30 September 2019 | www.moneymarketing.co.za
@MMMagza
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MoneyMarketing's guide to investing offshore in volatile times
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Increasing offshore exposure to protect capital
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he poor performance of the “The current economic landscape JSE over the past five years can is not sustainable for business or undoubtedly be attributed to individuals – something has to give the inept way in which South Africa when we put all the statistics together,” has been managed. Low economic he adds. “If you look at the basic growth, high unemployment and the economic issues we currently face, precarious state of Eskom’s finances, the reality is that there’s no immediate coupled with the looting that state turnaround in sight. Some economists capture brought about, has made many will say that the rand is undervalued, think again before investing all their okay – but what significant funds in the local market. fundamentals would need to In the past five years, the total change in order for the local dollar return on the S&P 500 was currency to recover? We believe 61% versus a loss of 4.7% for the issues are just too big. From the JSE’s Top 40 index in dollar an investment perspective, it terms. “Of course, past returns is the uncertainty that we are are no indication of future trying to de-risk for our clients.” returns, but it is hard Many South Africans are to see a spectacular susceptible to what is turnaround in South termed ‘home country Africa’s fortunes – in bias’ – defined as the fact, things may get tendency for investors worse,” says Nick to favour companies Pitro, Global Senior from the countries Consultant at in which they live. independent wealth This is a worldwide Nick Pitro, Global manager, Austen phenomenon and Senior Consultant, Morris Associates. certainly not unique Austen Morris Associates to South Africa.
Locally, there is also a feeling that it is unpatriotic to move money away from local markets to those offshore. But is investing about patriotism? “I am a South African – I’ve lived here all my life,” says Pitro. “I love our country and I am saddened by the current economic landscape. It is unfortunate that not a single day seems to go by that we don’t read another dire update about corruption, corporate mismanagement, declining GDP, SOE bailouts, credit downgrades, and the list goes on. However, if I was someone in my sixties – approaching my retirement – and I had seen my pension grow by a measly 2% to 4% net of fees (as most people have), I would certainly be considering my options. We are constantly looking for value for our clients and believe that the offshore investment space provides an appropriate and functional way to diversify away from domestic influence. Diversification is key and we believe that individuals should consider all of their options when looking at their investments.”
If investors have a house and pension here in South Africa, they should keep them – but take as much of their investable money as they can offshore, as staying invested in local assets will likely erode their wealth over time. “Our client profile is typically wealthier individuals (perhaps the top 5% to 10% of income earners) and we often advise that discretionary savings (salary bonus, monthly surplus, cash in bank, etc.) should be considered for an offshore investment. This provides for a portfolio that is de-risked from South Africa and allows our clients to benefit from global growth.” He explains that Austen Morris Associates is a completely independent advisory business that’s been around for 25 years. “We’re globally headquartered. We have a lot of exposure to what is happening around the world. In South Africa, we manage many rand assets, individual retirement savings, some employee benefit schemes and of course offshore assets. Continued on page 3
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NEWS & OPINION
30 September 2019
Continued from page 1
“Ultimately, clients look to us for the best perspective, I’m not so sure we’d advise clients to advice to help them achieve their personal goals, do so unless the offshore investment landscape retire comfortably, educate children, etc. became untenable.” “If I am unable to generate returns in line There’s no shortage of difficult issues for with my clients expectations, I need to look at South Africans to deal with currently and alternatives and certainly in the last 10 years, Pitro believes that at least four things should the offshore space has proved an incredible change before he’d recommend investing in option. Our exchange control is fairly relaxed local equities. and every South African can externalise R11m “Firstly, the failings of the JSE over the last a year offshore. There are great opportunities ten years – our clients are looking for capital offshore and we want to make sure we’re giving growth and it is simply not available here our clients access to these opportunities. right now. Secondly, the economic risk of Whether the client wants to invest in rand, unemployment currently standing at 29%. With dollars or sterling – makes no difference to us, millions of additional South Africans entering again we are simply looking for value.” the job market over the next five years – how Pitro says that from an advisory perspective, does a country sustain itself at these levels? he sits with three to five clients every day Thirdly, currency depreciation is completely and for the most part, destroying our buying power. South Africans are fairly The rand has depreciated by OUR CLIENTS ARE uneducated as to what 48% over the last 10 years LOOKING FOR is available offshore against the dollar. And lastly, – providing far more there are the continued CAPITAL GROWTH opportunities, industries political concerns. Infighting AND IT IS SIMPLY and diversification than within the governing party NOT AVAILABLE HERE and a standing president that the JSE can offer. “SA contributes less than 1% to inherited a completely failed RIGHT NOW global GDP. The investment state. These have no quick landscape elsewhere is immense,” he adds. fixes, these will take time.” Pitro is currently advising clients to invest in Another concern for Pitro is the rising the US stock market for the long run, despite its number of failing JSE companies that have extended bull market. undermined investors’ faith – like Steinhoff, “Yes, the S&P has been at an all-time high, EOH, Tongaat Hullett, Group 5, Omnia, Aspen, and yes, some US companies have reported Mediclinic and Brait. He believes that other incredible earnings. We believe that President listed companies – including some of those on Trump has been incredible for the US economy the Altex – are under severe pressure due to the and will do whatever it takes to position himself economic and political landscape in the country. for re-election and this should drive US growth. “I’m not sure that another Steinhoff will But we do need to make sure that investments happen as the tightening up of regulation are flexible enough to shift if/when the US will come into play and will probably prevent economy slows.” anything like that happening again. But as our He adds that if South African equities do currency continues to depreciate, there is a lot turn around and if the JSE starts to become of pressure on companies that are trying to the powerhouse it was some 10 years ago, it import goods and services.” would be favourable for clients that are holding Pitro still believes – in spite of the difficulty existing money locally in compulsory savings. of seeing any light at the end of the tunnel “If junk status doesn’t materialise, client’s should – that South Africa is an incredible place to have an investment portfolio that can cater for live. “You cannot maintain the same lifestyle that. There’s nothing to stop our clients from internationally, and if you’re funding your repatriating money once sent offshore. However, retirement in foreign currency, you benefit from a risk and continued diversification both ways.”
EDITOR’S NOTE
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hat an interesting time we’ve had over the past few weeks. Globally, the news was all about the US yield curve, when in mid-August it at last inverted. A yield curve compares the yield on bonds that have the same credit quality, but differing maturities. In the US, the yield curve between the three-month and the ten-year US Treasury inverted a while back – but last month, the curve between the two-year and the ten-year also inverted. Now, some believe that this is a sign of a coming downturn on the markets. Consequently, the word ‘recession’ was shouted from the rooftops. While a downturn may take a while to develop, investors should still be cautious. On the local scene, it was all about the bogeyman known as the IMF bailout (See page 6), as well as speculation about prescribed assets. Well-known figures in the investment world have been tweeting about imminent debt relief from the IMF. That’s not about to happen. Indeed, the IMF local representative himself, Dr Montfort Mlachila, told delegates at last month’s BER conference that SA has not approached the IMF for assistance and that it is the opinion of the institution that the country does not need support. The possibility of prescribed assets remains. The level at which the government would place those assets is important. I don’t believe that government would be as audacious as most people think – and consequently, the impact would be negligible. It’s early days yet and one must be patient as the investment industry and the Association for Savings and Investment SA (ASISA) engage with Treasury. Janice janice.roberts@newmedia.co.za @MMMagza www.moneymarketing.co.za
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NEWS & OPINION
PROFILE
30 September 2019
PHILIP BRADFORD CIO: SASFIN ASSET MANAGERS
How did you get involved in financial services – was it something you always wanted to do?
Even as a kid I was always a good saver, whether it was with sweets or money. Years later, when I got the chance to walk on the commodity trading floors in Chicago and the old trading floor of the JSE, I knew I wanted to be involved in financial markets. So, after university I studied for the CFA Charter and read as many books as I could on trading, investing and investor psychology. This helped me realise that I wanted to be a fund manager and help people protect and grow their wealth.
What makes a good investment in today’s economic environment?
A good investment, in any environment, is one that generates a consistent, predictable return. The more predictable the return, the lower the risk, and investors typically don’t focus enough on risk. Therefore, a great investment is low risk and gives you a high return that is consistent and predictable. Good investments tend to be boring and exciting investments are often very volatile and risky. At the moment, I am buying boring, low-risk bonds at yields of between 10% and 12%. It’s a great opportunity for conservative investors.
HOPE AND GREED ARE AN INVESTOR’S ENEMY
VERY BRIEFLY
What was your first investment and do you still have it?
One of my first real investments was buying shares in Didata in the late 90s and early 2000s. I was inexperienced and just following the herd trying to make quick money. I learnt good lessons about greed, fear and the volatility of markets, which have helped me to manage risk effectively. Luckily those lessons were cheap because I managed to sell that investment at a profit before it went down dramatically.
What have been your best – and worst – financial moments?
I have always been very disciplined with my spending and saving, so I have never allowed myself to get into a difficult financial situation. It is a great feeling to look back and know that because I consistently invested as much as possible into my pension fund (which I manage) and other investments, my family has financial security. My worst moments have come from investing in bad quality companies with uncertain earnings (like mining) with the hope that they will grow. Hope and greed are an investor’s enemy. Luckily these bad investments have been small.
Do you own Bitcoin? If not, why not?
An investment by definition should ‘bear fruit’ and should have some underlying value. Therefore, to me Bitcoin is not an investment because it provides no interest or dividends and it is not backed by any actual assets. Even Fiat currencies, which Bitcoin is supposed to replace, are at least backed by the tax revenue of a country and pay interest. Therefore, the owners of it are purely speculating and relying on the scarcity to force the price up. These assumptions make Bitcoin too risky for me. I wish those that hold it the best of luck. They may need it! I would far rather earn 10% to 12% from the bonds I buy for investors in the Sasfin BCI Flexible Income Fund and sleep at night.
