstakingly crafting a process and philosophy that aligns with their view of what hedge funds should deliver; protect investors capital when markets deliver negative returns and keep pace with balanced funds in bull markets. In this context, we can’t stress enough the importance of the numbers in the table.

The years highlighted in green are three periods where capital losses were common from traditional investment products; we protected capital in each of those years. But this is only half the story. With a benchmark of CPI+3%, this strategy is always looking to achieve returns in excess of inflation.

But what about the exorbitant costs?

Yes, hedge funds are generally more expensive than traditional products. Is that a good enough reason to ignore them completely?

Our Multi-Asset Hedge strategy has outperformed the average balanced fund, without the anxiety-inducing losses, over an 11-year period, on

Year

Obsidian Sanlam Collective Investments Multi Asset Retail Hedge Fund*

SA Multi Asset High Equity Balanced Fund average†

2007 (Q4)

2.5%

2%

(0.1%)

2008

13.0%

13.9%

(8.8%)

2009

15.1%

9%

15.7%

2010

10.1%

6.7%

11.7%

2011

6.1%

9.3%

5.2%

2012

16.3%

8.8%

16.3%

2013

13.8%

8.5%

18.2%

2014

11.8%

9%

9.7%

2015

15.7%

7.9%

7.5%

2016

9.3%

9.8%

1.3%

2017

5.6%

7.8%

9.5%

2018

0.8%

8,4%

-3,9%

10-year CAGR (Jan ’19)

10.9%

8.5%

9.2%

*Source: Obsidian Capital, February 2019. †Source: Morningstar, February 2019.

Highest rolling 12-month return = 19.1% (2015/2016) | Lowest rolling 12-month return = 5.9% (2018/2019) Investment performance prior to February 2017 was prior to the CIS establishment date. Returns are shown net of all fees and pertain to the calendar returns generated in each year.

a net basis. Obviously, we cannot guarantee this outcome going forward, but anyone who says they pick investment products without considering past performance is likely fond of porky pies.

We do, however, acknowledge the sensitivity of the end investor to fees, and the need to meet them halfway.

As a result, our engagement with those interested in our hedge fund proposition tends to be negotiationlike, rather than stipulation-like, in nature.

The issue of performance fees also needs to be addressed. If structured correctly, performance fees should only be levied when the investor has achieved returns well in excess of inflation. A high watermark principle is also a critical component of any performance fee structure to ensure that capital preservation is taken seriously. Again, appraise hedge funds on a case-by-case basis as the cost structures vary greatly.

Is the fund complicated?

Our Multi-Asset Hedge strategy has the same chassis as our Balanced Fund. The only difference is that when we identify assets (equity, bonds, etc.) that are overvalued, we can profit from their underperformance in the future by ‘shorting’ them. The best you can do in a long-only product is not hold the security.

We don’t use convoluted derivative or option strategies. We don’t invest in unlisted instruments. We don’t take risky punts. And the gearing has

20 WWW.MONEYMARKETING.CO.ZA

Benchmark (CPI+3%)

averaged about 1.7x since inception of the fund, a level in line with the capital protection/absolute return mandate of the fund, and one we’re happy to expose our own savings to.

We are confident that we could explain the mechanics of our hedge fund strategies to any potential investor.

We are not the exception We have laid out our hedge fund case above – one we think is compelling from any angle. But we are not alone; there are many successful hedge funds out there that are worth their salt. It is time that the hedge funds who deserve your consideration are unshackled from the Social Proof dynamic.

Traditional products simply don’t have the tools necessary to repeatedly provide downside protection for investors when markets inevitably turn red. The crowd is wrong on this one.

Disclaimer: Sanlam Collective Investments (RF) (Pty) Ltd “SCI”, a registered and approved Manager in Collective Investment Schemes in Securities. Collective investment schemes are generally medium- to long-term investments.

Past performance is not necessarily a guide to future performance, and that the value of investments / units / unit trusts may go down as well as up. A schedule of fees and charges and maximum commissions is available from the Manager on request. Collective investments are traded at ruling prices and can engage in borrowing and scrip lending. The Manager does not provide any guarantee either with respect to the capital or the return of a portfolio. SCI retains full legal responsibility for the third party portfolio. The Manager has the right to close the portfolio to new investors in order to manage it more efficiently in accordance with its mandate. An annualised return is the weighted average compound growth rate over the period measured. Performance is based on NAV to NAV calculations with income reinvestments done on the ex-div date. Performance is calculated for the portfolio and the individual investor performance may differ as a result of initial fees, actual investment date, date of reinvestment and dividend withholding tax.