UPS & DOWNS
South Africa’s tourism industry should receive a boost, now that the Department of Home Affairs has relaxed visa laws for Qatar, Saudi Arabia, the United Arab Emirates and New Zealand. Of the four countries, Qatar is the only one that also allows South
Africans entry without a visa. The department is in talks with the remaining three countries to reciprocate and also allow South Africans visa-free entry. The lifting of visa regulations is part of President Cyril Ramaphosa’s stimulus package.
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The German economy – the Eurozone’s largest – shrank 0.1% in the second quarter of this year, as global uncertainty and trade tensions between the US and China took a toll on the country’s manufacturers. If the German economy
has another negative quarter, it will be viewed as having fallen into a recession. Other economies in the Eurozone have slowed, with the GDP of the Euro area sliding from 0.4% in the first quarter to 0.2% in the second quarter.
Nicky Newton-King will retire as Chief Executive Officer (CEO) of the JSE on 30 September 2019. The Board has appointed Dr Leila Fourie as Group CEO, effective 1 October 2019. NewtonKing said, “It has been the privilege of a lifetime to lead the JSE. Having led and been involved in so many of the JSE’s key strategic initiatives over the last 23 years, my fingerprints are on much of the DNA of the JSE today. But, after eight years as Deputy CEO and eight years as CEO, I feel it is appropriate to step down – there is a time at which a CEO needs to step back and allow an institution to be led by a new energy and that time, for me, is now.”
JSE-listed financial services company Ecsponent Limited has announced that Terence Gregory will step down as CEO on 31 December 2019. Dirk van der Merwe, the current Financial Director, will succeed Gregory as CEO. Gregory will remain on the Board as a non-executive director subject to ratification at the next annual general meeting of shareholders, while also pursuing other business interests. Gregory joined Ecsponent as CEO in September 2010 at the request of the group’s majority shareholder at the time. He served as chief operations officer from 1 December 2015 and was reinstated as CEO from Terence Gregory, 1 October 2016. CEO, Ecsponent
Franklin Templeton is pleased to announce the appointment of Matthew Williams as Senior Director and Head of Institutional Sales, EMEA. In this newlycreated role, Williams relocated to Germany from Canada on 1 September 2019, where he will be responsible for developing and leading the institutional sales strategy and client relationship management for institutional clients in EMEA. Williams joined Franklin Templeton in April 2013 as Head of Defined Contribution and was later appointed to Head of Institutional and Client Service for Canada. Prior to joining Franklin Templeton, he held a number of leadership roles at ING Investment Management in Asia (Hong Kong and Thailand) where he advised sovereign and quasi-sovereign institutions Matthew on the development of Williams, Senior their pension models; and in Director and Head Australia where he was Head of Institutional of Sales for the ANZ channel. Sales, EMEA
NEWS & OPINION
30 September 2019
JAMES GEORGE Compliance Officer Manager, Compli-Serve SA
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nti-money laundering is a hot topic with the Financial Services Conduct Authority (FSCA) and the Financial Intelligence Centre (FIC), currently on an inspection drive to visit as many FSPs as possible. Both category I and II FSPs will be assessed for compliance with the FIC Amendment Act. This includes the internal rollout of a firm’s Risk Management Compliance Programme (RMCP), which should already be in effect. To be as prepared as possible, here are some pointers to keep in mind, pending any visits to your practice. Gather the goods While you will be notified and a suitable time proposed for your onsite visit, expect a full day and ensure that all key personnel are available for questioning (at any point throughout the visit). This includes senior management, key individuals (KIs), the person appointed in terms of section 42A (2) of the FIC Act, any staff who work with clients (representatives) and staff who work with accounts. You will likely only be given a couple of weeks to prepare the documents for the inspection, which will include your FIC registration and authentication
An intensive visit could await you… be prepared
documents, as well as a detailed list of active clients, sharing their geographic location and risk rating, among other key factors. Admin-savvy Ensure that your FIC registration details are correct on the GoAML FIC Reporting System, checking as well that the correct person is assigned to the position of FIC Compliance Officer or Money Laundering Reporting Officer. Accountable tasks actioned • As accountable institutions must identify and verify all clients in terms of their RMCP, assigning a risk to each client, these findings and type of customer due diligence (CDD) obligations must be applied. • The new FICA amendments make it clear that accountable institutions must additionally establish the nature, control structure and beneficial owners of legal persons, partnerships and trusts. • When a business relationship is established with a new client, the accountable institution must determine whether future transactions are consistent with the knowledge of the client (this
includes the nature of the business relationship concerned, as well as the intended purpose and source of funds, which the prospective client expects to use in concluding transactions over the course of the business relationship). Mitigate risks in line with your RMCP If an FSP works with prominent influential persons (domestic or foreign), there are appropriate steps to take to follow the RMCP and to mitigate risks. Senior management approval will be needed to establish the relationship, verify the source of funds and monitor the relationship.
Report reality It is required to report any suspicious activity. You have to file a cashthreshold report if the transaction exceeds R24 999.99, as well as a suspicious transaction or activity report and any terror financing/property reports too. Ongoing FICA training is an explicit requirement too, so keep this in mind. Keeping your compliance up to date at all times ensures that you will be more prepared for any upcoming visits, or other deadlines. Working with a qualified compliance officer can greatly assist the process. It can cost considerably more should you become uncompliant.
Talk of SA turning to the IMF ‘misplaced’: SA is not Argentina The most up-to-date fund performance and fact sheet data in South Africa Delivered over the Internet, which means you can access your account and all your research 24 hours a day, and from any location We manage all installation, maintenance and updates relieving pressure on your IT resources Incredibly easy to navigate, despite the depth of data and the range of sophisticated tools Your gateway to a vast array of valuable data in a product that is continually being developed with your needs in mind Automatically updated daily – no downloads or CD updates Full of excellent, intuitive features – line graphs, scatter charts, performance tables, ratio data, fact sheets, list builders and universe filters, and portfolio modelling The output options give you the flexibility to generate professional reports and presentations
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While South Africa’s government debt is rising due to Eskom and weak tax revenue growth, the government is far from bankrupt. That’s the word from Dave Mohr, Chief Investment Strategist, and Izak Odendaal, Investment Strategist, at Old Mutual Wealth. “The increased talk of South Africa turning to the International Monetary Fund (IMF) for assistance is misplaced,” they say. “The IMF itself sees no reason why we can’t sort out our own problems without its help. It has noted that the asset side of the government’s balance sheet is larger than the liability side, but the assets need to be ‘sweated’, or sold, to deliver a decent social or economic return.” The IMF helps countries that run out of dollars to repay debt or fund imports, usually when capital flows dry up. “South Africa’s government debt is mostly rand-denominated and there is no sign that it is struggling to fund itself in the local bond market,” Mohr and Odendaal say. “The flexible exchange rate takes care of the rest. South Africa is not Argentina, dependent on borrowing abroad in dollars.” Argentina turned to the IMF last year (for the biggest bailout on record) precisely because the lack of a domestic bond market means the government borrows in dollars. However, last month its financial markets suffered a sharp collapse – currency, equities and bonds slumped between 30% and 40% overnight – after the reformist President Macri lost a key indicative vote ahead of October’s presidential elections.
NEWS & OPINION
30 September 2019
ARC announces investment in Capital Legacy
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mpowerment investment holding company African Rainbow Capital (ARC) has announced its acquisition of a 25% shareholding in specialist financial services firm Capital Legacy for an undisclosed consideration. Capital Legacy is a major player in will drafting and estate administration. Operating since 2012, the company has identified improved, efficient and cost-effective solutions to will drafting, estate planning and execution. These solutions are significant in a South African context where only one in four people has a valid will in place at death. Inefficiencies in estate planning could result in as much as 30% of the value of the estate being used to cover costs. Furthermore, execution could take years, and not months, to conclude in the absence of adequate planning. This poses several financial risks to the dependants of the deceased. These include financial concerns, such as a lack of liquidity to settle debts, estate taxes and other legislated costs relating to the administration of the estate. For example, if a person dies intestate (without a valid will in place) with minor dependants, those inheritances may either be
TRACEY DAVIES Executive Director, Just Share
O
reduced to cash and transferred to the Government’s Guardian’s Fund or transferred to the minors’ appointed guardians – as opposed to what the deceased originally intended. In addition, the estate is distributed according to the laws of intestacy and the specific regulations thereof. “When I was a financial adviser, I tried and tested several providers of fiduciary services to get wills drafted for my clients, with little or no success or sense of comfort,” says Capital Legacy founder and CEO, Alex Simeonides. “In one instance, a client passed on and I personally had to translate the industry standard fee of 3,5% of gross assets into a rand value for a grieving widow and then ask her to settle the fee. This experience made me realise there had to be a different, easier and more honourable way to serve clients.” He adds that in the South African context, where access to wealth and preservation of wealth are real issues in our national discourse, one has to be aware that the real cost of dying is what may financially devastate those left behind. Simeonides explains that Capital Legacy offers the services and expertise required to provide the planning and
documentation individuals needs to ensure their assets are dealt with properly and efficiently after death. “Professionals with both legal and financial knowledge advise clients about their unique needs, such as whether to include provision for a testamentary trust in their will, and what costs their estate is likely to be liable for one day.” In addition to the legal advice provided, the firm offers financial solutions to specifically make provision for the potential impact of legislated costs associated with an estate. Since inception in 2012, Capital Legacy has drafted more than 200 000 wills. “The number of South Africans who do not have a will still exceeds those who do. Thus far we have demonstrated that our business is uniquely positioned to offer ordinary people a service from which they can benefit significantly. Our solutions are geared towards effectively managing legislated costs associated with an estate,” he adds. The transaction allows ARC to complement its existing financial services investments and facilitate synergistic opportunities between Capital Legacy and companies in which ARC is invested. Capital Legacy stands
to benefit from ARC’s empowerment status as it will improve its own empowerment rating. This is likely to result in Capital Legacy drawing more business flows and therefore improving its overall business success. “ARC sees Capital Legacy as a business with great potential in the space in which it operates as its services have broad appeal for so many South Africans in all market segments,” says ARC co-CEO, Johan van der Merwe. “Capital Legacy is a solid business and it makes an important difference in the lives of South Africans, which is an ethos that resonates well with ARC,” he adds.
Alex Simeonides, CEO, Capital Legacy
Johan van der Merwe, co-CEO, African Rainbow Capital
Bank’s policy on lending to coal-fired power stations ‘disappointing’
n 31 July 2019, Standard Bank announced Disappointing the release of its Coal-Fired Power Finance There are several areas in which shareholders might Policy (Policy). This partly discharges consider the Policy to be disappointing. the obligation imposed on Standard Bank by Standard Bank acknowledges in the Policy the 55% of shareholders who voted in favour of that the signatories to the Paris Agreement on a shareholder resolution tabled at its AGM on Climate Change “include all 20 African countries 30 May. The resolution, which was proposed in which the bank has a presence”. However, while by the RAITH Foundation and the Policy refers to the goals of the shareholder activist, Theo Botha, Paris Agreement, it does not express SHAREHOLDERS support for these goals. Nor does it with support from Just Share, CAN ASSESS FOR state that Standard Bank recognises required the bank to adopt and publicly disclose a policy on and accepts the severe risks posed THEMSELVES lending to coal-fired power stations by climate change. It also does not WHETHER and coal-mining operations. acknowledge the role that banks have In its SENS announcement, to play in facilitating the transition to THE BANK’S Standard Bank stated that it is a low-carbon economy, to avoid the POSITION IS “in the process of developing a significant social and environmental SUFFICIENTLY policy on lending to coal-mining impacts of failing to limit global operations”. temperature increases to 1.5°C above TRANSPARENT Now that Standard Bank has pre-industrial levels. adopted and disclosed such a policy, shareholders Interpreting the parameters set out in the Policy can assess for themselves whether the bank’s requires a significant degree of technical expertise, position is sufficiently transparent and accessible, which most shareholders will not possess. Standard and whether it adequately addresses the severe Bank does not rule out the financing of new climate and financial risks posed by the financing coal-fired power plants, but rather sets ‘Minimum of new coal-fired power infrastructure. Eligibility Requirements’ for doing so. The Policy
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states that these minimum requirements are “consistent with the principles and standards for coal-fired power finance contained in the latest OECD Annex VI sector understanding on export credits for coal-fired electricity generation projects dated January 2019”. The Policy summarises the qualifying parameters for financing, which are “linked to the level of development of the country in question”. As a very broad summary, high-efficiency plants (ultra-supercritical) are generally eligible for financing. Less efficient, smaller plants are only eligible for financing in International Development Association (less developed) countries. South Africa is not an IDA country. FirstRand On 5 August, Just Share and the RAITH Foundation submitted a climate risk resolution to FirstRand Limited. FirstRand’s AGM is on 28 November 2019 in Johannesburg. Like the Standard Bank resolution, the resolution calls for improved disclosure on FirstRand’s exposure to climate-related risks, and for it to adopt and publicly disclose a policy on lending to fossil fuelrelated projects.
NEWS & OPINION
30 September 2019
Ongoing learning essential for tech-driven insurance environment
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outh Africa’s insurance sector is facing a triple-whammy of change, forcing a rethink on many fronts, especially that of attracting and retaining the right skills. Along with rapidly evolving technological innovation and a changing customer demographic, the increased regulatory obligations for South African insurers will require increased investment and a new approach to HR. Marné Louw, Head of HR at African Unity Life, believes that the traditional, administrative role of HR should be evolving at the same pace as the industry, to become a strategic partner in the link between the company’s business imperatives and its employees. “Today’s HR bosses should have a deep understanding of the goals and strategies of the business and should understand they have an influence over the company’s bottom line,” she says. Just as the insurance industry has embraced analytics and data science to provide customer-centric products and services, forward-thinking HR leaders should be utilising the employee data at their fingertips in the interest of staff retention and engagement. In some companies, HR units are also making use of analytics in assessing would-be employees. By using data-modelling techniques, they are able to identify the most suitable candidates for the company. To meet the demand for skills required in the new digital environment, Louw believes that investments must be made into upskilling and retraining. “Repetitive administrative tasks will increasingly be performed by artificial intelligence and automated processes that will provide data which employees will have to analyse in order to make informed decisions. So, the training of the future must focus on the analysis of data,” she says. Louw stresses, however, that the human element must not be lost. “For example, when dealing with a funeral claim, an empathetic employee who can speak to the emotions of the client can never be replaced by AI,” she says. Studies have shown that technologydriven learning outweighs other methods when it comes to accessibility and overall learning experience for today’s employees. According to reports, insurance companies are missing out on more advanced learning tools such as gaming and simulation for training on claims scenarios, catastrophe situations and sales simulations. “Gone are the days when an
individual could rely on the training they received when they started out their careers. Adapting to the changes requires ongoing learning through training methods that keep pace with the times,” says Louw. But with the evolution of skills to fit the new digital environment must also come a rethink of performance management. Traditional methods of measuring and quantifying performance are making way for new processes that enable skills development and that nurture talent. According to Louw, insurance companies must rethink performance management with millennials and generation Z in mind. She adds that what is important to these employees is a performance review free of subjectivity and purely focused on measurable outcomes, so that they are able to keep track of how their current performance is influencing their career paths and growth opportunities. “Performance management has always been linked to personal development plans and incentives schemes, and it will always be. However, what was an incentive by previous generations is not necessarily an incentive for the new generation. Studies have shown that millennials value flexibility, skills development, training, regular feedback, mentoring, career progression and growth over other traditional benefits,” she says. Critical to the current environment of increasing digitisation and regulatory change is leadership that is both visionary and able to provide strategic clarity. According to the Deloitte report on human capital trends “organisations with strong leadership pipelines yield significant returns compared to their peers, improving their ability to retain employees, execute change and develop talent”. Louw believes that to prepare wouldbe leaders for top positions in the new age of insurance, companies must be certain of the competencies required and must measure these frequently. She adds that, once identified, leaders should encourage would-be leaders to be visionaries in their own positions and departments, by exposing them to new trends – including, but not limited to, technology.
Marné Louw, Head: HR, African Unity Life
NEIL KIRBY Director, Healthcare & Life Sciences Law, Werksmans Attorneys
Are all South Africans compelled to join the National Health Insurance Fund? The publication of the National Health Insurance Bill has resulted in much public comment as to the future of healthcare in South Africa. The NHI Bill proposes a Fund to purchase healthcare services on behalf of those persons eligible to join the Fund. The question that must be asked is whether or not all South Africans are compelled to become members of the Fund as it is proposed in the NHI Bill? There are also important implications for purposes of applying the Bill of Rights to the Fund, more particularly, the provisions of section 18 of the Constitution of the Republic of South Africa which provides that “everyone has the right to freedom of association”. Therefore, on the face of section 18, all South Africans have the right to choose with whom to associate, including whether or not to belong to a National Health Insurance Fund. In terms of the NHI Bill, a “user” is simply defined as “a person registered as a user”. The NHI Bill also deals with the persons who are eligible to join the Fund. The list includes South African citizens, permanent residents, refugees, inmates and certain categories of individual foreigners as determined by the Minister of Home Affairs after consultation with the Ministers of Health and Finance. Importantly, however, the NHI Bill does not contain a clause that compels any persons to belong to the Fund. Therefore, on the face of the NHI Bill as currently proposed, there is no mandatory requirement for South Africans to join the Fund. This is a departure from previous iterations of the NHI Bill in which an express requirement existed both to become a member of the Fund, as well as to make a payment in respect of that membership. On that basis, there would be an argument to be made that the Fund is to be established only for those who wish to join it and those who wish to continue with current funding models for obtaining their healthcare services would be entitled to do so. But is that position both tenable and viable for purposes of maintaining the Fund where only, potentially, a few members of the population elect to join the Fund? Perhaps the fact that the NHI Bill is silent as to mandatory membership of the Fund is not necessarily an indication of the manner in which the NHI Bill intends to operate, which, once again, implicates the freedom of association provisions in the Bill of Rights. Therefore, two sections of the NHI Bill may provide us with an indication of what, actually, is intended in respect of membership of the Fund, being: clause 33, which purports to limit the benefits available from a medical scheme in so far as “medical schemes may only offer complementary cover to services not reimbursable by the Fund”; and clause 49, which outlines the chief sources of income of the Fund, including general tax revenue, payroll tax and a surcharge on personal income tax. Currently, medical schemes are able to provide a range of medical benefits to members as determined in the Medical Schemes Act. Insofar as the NHI Bill prohibits medical schemes from offering benefits otherwise provided by the Fund, this will mean that members of a medical scheme who currently enjoy particular benefits from that medical scheme – more particularly, primary healthcare benefits – would have to be a member of the Fund in order to obtain such benefits. Therefore, and indirectly, clause 33 of the NHI Bill operates on the basis of a mandatory membership of the Fund (for those persons eligible to join the Fund). In addition, due to the funding of the Fund, as contemplated in clause 49, all South Africans, in one form or another, make payment for the establishment and maintenance of the Fund. Therefore, while a ‘membership fee’ will not be levied, amounts will be deducted from tax-paying South Africans in order to provide income for the Fund. Therefore, indirectly, tax-paying South Africans, at least, will be paying a membership fee or contribution to the Fund. Whether or not mandatory membership of the Fund is desirable will have to be tested against section 18 of the Bill of Rights. There are important constitutional considerations to take into account when evaluating the overall impact and effect of the NHI Bill on the current architecture of, at least, the private healthcare sector in South Africa.