INVESTING

31 March 2019

Novare wins at HedgeNews Africa Awards 2019

N

ovare Investments has received the award for the best Fund of Hedge Funds in the Multi-Strategy category for its Novare Mayibentsha Market Neutral Qualified Fund of Hedge Funds (FOHF) at the prestigious annual HedgeNews Africa awards that took place last month.

Now in their 10th year, the awards are based on risk-adjusted returns for calendar year 2018, using an established methodology that comprises net returns as well as the Sharpe ratio as a measure of volatility. The award in each category ultimately goes to the fund with the highest return over 12 months, provided its Sharpe ratio is within 25% of the top Sharpe among the nominees.

Over the 2018 calendar year, the fund was the top fund of hedge funds within the HedgeNews Africa multi-strategy category, returning 8.3%.

The Consumer Price Index (CPI) inflation was 4.5% over the same period.

The outperformance was largely due to the fund’s ability to protect against the adverse market conditions that were experienced in 2018.

The allocation to fixed income and market neutral strategies through 2018 was a key component in protecting against downside events and keeping

volatility low. Manager selection also contributed positively to the strong performance.

The Novare Mayibentsha Market Neutral FOHF has a moderate risk/return profile. The fund follows a multi-manager and multi-strategy investment approach. Qualitative and quantitative measures are considered in constructing the portfolio to target the fund’s investment objective.

“We are very proud to have won this award,” says Neil Verster, Portfolio Manager at Novare Investments.

“We follow a specialist approach to investment management with an innovative research framework. Our approach and philosophy combine to provide clients with superior products that are based on risk-cognisant investment performance,” comments Kagiso Mathole, Portfolio Manager at Novare Investments.

Neil Verster, Portfolio Manager, Novare Investments

Kagiso Mathole, Portfolio Manager, Novare Investments

WWW.MONEYMARKETING.CO.ZA 21

INVESTING

31 March 2019

Responsible investment growing priority for private equity firms

R

C

Sculpture by Beth Diane Armstrong

esponsible investment - involving the management of environmental, social and governance (ESG) issues - is an increasingly significant consideration for both private equity houses (general partners - GPs) and investors (limited partners - LPs), according to a new survey released by PwC. The Private Equity Responsible Investment Survey 2019 draws upon the views of 162 respondents from 35 countries/territories, including 145 private equity (PE) houses. This is the fourth edition of the survey, following on from previous editions in 2016, 2015 and 2013.

The 2019 survey has found that nearly 81% of respondents are reporting ESG matters to their boards at least once a year, with a third (35%) doing so more often. Almost all (91%) report having a policy in place or in development, compared to 80% THE PRIVATE EQUITY SECTOR HAS A in 2013. Of these, 78% are using or developing KPIs to track, measure and report on progress of their VITAL ROLE TO PLAY IN SUPPORTING responsible investment or ESG policy.