WWW.MONEYMARKETING.CO.ZA 9
NEWS & OPINION
30 September 2019
NHI ‘unworkable’ in current economic and fiscal context
O
n 8 August 2019, Minister of Health Zweli Mkhize introduced the National Health Insurance (NHI) Bill in the National Assembly. While full implementation is only seen after 2026, arguments against NHI were immediately put forward with the leader of the Democratic Alliance (DA), Mmusi Maimane, stating that in its current form, the Bill “will not bring about universal healthcare but will consolidate power, cripple the private health sector and collapse our economy”. The party is not satisfied that the Bill will pass constitutional muster and will therefore be requesting Parliament to seek a comprehensive legal opinion as to the constitutionality of the Bill in its current form – particularly in terms of Schedule 4 of the Constitution. In response to the criticism, Health Minister Dr Zweli Mkhize notes that while the NHI will be welcomed by many as a way to resolve unequal access to healthcare, there will be those “who will be sceptical for various reasons. We reiterate that NHI will benefit all, ensure equitable access to health services, by promoting pooling of resources and ensuring social solidarity in which there is cross subsidisation of the sick by the healthy, the poorer by the richer and the older by the younger. This is in line with the global trend in both developed and underdeveloped economies.” The minister rejects the DA’s claims as unfounded, and “an effort to preserve the inequitable access to health services”, stating that “no government should allow the perpetuation of the levels of inequality that currently exist in the country, especially in terms of access to healthcare”. Meanwhile, questions around the affordability of the Bill have been raised. According to Head of Capital Markets Research at Intellidex, Peter Attard Montalto, providing commentary on the NHI and its macro implications has always been hard because of the lack of certainty and detail from government – even with the Bill. “While the establishing foundations have now been proposed, a huge amount of the detail will only come from secondary regulations and through Ministerial discretion.” What is known is that there will be a central NHI fund that will have around it an institutional architecture, though ultimately rely on a huge amount of executive power from the Minister of Health to administer it. “It will be
responsible for establishing free at the He adds that currently healthcare point universal healthcare provisioning spending in this fiscal year is R223bn across the entire population. The (with an additional R237bn of private private sector will be unable to provide sector health spending, bringing the healthcare that the state provides national total to R460bn this fiscal and will only be able to provide year). NHI is expected to cost an complementary services once the NHI is additional R165bn to the fiscus in fully operational,” Attard Montalto says. current prices, per year from 2026. “The fund will act as a single buyer of “The broad political view is that this healthcare, pharmaceuticals and other money would be ‘transferred’ from the products and will set maximum prices private sector spending to the public for services for doctors, for instance. sector, as private medical insurance is NHI does include new structures of curtained from its offering. This cost, local commissioning of health services however, comes from PWC estimates that the fund will act through. However, that the Davis Tax Committee (DTC) evidence from NHI trials in recent used in its most recent report on NHI years of this mode of operation raises in 2017. We view this number as one serious concerns as to the effectiveness of the only likely sensible ones out of the process in a state system that there but would stress the upside risks completely lacks capacity.” He adds that of cost overrun in central and regional the biggest problem commissioning is a centralised fund costs especially.” REMEMBER, THIS being a lightning The DTC broadly FUND WILL BE laid out a number rod for corruption of funding wrapper and a huge future LARGER THAN options to raise state capture risk. ESKOM IN TERMS this additional “The audit and oversight functions OF YEARLY REVENUE money – the problem with their of National Treasury AND SPENDING analysis, according may well be able to to Attard Montalto, is they seriously pick up malfeasance after events occur overestimated fiscal buoyancy “and but stopping it will be impossible. It also we need to consider the impact also places far too much power in one person’s hands. Remember, this fund will of an NHI funding wrapper on wider buoyancy – i.e. it will suppress other be larger than Eskom in terms of yearly revenue.” In fact, overall the DTC revenue and spending.” outlined that NHI would only be Another concern is fiscal. “National feasible with strong growth in the Treasury has refused till this point economy, seeing new revenues directed to put NHI into the Medium Term towards NHI. Expenditure Framework (MTEF) He explains that the NHI Bill because there has been no credible costing from the Department of Health explicitly labels potential options for funding wrapper sources, albeit not the and the funding wrapper arguments specifics: general tax revenue, a shifting and politics will be so complicated that of the provincial equitable share and it is a headache they could do without. Indeed, these issues still stand, as well as the lack of credible impact assessments and failure of trials. As such, we see Treasury not putting an NHI funding wrapper into the Medium Term Budget Policy Statement (MTBPS) in October, though it may have to start putting in some additional spending from 2021/22 – assuming the Bill passes only halfway through the 2020/21 fiscal year.” Attard Montalto notes that the Budget in February only contained three references to NHI and the MTBPS a similar number – of which most was reallocating unspent trial money for health workers, i.e. away from the NHI.
10 WWW.MONEYMARKETING.CO.ZA
Peter Attard Montalto, Head: Capital Markets Research, Intellidex
conditional grants to provinces to the Fund, removal of the medical schemes tax credit and using that money, an employee and employer payroll tax, a surcharge on personal income tax. The Bill specifically asks for hypothecation – in other words, earmarking. “The DTC did not explicitly recommend an individual wrapper but one option they had was for a 2pp payroll tax on employers and employees, a 2% surcharge on taxable income and a 2.5pp increase in VAT they said would raise the required amount of money (they were working in 2010 prices). However, we calculate that based on current buoyancy rates there would be a shortfall from such a wrapper of around R45bn/year and a negative impact on wider tax collection maybe of the order of R50-75bn approximately. This would mean by our calculations the wrapper would need to be more like 2.7% payroll tax, 2.7% surcharge on taxable income and 3.5pp on VAT – and that is only to address the NHI hole, not the wider revenue shortfalls.” To avoid a tax ‘doom’ cycle, the Treasury is focused much more on the expenditure side than revenue side. Attard Montalto says that funding 50% of the shortfall by bond issuance would mean a further increase at auctions of three times that which was seen recently for Eskom – a clearly impossible route to follow. Wider problems will include medical workers’ salaries under NHI and the emigration of skills. “Overall, we think NHI is unworkable in the current economic and fiscal context, even if sorely needed. Indeed, it can do more harm than good at a macro level,” he says.
INVESTING ETFs FEATURE
30 September 2019
SIYABULELA NOMOYI Head: Index Management, Sygnia Group
How to gain access to top Japanese companies
F
or more than half a century, the Japanese economy has been one of the biggest and most advanced in the world, built on the growth of local companies that have successfully manufactured and exported high-quality goods across the globe. These corporations include household names such as Toyota, Sony, Mitsubishi, Nintendo and Panasonic – market leaders in their respective industries for many years. These firms have maintained their positions through high levels of spending on research and development to keep them at the forefront of technological advances. The Sygnia Itrix MSCI Japan ETF provides investors with access to a diverse range of these companies through a single fund that holds exactly the same shares that make up the MSCI Japan Index, which covers all of the country’s largest listed businesses. Understanding the Sygnia Itrix MSCI Japan ETF The Sygnia Itrix MSCI Japan ETF gives investors broad exposure to the Japanese market. It covers over 300 large- and mid-cap companies listed on the Tokyo Stock Exchange that together make up more than 85% of the total value of the market. Its largest sector exposure is to industrial companies, which include firms that produce everything from machinery to rubber, glass and ceramics, followed by consumer goods, information technology and financials. The fund is highly diversified, with the largest holding, Toyota, being just 4% of the total portfolio. This makes it far less concentrated than South African index funds, which are dominated by a few very large stocks. The advantages of the Sygnia Itrix MSCI Japan ETF The top Japanese companies have been producing quality goods for decades; their brands are well recognised and used across the world. Investors in the Sygnia Itrix MSCI Japan ETF
will therefore gain exposure to stocks with strong revenue streams that earn their profits in many different markets and are thus not dependent on the performance of a single economy. As this ETF is listed on the JSE and can be bought and sold in rand, South African investors get access to this international exposure at a low cost, without having to take money offshore. The MSCI Japan Index is recognised as a barometer of the Japanese economy, so, as the holder of the Sygnia MSCI Japan Index ETF, investors will essentially track the Japanese equity markets.
Performance (annualised):
How does the Sygnia Itrix MSCI Japan ETF fit into a portfolio? The Sygnia Itrix MSCI Japan ETF allows investors to diversify outside of South Africa to reduce their country-specific exposure and to protect themselves against the devaluation of the rand. As it only covers the Japanese stock market, however, it should be used within the broader international component of a diversified portfolio. The fund is fully invested in the stock market, so it can be volatile in the short term and will be affected by currency movements. Investors should thus be prepared to hold this ETF for at least five years.
Keyence Corporation
How to access the Sygnia Itrix MSCI Japan ETF The Sygnia Itrix ETFs are available through Sygnia’s Alchemy investment platform and can be bought in the same way as unit trusts, providing investors with ease of access. Our ETFs can also be invested in through any stockbroker in South Africa if you have an existing stockbroking or personal share portfolio account.
Information technology: 11.1%
Key features of the Sygnia Itrix MSCI Japan ETF • Index tracked: MSCI Japan Index • Total expense ratio: 0.86% • Fund size: R710 million
Other: 7.5%
Assets invested in US ETF and ETP industry break through $4tn milestone ETFGI, a research and consultancy firm covering trends in the global ETF/ETP ecosystem, reports that assets invested in the US ETFs and ETPs industry broke through the $4tn milestone at the end of July. ETFs and ETPs listed in the US gathered net inflows of $33.90bn in July, bringing year-to-date net inflows to $149.76bn. Assets invested in the US ETF/ETP industry have increased by 1.6%, from $3.96tn at the end of June, to a new record of $4.02tn,
according to ETFGI’s July 2019 US ETF and ETP industry landscape insights report. “The S&P 500® gained 1.4% in July, as strong earnings combined with signs of economic growth and expectations of a rate cut by the Federal Reserve supported equity gains,” says Deborah Fuhr, managing partner, founder and owner of ETFGI. “International markets posted losses, with the S&P Developed ExUS and the S&P Emerging BMI both
3 years:
4.4%
5 years:
8.3%
10 years:
10.3%
Top holdings: Toyota Motor Corp. Softbank Corp. Sony Corp. Mitsubishi UFJ Financial Group
Takeda Pharmaceutical Co Ltd Sumitomo Mitsui Financial Group Inc. KDDI Corp Honda Motor Co Ltd Nintendo Co Ltd Sector allocation: Industrials: 21.3% Consumer discretionary: 18.2%
Financials: 10.7% Healthcare: 8.8% Telecommunication services: 5.6% Consumer staples: 8.9% Materials: 5.8%
30 June 2019
GROWTH IN US ETF AND ETP ASSETS AS OF THE END OF JULY 2019
down 1%, with headwinds including US dollar strength. Boris Johnson began his term as UK Prime Minister with demands for a renegotiation of the EU withdrawal agreement, issuing a threat to otherwise leave
without one. Pound sterling fell to near its lowest in two years.” At the end of July 2019, the US ETF/ETP industry had 2 280 ETFs/ ETPs, from 151 providers listed on three exchanges.
WWW.MONEYMARKETING.CO.ZA 11
INVESTING ETFs FEATURE
100 Products 12 Product Providers 1 Platform We provide financial advisors with the largest range of top performing exchange traded investment products at the lowest possible cost. All in one convenient place.
30 September 2019
LANCE SOLMS Head: Itransact
Which ETFs do I choose?
W
ith over 60 ETFs to choose from, selecting the correct ETFs that will reduce risks, cut costs and still provide attractive returns can be a difficult, if not impossible, task. The Itransact Investment Platform solved this task seven years ago, by offering financial advisers a range of multi-managed risk-adjusted ETF portfolios. Lance Solms, head of Itransact, says, “We knew that the ETF market would become popular with advisers and investors, creating the challenge of which ETFs to pick.” Judging by its track record, it seems Itransact has got it right! Their recipe is quite simple, explains Solms.
Index Tracking Funds
Retirement Annuity
Protected Funds
Index Tracking Fund Portfolios
Preservation Fund
Structured Notes
Tax-Free Savings Account
Living & Flexible Annuities
Linked Endowment
0861 432 383 www.itransact.co.za Itransact is an authorised Financial Services Provider 12 WWW.MONEYMARKETING.CO.ZA
ETF selection “We first make sure that the ETFs selected are collective investment schemes, ensuring investors capital is protected against the unlikely event of insolvency from an ETF issuer,” he says. “We then disqualify all ETFs that use so-called smart beta, active or multifactor methods. These are not ETFs. They are mostly ‘dressed-up’ ETFs that attempt to ‘behave’ like active managers or stock pickers and are best suited to be bought as single funds. “We therefore only use unpolluted low-cost ‘vanilla’ ETFs as our building blocks. These ETFs provide us with broad, well-diversified exposure to a market. Each portfolio is designed to tolerate the failure of a stock or
two within the ETF itself, with little impact on the overall portfolio. “Using plain vanilla ETFs also averages out the price behaviour signal we are looking for, as their performance is the average of many stocks, tracking a specific asset class, making the ETF price return behaviour more predictable. Dressed-up ETFs are not as predictable as they add unwanted risks and cost more.” Asset allocation Itransact takes the historical price and total return series (net of its Total Expense Ratio) of each and every ETF in the market and process that in a tried and tested propriety algorithm that shows how ETFs behave in terms of producing a market view. “From this process, we derive no more than 10 ETFs that are well diversified from one another and efficiently track both domestic and offshore equity, real estate, bonds and money markets,” Solms says. “We now need only select the lowest-risk, highest-return ETFs to represent each asset class according to the chosen risk bands that govern each portfolio range and allocate the capital by portfolio contents and risk weightings.” Portfolio returns (Up to 31 July 2019) Note that TERs of all portfolios are under 0.50% per annum including VAT, making them very low cost.
DISCRETIONARY
1 Year
2 Year
3 Year
4 Year
5 Year
6 Year
7 Year
Conservative
6.97
6.73
5.77
5.74
5.91
–
–
Cautious
6.32
5.62
4.35
5.48
5.89
6.81
6.98
Moderate*
8.20
7.00
5.40
6.65
7.49
8.39
8.77
Growth
5.80
6.41
5.46
5.62
6.82
8.75
9.39
International
8.45
12.87
9.47
10.12
10.32
10.75
–
REGULATION 28
1 Year
2 Year
3 Year
4 Year
5 Year
6 Year
7 Year
Conservative
6.50
5.88
4.53
5.07
6.91
8.04
–
Cautious
6.16
3.99
3.54
4.80
6.13
6.14
–
Moderate
6.89
3.81
2.97
5.05
6.40
6.67
–
Growth
4.86
4.00
3.67
4.98
6.78
7.75
–
*Flagship product. Ter of 0.47% Source: Index Solutions 2019
OFFSHORE SPECIAL SUPPLEMENT
MANAGING DOWNSIDE RISKS IN THE LATER STAGE OF THE GLOBAL BULL MARKET PAGE 21
IS THERE INVESTMENT OPPORTUNITY IN THE ONLINE AUTO MARKET? PAGE 16
NAVIGATING A SEA OF SURPRISES BY INVESTING IN THE WORLD’S BEST DIVIDEND PAYING COMPANIES PAGE 14
OFFSHORE SUPPLEMENT
ROBIN HARTSLIEF Investment Professional, Marriott
30 September 2019
NAVIGATING A SEA OF SURPRISES BY INVESTING IN THE WORLD’S BEST DIVIDEND PAYING COMPANIES
T
he word ‘surprise’ has been described as representing “the difference between expectations and reality, the gap between our assumptions and expectations about worldly events and the way those events actually turn out”. In a highly uncertain global economic environment, where the world seems full of ‘surprises’, the likelihood and cost of making incorrect decisions increases significantly. As a result, investment outcomes become less predictable. In our opinion, the best way to increase the predictability of income and capital returns in volatile times is to invest in highquality, robust companies whose prospects are largely unaffected by economic, political or technological disruptions. Review of the year so far 2019 started off well for investors, with further interest rate hikes looking unlikely in first-world and developing markets. Globally, both bonds and equities rallied strongly, erasing the losses investors experienced in 2018. Market volatility, however, made an unwelcome re-appearance in May. Shaken by a sudden breakdown in trade talks between the US and China, the MSCI world index declined by 6.1% in the same month – a common market response to anything unexpected. Regrettably for investors, these market ‘surprises’ are occurring more and more frequently due to increasing
geopolitical instability, more divergent economic prospects and rapidly advancing technology. Given how difficult it is to forecast how the future will unfold (especially in the short term), at Marriott we use our Income Focused Investment Style to ensure more predictable income and capital returns, irrespective of potential downgrades, trade wars, downturns and other unexpected events. In our opinion, the key to more predictability is more quality – by investing exclusively in quality companies (those with superior brands, balance sheets, cash flows, management teams and track records) the likelihood of achieving an acceptable outcome over the long term increases significantly. This is due to their ability to grow profits and dividends (the long-term driver of capital growth) in almost all circumstances. Best quality found offshore From a global perspective, the highest quality companies – those with the most reliable and consistent dividends, as illustrated in the table below – are typically listed on firstworld exchanges. Consecutive dividend increases Coca-Cola
55
Colgate-Palmolive
55
Procter & Gamble
63
Johnson & Johnson
56
Medtronic
41
Unilever
38
ANXIETY OVER IMPACT OF NO-DEAL BREXIT ON BRITAIN’S PASSPORT POWER With just only a few weeks to go until the 31 October Brexit deadline, Brits are becoming increasingly concerned about the potential decline in their passport power. ‘Hard’ Brexit, ‘soft’ Brexit, no deal, or even a second referendum all could result in radically different and largely unpredictable implications for British passport holders. Over the past 14 years, the UK has consistently held one of the top
five places on the Henley Passport Index. However, with its exit from the EU now imminent, coupled with ongoing confusion around the terms of its departure, the UK’s once-strong position looks increasingly uncertain, with the British passport falling out of the top five on the global ranking for the first time in July this year. Dr Juerg Steffen, of investment migration firm Henley & Partners, says they have seen a 200% increase in British nationals
14 WWW.MONEYMARKETING.CO.ZA
Marriott Offshore Portfolio
Total Returns in sterling (Annualised)* 1 year
3 year
5 year
Income Growth Portfolio
19.0%
7.5%
11.5%
Balanced Portfolio
15.9%
7.7%
11.8%
*Gross total return based on target portfolio weightings
These dividend track records are even more impressive when one considers that they have been achieved despite numerous setbacks, such as the Asian financial crisis, the dot com bubble and the global financial crisis. The ability to effectively navigate these setbacks can be attributed to a combination of brand power, size, scale and global reach that very few companies can match. In an unpredictable world, the increased certainty that these high-quality businesses provide is likely to become increasingly sought-after by investors. Attractive dividend yields In addition to providing more predictable capital growth prospects, the attractive dividend yields these companies offer makes them all the more appealing from an investment perspective. As a result of the wave of monetary easing that has gained momentum since the beginning of the year, negative-yielding debt is currently sitting at an all-time peak of approximately $12.5tn globally. Against this backdrop, the appeal of these alternative sources of reliable income is likely to increase substantially, especially if the
applying for residence and citizenshipby-investment programmes over the past two years. “Affluence alone is not a guarantee of personal and financial freedom and security. This might not have been intuitive for British HNWIs who have thus far enjoyed the luxury of possessing bulletproof citizenship, but for HNWIs from less stable jurisdictions, the idea of managing your risks and creating opportunity through alternative residence and citizenship is well understood.” For British HNWIs without the ancestral connections to join the spike in German, Irish, and other European citizenship applications, there are numerous options available. For an investment of between EUR1m and
income they produce is expected to grow in excess of inflation. The table above highlights the latest dividend growth produced by Coca-Cola, Colgate-Palmolive, Procter & Gamble, Johnson & Johnson, Medtronic & Unilever. Conclusion In a world full of ‘surprises’ and historically low interest rates, the attractive yields and increased certainty that the world’s best dividend-paying companies offer, suggests they will likely serve investors best in the years ahead. As such, we continue to maximise our investor exposure to these companies across our portfolios. The table below outlines the good returns of our offshore share portfolios over 1-, 3- and 5-year periods.