SUSTAINABLE DEVELOPMENT Most strikingly, 35% of respondents reported having a team dedicated to responsible investment activity (an increase from 27% in 2016). Of those without a specific function, 66% rely on their Investment/Deal teams to manage ESG matters. is a really encouraging survey that suggests a concern, only 41% are taking action. Similarly, Meanwhile, two thirds (67%) of respondents have responsible investment is starting to come of age 83% are concerned by climate risk for their portfolio identified and prioritised sustaibable development in terms of driving sustainable business practice. companies, yet only 31% have acted upon this. goals (SDGs) that are relevant to their investments The private equity sector has a vital role to play in Mammatt further comments, “There is a (compared to 38% in 2016) and 43% have a supporting sustainable development: the survey risk of “impact-washing” - where it is claimed proactive approach to monitoring and reporting highlights that private equity houses and LPs are that investments have a greater SDG-aligned portfolio company performance against the SDGs taking that responsibility seriously and driving contribution or positive impact than can be (up from 16% in 2016). genuine change. That is especially important as their evidenced, or using positive examples of responsible The upward trend also corresponds with the role in global capital markets increases. investment to divert attention from other nearly three quarter of organisations (72%) globally “It is heartening to see that responsible investment investments where less action has been taken. mentioned in the global Sustainable Development is seen as a matter for those at the heart of the “Yet investors and PE leaders have a role to play Goals (SDGs) in their annual corporate or investment process and needs to be supported by in continuing to influence responsible investment sustainability reports - an increase of 10% on last year, rigorous monitoring and reporting. LPs are playing behaviour, through demanding more robust according to the SDG Reporting Challenge Report a vital role in applying pressure to act on key areas of and granular reporting around ESG matters. For 2018 issued by PwC in November 2018. PwC’s study ESG concerns and in influencing board agendas. instance, PwC has worked with the well-respected - From promise to reality - examines the corporate “Yet while responsible investment may only be global initiative The Impact Management Project to and sustainability reporting of over 700 listed at the ‘young adult’ stage of development, these are develop an impact assessment framework based on companies across 21 countries and six sectors, to test signs of increasing maturity.” the SDGs, to support investors. on the integration of the Sustainable Development Even so, the survey also acknowledges a continued “We are at the stage that we can see ESG genuinely Goals into business strategy, planning and reporting. distance between those considering action, and driving returns, and enhanced ESG practices can Jayne Mammatt, Partner Sustainability and those taking proactive steps. For instance, while potentially enhance multiples: it may well be the Climate Change, PwC South Africa comments: “This 89% of respondents cite cyber and data security as next big value lever.”

Prescient Money Mktg 1-4 Rhino Ad_r3.pdf 7/19/17 10:30:25 AM

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PRESCIENT GROUP OFFERING: LOCAL AND OFFSHORE INVESTMENT MANAGEMENT / UNIT TRUSTS STOCKBROKING / RETIREMENT PRODUCTS / UMBRELLA FUNDS / ADMINISTRATION / PLATFORM SERVICES AUTHORISED FINANCIAL SERVICES PROVIDER (FSP 612)

22 WWW.MONEYMARKETING.CO.ZA

EMPLOYEE BENEFITS

31 March 2019

Default regulations - living annuities post 1 March 2019

DAVID GLUCKMAN Head : Special Projects, Sanlam Employee Benefits

I

write this article with 10 days to go before the law requires that every South African retirement fund must make available a trusteeendorsed annuity strategy for its retiring members.

Yet there is great uncertainty in the retirement funds industry regarding how this will play out.

During November 2018, the FSCA issued a draft conduct standard pertaining to all living annuities used in terms of such trustee-endorsed annuity strategies. Comments were requested by 14 January 2019, and now we all await the next steps.

There are key principles that the FSCA wishes to enforce for living annuity strategies: 1. Suitable for the average member who does not have the expertise to make choices 2. Ensure greater protection from risks such as poor investment returns and excessive fees 3. Sustainability is a priority 4. Greater monitoring and communication onus placed on trustees 5. Maximum drawdown rates are specified by age and gender as set out in table 1.

The table shows that approximately 80% of retirees (and more than 90% of investment amounts) are being invested in living annuities. These are the de facto annuity vehicle of choice of retiring South Africans.

And indeed the ASISA numbers also indicate that the FSCA is correct to be concerned about the sustainability of living annuities.

But I can’t help wondering if the FSCA are correct to focus to such a degree on sustainability of income. The root problem appears to be that South Africans simply have not saved anywhere near enough at the point of retirement.

No annuity structure can solve that problem. South African retirees are hence compelled to make tradeoffs both at point of retirement and thereafter.

My fear is that the unintended consequences of overly restrictive trustee-endorsed annuity strategies, along with placing too great a

TABLE 1: Age

Males

Females

55

4.5%

4.0%

60

5.0%

4.5%

65

5.5%

5.0%

70

5.5%

5.0%

75

6.0%

5.5%

80

7.0%

6.0%

85

8.0%

7.0%

The FSCA’s emphasis on sustainability above all other factors is laudable and noble, but the question remains: Will such regulation work and result in a significant change in annuity purchase behaviour upon retirement?

Clearly the FSCA is concerned that far too many retirees are purchasing living annuities for the wrong reasons, as evidenced in the table below based on ASISA’s new business statistics for 2016: TABLE 2:

burden on trustees, are likely to be: • Very few members will opt into these strategies • Trustees will look to mitigate their risks by focussing on tick-box compliance • Behaviours and choices at retirement will continue as before • The cost will exceed the net benefit to members.

By the time you read this article the default regulations will already be in effect, and we should know if any tweaks were made to the draft conduct standard.

Editor's comment: One day after this article was submitted for publication, the FSCA released a notice confirming “It is not anticipated that the final conduct standard will be published before 1 March 2019, given the new and extensive standard-making process required by the FSR Act.”. We live in interesting times!”

# Policies

Single Premiums

Average Single Premium

Living Annuities

55 086

R56 810 000 000

R1 031 297

Life Annuities

13 950

R5 286 000 000

R378 925

SA companies brace for global war over talent

T

he Enterprise Observatory of South Africa (EOSA) recently drew attention to some alarming findings on the talent shortage in the Department of Home Affairs’ 2017 white paper on emigration.

According to the research, there was an acceleration of skilled emigration with around 400 000 professionals leaving South Africa over the past 14 years.

The trend speaks to a growing recognition that human capital plays a vital role in the knowledge economy, and that a global war over talent has emerged as companies are experiencing a shortage of skilled workers. This is according to Regard Budler, Head of Product Solutions at Momentum Corporate, who believes that many local companies are not exempt from this challenge. “Companies not quick enough to respond to this threat could fall behind,” he says.

According to the World Economic Forum Global Challenge Insight Report, skilled workers in areas of engineering, as well as humanities, sciences, digital technology and arts, are most sought after. The report identifies three factors that are driving this global tendency: the general shift in demographics, the high pay offered by developed economies,

and limited opportunities for growth in home countries.

“Developed countries are experiencing the negative impact of an ageing population, and are looking to the next generation of highly skilled workers to replace these critical skills. And according to Momentum Corporate research, 76% of the workforce will be younger than 37 by 2020. Employers need to stay ahead of not only current, but also future workforce trends if they want to maximise productivity. This vacuum in expertise is creating an enticing opportunity for a younger, highly skilled workforce – particularly millennials – from less developed economies to gain international exposure while progressing up the corporate ladder,” adds Budler.

He admits that in the current economy, it is difficult for local companies to compete with global salary expectations. Based on an analysis of Momentum Corporate’s client base, 74% of employees earn less than R150 000 per year, while many may have not received annual increases for the last three years. However, he believes it is possible for businesses to counter this by thinking more broadly around their

employee value proposition in terms of employee benefits.

“Younger employees are increasingly seeking opportunities for personal growth and career development, including opportunities to work overseas. Companies looking to retain these workers could consider rewarding loyalty by offering workers alternative opportunities. We’ve noticed more and more companies are using paid sabbaticals and international exchanges as a means to keep talent,” continues Budler.

He points out that millennials place value on work-life balance and flexibility. The advancement in technology has changed the way employers engage with employees, and how employees engage and collaborate with each other, which can allow workers to work remotely and with greater flexibility. Companies can respond to this trend by acknowledging that millennials value time with family, and recognise that the hours spent in the office don’t necessarily translate to productivity, but rather on getting the task done.

Budler says that with the rise of workplace flexibility, highly skilled employees are also looking for more

flexibility and choice in the structuring of their formal employee benefits.

A good start could be to simply utillise a retirement fund offering that includes member level investment choice or flexibility for employees to adjust their level of cover on group benefits such as critical illness and life cover.

He notes that millennials are also seeking work that is more purposeful.

“South African employers can counteract the high salaries offered by global companies by becoming a valued place of work. They can consider doing this by cultivating a workplace culture of shared values, and providing employees with the opportunity to spend part of their time championing causes that are close to their hearts.”

Budler concludes, “Partnering with a future-forward employee benefits provider will allow employers to create a compelling employee benefits value proposition that not only resonates with the values of highly skilled millennials Regard but one that Budler, meets the Head: objectives of Product Solutions, the business.”

Momentum Corporate

WWW.MONEYMARKETING.CO.ZA 23

RISK

31 March 2019

Rising incidence of art theft calls for specialised insurance

T

he television programme, Carte Blanche, recently exposed the growing criminal underbelly of art theft in South Africa, where expensive paintings, drawings and sculptures – stolen from wealthy South Africans’ homes to be sold on the black market – are fast becoming one of the best illicit currencies for organised criminals.