Latest dividend growth Coca-Cola
5.4%
Colgate-Palmolive
5.0%
Procter & Gamble
4.0%
Johnson & Johnson
7.1%
Medtronic
8.7%
Unilever
8.0%
EUR2m, Malta and Cyprus offer the most popular citizenship-by-investment programs in the EU at present. The Portugal Golden Residence Permit Program and the Greece Golden Visa Program, where the minimum investment in property begins at EUR 350 000 and EUR 250 000, respectively, are also increasingly popular and include the opportunity to apply for full citizenship after five years.
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 SUPPLEMENT
30 September 2019
MATTHEW SPENCER Head: Investment Counsellor Group, Orbis
N
aspers, which owns OLX and Autotrader, recently proposed a deal to buy WeBuyCars.co.za for approximately R1.4bn. Despite the Competition Commission turning down the deal, it shows the potential for investment in online listings in the auto sector. According to Matthew Spencer, head of the Investment Counsellor Group at Allan Gray’s offshore investment partner Orbis, China’s
IS THERE INVESTMENT OPPORTUNITY IN THE ONLINE AUTO MARKET? online marketplace is offering investors an attractive alternative to expensive momentum stocks. Spencer says companies who manage to establish a foothold in the market by creating platforms that bring together high volumes of buyers and sellers, will succeed. “It is hard to predict market share in a young market when you have a business where value per user increases with the number of users. But once your firm establishes a significant lead, market share tends to persist. In the motor industry, car buyers want a platform with the most dealers, and car dealers want one with the most buyers. Getting it right means attracting customers from both sides. “Google and Facebook have shown us that building a network establishes dominance – capturing your audience ensures the sky is the limit. This is why we are excited about Autohome. Considering China’s market size, the
opportunity is extraordinary.” Autohome is like China’s version of Autotrader in the UK, but instead of dealing with used cars it deals with new cars. “It’s the go-to place for a new car in China. Autohome generates leads for dealerships and provides automotive manufacturers with a captive advertising audience. About 30 million new cars were sold in China last year, of which one-third was from sales leads from Autohome.” Furthermore, Autohome generates US$1bn in revenue and about 10 million successful leads annually. “Car companies essentially pay Autohome US$100 per successful lead, which is great value considering the marginal profit for each car sold is about $5 000.” But why only $100? In 2018, 28 million new vehicles were sold in China, 63% more than in the USA. Despite this, there are only 123 cars per 1 000 people in China. Spencer says another long-term
attraction is the immature secondhand car market. Autohome has the information of new car buyers, enabling them to enter the second-hand car market. It is also building a platform to leverage this. Additionally, Autohome is 52% owned by insurance company Ping An, and is currently exploring the best way to offer insurance and financing to these car buyers. “Assessing the downside risk, we note Autohome has $1.5bn of net cash and is forecast to earn another $1.3bn in free cash flows in 2019 and 2020. Even if Autohome’s enterprise value slumps to just two times revenue, that would still imply $5bn of total value, capping the downside at 50-60%. “However, if Autohome continues generating the cash flow and growth that we expect over our investment horizon, the upside could be enormous,” says Spencer. Orbis presented at the Allan Gray Investment Summit in Johannesburg and Cape Town in July 2019.
Seize the sunrise in Mpumalanga, while your money seizes opportunities offshore. South Africa has so much to offer, but there’s also a far bigger world of investment opportunity beyond our shores. An offshore investment gives you access to opportunities across different countries, industries, companies and currencies, exposing your portfolio to more possibilities while diversifying your risk. So, while you enjoy life in the country you love, your investment could be discovering a world of investment opportunity. Stay local. Seize global opportunities. www.investecassetmanagement.com/offshore
Globally recognised investment manager
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Investec Asset Management is an authorised financial services provider. IAM_MonMar_E_16906
16 WWW.MONEYMARKETING.CO.ZA
OFFSHORE SUPPLEMENT
30 September 2019
LESLEY-ANN MORGAN Multi-Asset Fund Manager, Schroders
IS THIS MARKET LOSING ITS MARBLES?
T
he chart that caught the eye of the Schroders Multi-Asset Investment team this month shows that the relationship between the ISM Manufacturing Purchasing Managers’ Index (PMI) and the S&P 500 index has broken down. The PMI is based on a survey of purchasing managers from more than 300 manufacturing firms. It is a widely followed and influential gauge of business confidence, as it incorporates new orders, production, employment, supplier deliveries and inventories. Typically, when the index is rising with improved business confidence, stocks climb. Conversely, when it is falling, the stock market follows suit. However, as the chart shows, business confidence has fallen in recent quarters. At the same time, the US stock market has rebounded to near all-time highs. What’s more, while equities (stocks) have risen, so too have bond prices. This is as investors anticipate that the US Federal Reserve will reverse its policy tightening and
begin to cut interest rates. An environment characterised by simultaneous strength in equity and bond markets is not sustainable. But as this long economic cycle is drawn out, can business confidence and economic growth return to support equities? Or have risk markets begun to lose their marbles? We on the Schroders Multi-Asset Investment team have a neutral stance on equities while we await greater clarity on how this macroeconomic picture plays out. We currently have a supportive view of bond markets given the reemergence of central bank support, weaker economic indicators and the persistence of political risks across various regions, which all support this defensive asset. It is important to note that Schroders does not provide advice and this should not be perceived as a recommendation to purchase or sell a particular stock or asset class. Past performance is not a guide to future performance and may not be repeated.
AN ENVIRONMENT CHARACTERISED BY SIMULTANEOUS STRENGTH IN EQUITY AND BOND MARKETS IS NOT SUSTAINABLE
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
Source: Bloomberg to 31/07/2019
18 WWW.MONEYMARKETING.CO.ZA
SARAH STEADMAN Head: Wholesale Accounts, STANLIB
GLOBAL REITS STRETCH INVESTOR HORIZONS
D
espite the close to 50% international exposure in the JSE’s all-share index, South African investors continue to favour direct offshore assets, seeking even greater diversification than the JSE can offer. Amid the search for the best global opportunities, offshore real estate investment trusts (REITs) are a very attractive inclusion in a South African investment portfolio for various reasons, apart from the attractive income yield they offer. These range from the diverse characteristics of the global listed property environment to the particular benefits of accessing global REITs through unit trust structures. Global REITs offer South African investors far more comprehensive regional and sectoral property exposure than they can obtain locally. Some of the best REIT opportunities can be found in the US, Japan, Germany, Singapore and other markets. Global REITs tend to concentrate their portfolios in leading international cities such as New York, London, Paris, Berlin, Tokyo, Hong Kong and Sydney, where high land prices present a significant barrier to entry for small investors. There is also a wide variety of property sub-sectors and specialisations available in offshore markets, unlike the limited range available in SA. Offshore, the choice includes logistics, healthcare, self-storage, data centres, cellular towers, hotels & casinos, Specialty Health Care accommodation and more. The regional and sectoral depth of developed market REITs adds a significant layer of diversification to a South African investment portfolio. Global REITs are a great way to invest in specific, long-term secular growth trends – such as online business, mobile technology and demand for better healthcare for ageing populations – as well as to benefit from fast-evolving trends in the way societies live, work and shop. For example, the massive growing demand for digital and cloud infrastructure has led to the emergence of listed Data Centre REITs like Equinix & Digital Realty. These companies have adeptly positioned their portfolios to benefit from the increasing growth of global tech firms. With so much choice, identifying opportunities and embracing shifting trends can be difficult without the right expertise. Nicolas Lyle, Senior Analyst for the STANLIB Global Property fund, says it’s profitable to be able to take advantage of global sectoral trends by shifting allocation between sub-sectors and geographies. Over the past two years, the STANLIB Global Property Fund has shifted some of its US offshore retail focus to logistics and warehousing, in line with consumer retail trends towards online shopping. More recently, in the wake of political unrest in Hong Kong, the benefit of active management was evident in the fund’s down-weighting of the region in favour of other, more stable jurisdictions. REITs are exempt from corporate income tax, so income is only taxed in the hands of the end investor. However, there is an additional advantage to investing in an accumulating global property unit trust, since dividends are not distributed in the fund but are ‘rolled up’ into the unit price. Investors do not pay income tax on any distributions, only capital gains tax (CGT) on the final total return. REITs have both bond and equity characteristics. They earn attractive income, like bonds, but trade as equities, which entails additional risks. They complement a traditional mix of assets, giving investors uncorrelated, liquid access to stable income and competitive total returns.
Ashburton Fund Managers (Proprietary) Limited (Reg. No 2002/013187/07) is an authorised financial services provider (FSP number 40169) in terms of the FAIS Act, 2002. Ashburton Management Company RF (Pty) Ltd is an approved CIS manager in terms of the Collective Investment Schemes Control Act, 45 of 2002. The Global Leaders Equity Fund is a sub-fund of the Ashburton Investments SICAV; a Luxembourg-registered collective investment scheme approved by the Commission de Surveillance du Secteur Financier (CSSF) and which has been approved for distribution in South Africa in terms of section 65 of the Collective Investment Schemes Control Act, 2002. Issued by Ashburton (Jersey) Limited. Registered office IFC 1, The Esplanade, St Helier, Jersey JE4 8SJ. Regulated by the Jersey Financial Services Commission.