However, with the price of fine and classic art in the country having risen by 28% in the past ten years, Christelle Colman, managing director of Elite Risk Acceptances – a subsidiary of Old Mutual Insure – says that many of the valuable artworks that are stolen are grossly underinsured.

“Too often, local victims of art theft are disappointed to find that the insurance cover they have in place is not adequate for their art collection.

This is partly a result of pieces having appreciated significantly in value over time – either upon the death of the artist or depreciation of the randexchange rate – but also because many general household insurance policies apply a minimum value limit per item insured and would therefore fail to provide sufficient insurance cover for fine art that far exceeds this assigned value.”

As such, Colman says that catering to the specific needs of high-net-worth South Africans must include access to a panel of experts available to assess the value of their art works. “Something as meaningful as a personal art collection should not be overlooked, and in order to insure the pieces for their correct value and cover options, there are a number of unique factors that need to be taken into account.”

There are also instances where a commissioned piece, that is not yet completed, will have no insurance cover whatsoever, she adds. “Sometimes, individuals will commission an art piece, which usually requires a deposit. In the case that the work in progress gets stolen, or there is damage to the artwork before it is completed, insurance cover will allow clients to recover the deposit put down for the commissioned piece.”

Similarly, she points out that artwork will typically need to be transported from studios or galleries to the individual’s property. “What if thieves were to intercept the piece during transit, or if an accident were to occur whereby the piece was destroyed?”

To adequately cover these risks associated with the transit of valuable pieces, as well as the other unique risk factors associated with art, Colman says that specialist cover is no longer even a question for serious collectors. “With art theft on the rise, South Africans need to ensure that their valuable pieces are insured comprehensively and at their current market value to avoid financial loss,” she concludes.

Christelle Colman, Managing Director, Elite Risk Acceptances

24 WWW.MONEYMARKETING.CO.ZA

The risk of uncontrolled veldfires

R

unaway fires can be devastating as lives and property can be lost. Nothing can ever prepare one for the consequences of an unplanned, sporadic and ravaging wildfire. In the last few years, South Africa has witnessed several devastating veldfires that have cost the non-life insurance industry billions of rand.

Something as simple as a small flare can have devastating consequences if not managed correctly.

“Uncontrolled veldfires pose a serious risk to the general environment, human life and property, as well as livestock in farm settings. Educating vulnerable communities and giving them the knowhow of what can accelerate and increase the intensity of veldfires can assist in reducing their impact,” says Nico Esterhuizen, General Manager Insurance Risks at the South African Insurance Association (SAIA).

back on our feet quicker by replacing the assets we may have lost in the fire.

It is imperative that policy and prospective policy holders are aware of what cover is provided for, and which items are covered by their policy.

Homeowner/Building Cover: This insurance covers the building and other things that are permanent and immovable within your property boundaries. Most homeowner / buildings policies include parameter walls, garage and gate and the motors that power them, outbuildings, swimming pool and/or borehole and associated pumps, and all the fixtures and fittings in the house or flat itself.

Household Contents Cover: Contents include your furniture, clothes, crockery, linen and other items in the house. By taking out householdcontents insurance cover, you know that when you are affected by veldfires, the insurance product will The importance of assist you by replacing, repairing or assessing the risk reinstating the damaged goods. around our properties All Risk Cover: It covers your IT IS IMPERATIVE Vegetation that is adjacent to THAT POLICY AND other items that you carry with you, our properties can be a source like your cell phones, cameras etc.

PROSPECTIVE of fuel and can increase the It will come in handy if any of these impact of fires. Vegetation found POLICY HOLDERS items are damaged by veldfires away around our property like shrubs, from your home.

ARE AWARE OF grasses, bark, (especially if it is Public Liability Cover: This WHAT COVER IS loose), dead leaves and twigs insurance product provides can add fuel to the fire. Without liability cover to the policyholder.