FULLY INVESTED IN BRINGING THE WORLD’S BEST, TO YOU In a volatile and uncertain world, where investment returns are unpredictable, wouldn’t you like the opportunity to access up to 25 of the world’s leading mega cap stocks? Wouldn’t it be even better if they came to you? The Ashburton Global Leaders Equity Fund is a concentrated portfolio of the world’s most prominent companies as measured by market cap, with the aim of delivering sustainable superior returns over the long term through geographic and sector diversification. The fund is available in US dollars as a direct offshore offering, or via the rand-based feeder fund without having to utilise your offshore allowance. From R500 per month or a lump sum of R5,000 via the rand feeder fund, you can put your money to work with the world’s best. Visit www.ashburtoninvestments.com to find out more.
FULLY INVESTED /
A part of the FirstRand Group
OFFSHORE SUPPLEMENT
RORY SPANGENBERG Director: Global Equities, Northstar Asset Management
30 September 2019
VALUE IN FLEXIBILITY
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nvestors looking for offshore exposure evident in our global stock selection record, which would be well-advised to spend some time combines high ‘Hit Rate’ (number of portfolio considering which kinds of offshore investment holdings outperforming the benchmark) over best serve their long-term interests. It is clear that time and a strongly positive ‘Win/Loss’ ratio not all offshore investments are created equal. (returns from winning investments against losers), We would argue that this is particularly true in allowing the Fund to capture more efficiently the the current global investment environment. The upside in the winners. bull market run of more than a decade indicates an Since the start of 2016, the Northstar Global increased likelihood that we are approaching a late Flexible Strategy has matched the return of the stage in the cycle. Recession signals are flashing (all equity) MSCI World Index, even while the around the world and inverted yield curves suggest proportion of equities in the strategy has reduced low growth ahead. Yet forward PEs on the major as compelling equity opportunities decreased. The stock markets remain stubbornly high. Taken strength of our stock picking and asset allocation together, these signs suggest that prudent investors approach allowed the strategy to capture nearly should apply their minds to ways of mitigating 90% of the upside in the MSCI, while limiting downside risk. downside exposure to just over 70%. That this At the same time, no one wants to miss out was achieved with significantly lower equity on future upside. This implies a exposure (currently below 60% of preference for investment managers the portfolio) demonstrates that INVERTED that can show a consistent record the underlying equity portfolio as stock pickers and an investment continues to outperform the YIELD CURVES that includes exposure to other benchmark. SUGGEST LOW asset classes. With flexible funds able to GROWTH AHEAD produce competitive performance Over the last twenty years, a period that includes the bursting as well as downside protection, we of the dot-com bubble and the global financial believe that the Northstar Global Flexible Fund crisis, flexible funds have been shown to match is a compelling option for investors that the performance of equity-only funds, while do not want to sacrifice performance, preserving capital far more effectively. Investors in but also believe in taking an informed these funds have enjoyed the benefit of downside approach to risk management at this protection during market corrections and equitylate stage in the cycle. linked performance during the recovery. Northstar Asset Management’s Global Flexible Fund is an equity-centric fund that invests across asset classes to exploit uncorrelated investments and those that can meaningfully enhance yield in the portfolio. The Fund’s equity exposure derives from the opportunities identified by our disciplined bottom-up stock picking approach. Northstar’s robust proprietary research and portfolio construction process identifies the positive fundamentals in potential investee companies that translate into superior and sustainable return on capital and free cash flow over time. The benefits of this approach are
STRUCTURED INVESTMENTS THAT RECONCILE THE BULLS AND BEARS Bears point out that in the US, the flattening and inverting of the yield curve is seen by many as a harbinger of a recession. Europe, the other important developed market, has seen its leading economic indicators declining this year. Bulls counter this by pointing out that the world’s leading developed market central banks – and many emerging market central banks – have switched to more accommodative policies. How does the average investor reconcile these two different views? One answer has been to look at the world of structured products. Structured products have an excellent track record of delivering performance while protecting capital. Melissa Dyer CFP, Managing Director of Harbour Wealth, says, “We have seen structured products perform increasingly well as they have become more responsive to market opportunities and simpler in their structure. “Over the past few months, our investors have received returns from Structured Products of between 40% (Investec USD S&P 500 Digital Plus) to 76% (Investec FTSE 100 Autocall) over a 3.5-year investment period, with their capital protected. These products don’t replace your traditional investments, they just enhance and diversify. Investors have also responded positively to the increased transparency and easy accessibility of structured products. As a financial adviser, having an investment that has some level of capital protection, as well as geared upside, provides a wonderful alternative when structuring clients’ investments in these difficult market conditions.” Investec’s Brian McMillan says an analysis of their structured products over the last 10 years reveals that 93% of issues have returned a profit for investors, with an average annualised return in rand of 10.6% versus 6.3% for the underlying indices with none having incurred losses. “The growth in popularity of the asset class points to the fact that it’s satisfying a need in the investor community. Investors are looking beyond simple strategies that just track indices up or down, to those where they can combine a view on a particular market index with capital protection – especially important in volatile times,” McMillan adds.
Northstar SCI * Global Flexible Fund Top performing fund in its category This flexible, high conviction fund invests predominantly in global equities and is placed 1st over 1 year , 2nd over 3 years and 3rd since inception.
To view the performance of this fund visit our website at www.northstar.co.za
Closer to the truth
*SCI refers to Sanlam Collective Investments. 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. The Manager retains full legal responsibility for the third-party-named portfolio. Northstar Asset Management is an authorised Financial Services provider in terms of the FAIS Act (FSP 601). There are risks involved when buying, selling or investing in any financial product. The value of financial products can increase as well as decrease over time. The inception date of the fund is 12 January 2016, returns are measured to 30 June 2019. The fund is in the ASISA Global Multi Asset Flexible category.
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OFFSHORE SUPPLEMENT
30 September 2019
CLYDE ROSSOUW Co-Head: Quality, Investec Asset Management
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volatility spikes in equities, bonds, currencies and commodities serve as an important reminder of the latent risk in markets at these levels. Technological change is also severely disrupting a variety of companies and industries, causing earnings forecast downgrades in many cases. When it comes to generating sustainable long-term returns, we believe avoiding capital losses is just as important as achieving capital gains. This is where the value of good active management truly comes to the fore. Index-tracking passive strategies expect investors to put their faith in a basket of equities, regardless of their characteristics and inherent risks. We don’t believe a quantitative passive approach can to fully capture mispriced opportunities able to generate sustainable outperformance over the long term. As active managers, we believe that in-depth bottom-up qualitative research is essential to fully evaluate the sustainability of a company’s
competitive advantage and profitability. Quantitative metrics may not reveal, for example, the true strength of a company’s competitive positioning and market share or the impact of shortterm currency movements. They also would not demonstrate a company’s dependence on the economic cycle or its relationships with key stakeholders or business tail risks, such as regulatory/ political risk or over-reliance on a single product, market or customer. Furthermore, aggressive accounting and financial engineering can give a false picture of the actual health of a company. This can distort earningsbased metrics on which quantitative passive strategies rely. Even accurately reported figures can be misleading. For example, high margins may reflect under-investment rather than pricing power or cost efficiency. Overall, different levels of disclosure, accounting treatments and calculation methodologies, as well as corporate activity leading to one-off gains
or losses, all make cross-company comparisons difficult using a solely quantitative-based approach. In addition, quantitative strategies struggle to take advantage of forwardlooking themes and trends, such as technological disruption, and social, environmental, political and demographic change. Our Quality investment team scours a global universe of over 20 000 listed equities from which we select only 25-40 stocks for the Investec Global Franchise Fund. The Fund has a long-term track record of delivering durable, defensive and differentiated returns. Our portfolio companies have proven to be less sensitive to the economic and market cycle and have offered an attractive combination of resilience and long-term structural growth – much-needed attributes in this uncertain environment. 1 2
Morningstar Direct data, as at 31.12.18 Morningstar Fund Flows and Investment Trends, 2009
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aving now endured for well beyond a decade, the equity bull market in developed markets is officially the longest in history. Over this period, the market share of passive global equity market strategies has increased significantly. The market share of active US equity funds, for example, was 51.3% at the end of 2018, versus 48.7% for their passive counterparts 1. In 2009, the split was 73% (active) versus 27% (passive)2. And while investors have enjoyed the tide of rising markets, the importance of managing downside risks received less attention. But with global growth concerns and geopolitical uncertainty on the rise, so too are the downside risks increasing. These include rising debt burdens across governments, corporates and households, and central bank policy beginning to shift away from the huge quantitative easing experiment that has supported asset prices over the last ten years. Furthermore,
MANAGING DOWNSIDE RISKS IN THE LATER STAGE OF THE GLOBAL BULL MARKET
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.