PROVIDED FOR additional fuels, fire dies, however As a homeowner you may make when such vegetation is left around our properties, a mistake and leave a burning fire outside at the fire will grow in its intensity and spread quickly. night. During the night the wind may blow, and To minimise the risk, we need to cut dry grass, the fire may spread to neighbouring’ properties. regularly clean roof gutters as leaves tend to pile Should they be successful in proving that you up and clog the pipes, trim trees and place loose were negligent and hold you liable for their losses, wood 10 metres or more, away from our property. personal liability cover will then assist you against any law suits.

Topographical features that negatively affect veldfires “It is important to have knowledge on how Slopes affect the behaviour of fires. The fire runs to recognise the weather conditions associated faster uphill than downhill because the flame length with high fire danger: temperature, wind is closer to other fuelling objects. North facing slopes speed/direction and humidity. Training staff are warmer and are more prone to fires because in firefighting techniques and safety standards they are exposed to the sun. North facing slopes for burning rubbish and disposing of hot ash is temperatures are high and the fuels like wood etc. are essential,” says Esterhuizen. dry, and thus can easily ignite and burn.

Insurance products We can take out insurance products for our property and household to assist us in the event that a veldfire cannot be prevented and our belongings are destroyed. Appropriate/suitable/the right insurance product/s will ensure that we get

Nico Esterhuizen, General Manager: Insurance Risks, SAIA

RISK

31 March 2019

BRAD TOERIEN FMI CEO

I

Three things every Early Earner needs to know

ncome earners under the age of 30 are dangerously underinsured with only 35% of the disability cover they need1. And of this cover in place, 75% is lump sum benefits (rather than income), that will only protect an individual for permanent disabilities2.

Yet the risk of a temporary injury or illness is much higher, leaving Early Earners exposed. We have a responsibility, as an industry, to set this straight.

So, who are Early Earners? We define them as those individuals who are just starting out, and who have not yet bought a home nor have any dependents.

Their greatest need is to protect their monthly income from the financial impact of an injury or illness. This is the time of their lives when their trajectory for future earnings is at its highest. Therefore, protecting your young clients’ ability to earn an income should be the foundation of any financial plan.

We understand that you may receive some resistance from this particular market. They are skeptical of the insurance industry, wary of advisers’ motives and as a result, seek to make their own decisions rather than follow the conventional route.

Compounding the challenge is the perception that life insurance is death cover, so Early Earners don’t see the need for such a product without dependents. And they believe they’re invincible and can’t imagine they’ll ever be too sick to work.

On the flip side, financial stability and freedom are important to them. They’re paranoid about the debt trap. And contrary to popular belief, they’re better at saving than their parents were at their age.

There are three simple things every Early Earner needs to know to help them secure their future income the minute they get that first pay cheque.

1

The value of their future income By using FMI’s Future Income Calculator (available on our website), you can quickly and easily calculate an individual’s specific future earnings.

And it will surprise them! Take 25-year olds earning R15 000 a month as an example. They will earn a staggering R38.3m over their working lifetime3.

This is what they need to protect.

2

Their risk reality A 25-year old has a 96% chance of experiencing a temporary injury or illness that will stop them from working for more than two weeks during their working career. By comparison, they would only have a 14% chance of a permanent disability and only a 9% chance of death during their working career4. Traditional lump sum benefits will not protect an Early Earner from their most likely risk of a temporary injury or illness, so the best approach

would be to ensure they have temporary and longterm income cover to make sure they’re protected in such an event.

3

The financial impact of an interruption in earnings In our 2018 #RealityCheck consumer survey, 62% of respondents said they’d run out of money in three months, which means even a temporary interruption can have long-term consequences. Early Earners don’t think twice about insuring their car and cellphone, but few consider protecting the income that makes this all possible. It’s important to point out that it’s their income that enables their lifestyle and future dreams, and it is core to their financial future. In today’s economy, it’s vital that Early Earners are made aware of their risks and do more to protect their income.

If Early Earners understood the value of their future income; the high probability of experiencing a temporary injury or illness; and the financial impact of an interruption in earnings, they’d want to protect their INCOME FIRST.

1 ASISA Gap study 2FMI’s 2018 Disability Cover study 3FMI Future Income Calculator. 6% nominal growth, retirement age of 70.

4 FMI Risk Stats 2019. Probability based on temporary disability lasting longer than 2 weeks during working career up to retirement age of 70.

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HEALTH

31 March 2019

LAUREN SALT Senior Associate, Baker McKenzie,

RUI LOPES Associate Designate, Employment & Compensation Practice, Baker McKenzie

Diagnosing employer medical aid contribution changes – the NHI Bill

T

here has been a lot of hype around the proposed National Health Insurance Bill, 2018 (NHI Bill) and the numerous implications for South African citizens. Little has been said, however, about how the NHI Bill will impact on the provision of medical aid benefits in the employee context.

The NHI Bill aims to enable access to free, universal, high-quality healthcare for all, by creating a single national health insurance fund. The NHI Bill will, once promulgated, centralise the procurement of medical supplies by the State. A key feature of the NHI Bill is the establishment of the National Health Insurance Fund (NHI Fund).

Membership of the NHI Fund will be mandatory for all South African citizens.

Currently, the NHI Bill is silent in relation to how the contributions towards the NHI Fund will work, but the Department of Health has indicated that everyone that can afford to do so will be liable to contribute towards the NHI Fund. It appears that contributions to the NHI Fund would be in addition to any medical aid scheme premiums, if individuals should choose to remain members of a private scheme.

It is envisaged that all healthcare will be accessed free of charge through the NHI Fund.

It has been suggested that one of the options for funding the NHI would be via a withholding tax, similar to Pay as You Earn (PAYE). This would then be paid over to the NHI Fund by the employer.

Accordingly, once the NHI Bill is promulgated, employers will most likely have to contribute towards the NHI Fund and it appears that they would no longer be expected to contribute to private medical aid schemes on behalf of their employees, unless they elect to make both contributions.

Where an employer chooses to cease making private medical aid contributions

on behalf of its employees, as a result of the introduction of the NHI Fund, this may result in a unilateral change to the employees’ terms and conditions, or a potential unfair labour practice relating to the withdrawal of benefits.

This is especially the case if the changes are not effected in the appropriate manner.

For those employees who decide to stay on a private medical aid scheme in addition to contributing to the NHI Fund, the draft Medical Schemes Amendment Bill has made several changes to the current system, which appear to be advantageous for medical scheme members. It abolishes co-payments, requires medical aid schemes to make full payment of the patient’s expenses, and removes medical aid brokers.

If these amendments are passed, medical aid scheme members who have raised concerns about above-inflation premium increases and exposure to co-payments should see immediate improvements. However, the changes could also potentially cause medical aid schemes to raise member contributions to cover their increased obligations.

While a substantial amount of detail is still to be fleshed out in the regulations, implementation of the NHI is currently targeted for 2025. In the interim, employers should consider whether they would want to cease contributions to their employees’ private medical aid scheme.

In order to potentially cap their (future) liability and curb any headaches associated with trying to escape double contributions later, employers should consider building the present value of their contributions into their employees’ gross remuneration packages, requiring them to facilitate their own medical aid membership in the future. The effect of this will, at the very least, mitigate financial risk concomitant with increased premiums following the promulgation of the NHI Act.

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LINDA VAN RENSBURG Senior Consultant, Alexander Forbes Health

How to avoid a medical aid’s late joiner penalty

M

edical schemes are required to maintain a reserve level of 25% of gross contributions. Members who joined the scheme earlier in life would therefore have contributed towards the scheme’s reserves for a longer period than those that join the medical scheme later in life or when they need to claim. It is for this reason that the Medical Schemes Act allows the application of late joiner penalties – not only to encourage members to join earlier in life, but also to protect the existing members.

Late joiner penalties are applied after the age of 35 and are not applicable to members or dependants who were on a medical scheme prior to 1 April 2001 and who have not had a break in cover of more than three months since this date.

Should this, however, not be the case, a late joiner WHEN penalty may be applied.

CALCULATING When calculating the late THE LATE JOINER joiner penalty, only coverage on a registered South African PENALTY, ONLY medical scheme is taken into account. This is referred to as COVERAGE ON ‘credible coverage’.

A REGISTERED

SOUTH AFRICAN MEDICAL SCHEME IS TAKEN INTO ACCOUNT

Example An applicant aged 65 declares having been on a medical scheme for a period of 25 years. The credible coverage is deducted from the member’s current age (65 – 25 = 45) which means that the member was not on a medical scheme for 10 years after the age of 35. The late joiner penalty percentage is therefore 25%.

Number of years not on a medical scheme after the age of 35

Penalty

1 – 4 years

5%

5 – 14 years 15 – 24 years

25% 50%

25 + years

75%

It is important to note that the late joiner penalty is only calculated on the late joiner’s risk premium, i.e. excluding savings account contributions.

How long does a late joiner have to pay the penalty?

As the late joiner penalty is intended to ensure that reserves are accumulated for members/dependants joining later in life, the late joiner penalty is applicable for the entire period that the late joiner is a member of a medical scheme.

What if the late joiner is an expatriate and had been on a medical scheme in another country before relocating to South Africa?

As expatriates are not contributing towards reserves while overseas, a late joiner penalty may be applied upon relocating to South Africa. Medical scheme cover in another country is not considered credible coverage and will therefore not be taken into account.

EDITOR’S BOOKSHELF

31 March 2019

WHEN CULTURES COLLIDE LEADING ACROSS CULTURES 4TH EDITION

BY RICHARD D LEWIS This is an extensively revised new edition of the book that revolutionised international business and communication across cultures.

In this fourth edition of his seminal work, cross-cultural expert and international businessman, Richard Lewis, provides leaders and managers with practical strategies to embrace differences and successfully work across diverse business cultures. With the inclusion of several new chapters, contemporary Europe is now completely covered, plus significant revisions have been made throughout to bring political information and statistics fully up to date.

Using the powerful ‘Lewis Model’, this book equips individuals, teams and organisations with practical strategies and knowledge of cultural behaviour, leading to more successful business outcomes at all levels.

BOOKS ETCETERA

SHOOT FOR THE MOON

BY RICHARD WISEMAN On the 20th July 1969, Neil Armstrong became the first person to walk on the moon. We all recognise this to be one of mankind’s greatest achievements. Yet, what did it take to make John F Kennedy’s dream a reality?

In this remarkable book, Professor Richard Wiseman presents a pioneering study of the mindset that took humanity to the moon, and shows readers how they can harness and use it to achieve the extraordinary in their everyday life.

Combining personal interviews, mission archives and cutting-edge psychology, Wiseman embarks on the ultimate voyage through inner space. He identifies eight key principles that make up the ‘Apollo Mindset’, including how pessimism is crucial to success, and how fear and tragedy can be transformed into hope and optimism. Readers will discover a series of practical techniques they can use to incorporate these winning principles into both their professional and personal lives.

AMBITION REDEFINED

BY KATHRYN SOLLMANN Ambition Redefined is a timely alternative to current women’s business books that define professional ambition and success as climbing the corporate ladder. In fact, the corporate ladder is not a path that all women want or should feel pressured to follow.

The book’s focus is on the more critical and widespread workplace issue for everyday women – to always work in a way that fits their lives alongside their two major caregiving roles: for children and aging parents.

Sollmann debunks common assumptions such as: • It’s not ‘worth it’ unless the salary is high: Women forfeit up to four times their salaries every year out of the workforce to care for children and/or elderly parents – and it does not take a six-figure salary to achieve long-term financial security.

• Finding flexible work is impossible: In the ever-widening world of flexiwork, women can find many ways to tuck all generations of their families into a future that is financially secure and safe. The book includes realistic, practical tools for preparing for and finding flexible work within a current job or a new opportunity.

SUDOKU ENTER NUMBERS INTO THE BLANK SPACES SO THAT EACH ROW, COLUMN AND 3X3 BOX CONTAINS THE NUMBERS 1 TO 9.

SUPERFAST LEAD AT SPEED

BY SOPHIE DEVONSHIRE In today’s fast-paced world, leaders need to move at speed. The rate of innovation and change in organisations and the challenges of impatient investors or shareholders mean leadership decisions must be quick, smart and deliver real impact.

Superfast provides both inspiration and ideas about how to accelerate performance in an agile and thoughtful way, shedding new light on leading in a world that is fluid and uncertain. The book contains the practical solutions to leadership questions that the most savvy global leaders employ, and maps the reader’s own shortcut to personal and professional success.

Leadership is not just about moving fast, however. The book also shows readers how to use their time in the smartest, most efficient way possible – slowing down when necessary to get decisions right and accelerating elsewhere to unlock growth.

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