1886_ORBIS 1%_Chapel_155x220.indd
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OFFSHORE SUPPLEMENT
30 September 2019
IT’S TIME FOR A PLAN B IN EUROPE FOR YOUR CLIENTS
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othing is more expensive than a missed opportunity. All forward-thinking financial advisers who have a tangible and affordable offshore solution for their clients will be ahead of their opposition, as they will be creating a true legacy plan that can potentially benefit their client and descendants for generations to come. When this legacy is based in Europe – the world’s largest single market and global trading block – an advisor is assuring his/her client’s future by not only protecting them against political risk but also against economic instability, which is currently a reality in South Africa. Property ownership in certain countries in Europe will result in your clients securing a second citizenship (and EU passport) or permanent residency status. An EU passport gives your clients
unlimited access to the EU and the UK an investment – not a donationThe (until Brexit on 31st October): they can property/ies can be rented out and travel, live, work and study anywhere need to be retained for only five in the European Economic Area, and yearsCitizenship is passed down enjoy visa-free travel to many countries. through descent, offering a legacy to Permanent residency is also future generations. appealing because it gives the permit Permanent residency is granted holders the legal right to live in that in two months on the Fast Track country without having to go through programme. onerous immigration processes should This is the only programme in they wish to make a Europe where three permanent move. generations in the CITIZENSHIP Cyprus, an ex-British same family (including colony and full EU IS GRANTED IN both the parents and member, currently in-laws) all acquire SIX MONTHS has the most attractive residency by buying one second citizenship and permanent propertyDependent children up to residency programmes available. 25 qualifyThe property can be rented Citizenship is granted in six months outThere is no requirement to live via Cyprus’ Citizenship through in Cyprus, nor do you have to be Investment programme. It’s the quickest domiciled there for tax. process in Europe.All dependent An astute offshore property children up to age 28 and the parents investment that works for your clients of the investor qualifyIt’s mainly in the short, medium and long term
is the achievement of a lifetime. In Cyprus, investing in the Citizenship through Investment or the Fast Track residency programmes 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 for your clients while the programmes are still open? Cypriot Realty – a proudly South African company in operation for nearly 11 years – can assist you. We are recognised and respected as Southern Africa’s authoritative offshore investment specialists, promoting Cyprus as an ideal destination for acquiring EU citizenship or permanent residency, property investment, immigration or retirement and starting an EU-based business. We understand investor’s needs. Contact us for a confidential meeting to discuss how we can help you realise your client’s Plan B in Europe.
CYPRUS UP CLOSE...
South Africa’s Cyprus specialists since 2008.
We have offices in Sandton, Cape Town & Cyprus
Cypriot Realty would like to invite you to CYPRUS SECURING YOUR CLIENTS’ ‘PLAN B’ IN EUROPE Assist them to acquire 2nd citizenship or permanent residency in Cyprus
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Nothing is than a m more expensive issed op portunit y!
INVESTING
30 September 2019
KIM HUBNER Business Development and Marketing, Laurium Capital
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SISA statistics at the quarter ended March 2019 report that 36% of assets (R764bn) in the Collective Investments Scheme Industry are invested in income-generating funds. These include income, variable term, short-term and money market funds. Having traditionally been a more equity focused house, with the hire of Jean-Pierre Du Plessis in January this year, Laurium Capital launched the Laurium Income Prescient Fund on 1 March 2019. Du Plessis’s appointment brings important fixed income capability to the 13-strong Laurium investment team, with more than 20 years’ experience in financial markets, predominantly focused on fixed income and alternative investments. The Laurium Income Prescient Fund is a multiasset income fund. Funds in this category may invest in a spectrum of bonds, money market, real estate markets or, to a limited degree, equities, with the primary objective of maximising income. They can have a maximum effective equity exposure (including international equity) of up to 10% and a maximum effective property exposure (including international property) of up to 25% of the market value of the portfolio. The ASISA category allows the fund to invest within the SARB limits, a maximum of 30% in offshore investments and 10% in African investments. This said, the fund aims to limit currency volatility through hedging where appropriate.
DARRYN FAULDS Fund Manager, MeTTa Capital
Just ten months ago, President Cyril Ramaphosa was gearing up for the country’s inaugural Investment Summit, which sought to help raise a muchneeded $100bn for the economy. The summit was a high-profile event, featuring globally respected business leaders such as Alibaba founder Jack Ma. At that stage, Ramaphosa’s administration had raised over $35bn and its success prompted a second summit planned for later this year. There’s no doubt that the Investment Summit is a positive initiative that can help reignite much-needed growth. However, the reality is that headwinds threaten to derail this good work. Rising unemployment and weak business conditions are holding back the economy. Eskom’s high debt levels are also raising concerns that rating agency Moody’s could downgrade the country’s debt to junk, sparking a sell-off in local assets and a weakening of the rand. During these challenging times, every single rand of investment in the country counts – especially from South African investors who are desperately keen to inject capital into local enterprises.
Diversifying clients’ assets to achieve their financial goals The Laurium Income Prescient Fund has a primary target of generating inflation +3% returns, and a secondary objective of avoiding drawdowns over a rolling three-month period. This fund is for investors who want to obtain real returns but with low volatility, and is focused on compounding real returns over time while minimising the potential for drawdowns. The largest determinate of returns will be derived from generating yield in the portfolio. There are several drivers that can be used to actively generate returns – duration, credit, inflation-linked bonds, preference shares, property and international assets and currency. Fixed Income investments play a vital role as a source of income, for capital preservation, total return and diversification benefits. However, in volatile times there is a temptation to try and time markets by switching into less risky assets, which has proven to be a destroyer of strong real returns over time. This temptation is evident over the past 12 months ended 31 March 2019, with net flows into fixed income funds accounting for 75% of total net industry flows. Given the poor performance of equity markets over the past five years, this may not come as a surprise, but it is important for investors to remember that equities deliver real returns over time. The graph shows that over the last 20 years, the All Share Index has delivered positive real returns over five-year rolling
GRAPH: ALSI FIVE-YEAR ANNUALISED ROLLING RETURNS ADJUSTED FOR INFLATION OVER 20 YEARS (%)
periods 100% of the time, and for what is it worth, given that forecasting the future is unpredictable, Laurium expects that investors may benefit from a better return environment from equities over the next few years. Rather than timing the markets, a strategic combination of investments across asset classes is likely to be the best approach in diversifying clients’ assets to achieve their financial goals and generate retirement-worthy returns over time. 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
Treasury seeks to curb Section 12J schemes Benefits of Section 12J
Just before the first Investment Summit last year, I wrote about why Ramaphosa should take a closer look at opportunities around Section 12J, which is legislation that gives local investors an incentive to inject capital into Small to Medium Enterprises (SMEs). Section 12J has been part of the Income Tax Act since July 2009 and it enables investors to receive an immediate deduction equal to 100% of the amount they’ve invested. The legislation has a sunset clause of 2021, with the possibility of an extension. As of February 2019, a cumulative R6bn has already been invested in Section 12J funds in SA, highlighting its success and benefit to local SMEs. The result has been growth stories in the real economy with SMEs building out solutions in various jobs-and-resourceheavy sectors: including hospitality, student accommodation, business and enterprise development, as well as renewable energy. Section 12J has also matured quickly and evolved with the sector’s first 12J fund portfolio offering, MeTTa Capital Moderate Risk Fund I, having been launched in 2017. Since 2017,
MeTTa Capital has conducted several capital raises. During the most recent capital raise for the period ending February 2019, our highly respected investment committee, headed by Dr Adrian Saville, conducted a strenuous due-diligence process evaluating over 110 Section 12J companies, filtering it down to a basket of six marketleading investment strategies. MeTTa Capital is making it easier for investors to participate in an asset class that translates into more investment within the heart of SA’s economy. But the good work done for all Section 12J investors is now at risk of being held back, owing to regulatory changes.
Draft Taxation Laws Amendment Bill
In July, National Treasury released the 2019 Draft Taxation Laws Amendment Bill (TLAB), which contains proposed amendments to certain elements of Section 12J. As part of the TLAB, it has been proposed that the tax deduction for an investment in a Section 12J company be limited to R2.5m per investor, per annum, effective from 21 July 2019.
By implementing this limitation, National Treasury is trying to curb excessive deductions which they say may translate to instances of tax abuse. This is a legitimate concern. However, we as an industry believe there are better ways of handling this problem. The tangible data points of the space already suggest real success is happening within the initiative, especially on a job-to-cost metric. By implementing a R2.5m limit, government is at risk of holding back legitimate investment in the space. Also, the wording of the proposed amendment appears to apply equally to companies seeking to invest in the 12J space. By their nature, companies have more capital to inject into 12J funds and also have a lower net taxcost to the fiscus. At this limitation, we’ll see fewer corporate entities participating within the initiative, and our country could prolong the continuation of the stockpiling of cash on balance sheets. As a player in this space, we at MeTTa Capital Managers hope that National Treasury will listen to what our industry has to say and be open to further discussions.
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EMPLOYEE BENEFITS
30 September 2019
Employees with Benefits
– how insurers should be playing in the SMME EB space The working world has changed. Insurance has accordingly shifted focus from bigger corporations to the SMME space. But what’s the best way for SMMEs to attract and keep employees? After having scooped the prize for Employee Benefits (EB) at the recent FIA Awards, Linda Schroeder, Liberty Divisional Executive: Corporate Sales and Servicing, describes what workers want. EB isn’t what it used to be In today’s economy, it is no longer enough to have an Employee Benefits program that only focuses on the major life events like retirement, death and disability. Employers need to focus on education and employee wellness programs to become the employer of choice to grow their business. In the past, this would only have been an area for bigger corporates, but now we understand that smaller and medium enterprises are the lifeblood of the economy. This is especially true for a country like South Africa, where up to 40% of the economy comes directly from SMMEs (small, medium and micro enterprise businesses), which will be responsible for 90% of all jobs by 2030, according to the National Development Plan. A pressing need to look after the little guy, SMMEs are key in creating jobs and employment in the country. Research from the National Treasury Research on SMMEs in South Africa (2008) states that “8 out of every 10 new jobs created in South Africa are in SMMEs”. Also, the World Bank identified the following key benefits of SMMEs: • SMMEs are productive drivers of inclusive economic growth and development in South Africa and developing countries around the world, and they drive diversification through their development of new and unsaturated sectors of the economy • SMMEs are critical for poverty reduction. The geographical location of SMMEs (mostly located outside of the big metropolitan areas) provides an opportunity to employ local people. This alleviates poverty and encourages economic activity • Because SMMEs play the competitive game differently from the big corporates, their nimble approach to competition drives efficiency and productivity. But SMMEs have problems of their own Liberty Corporate’s research indicates that most SMMEs struggle with staffing issues. At the top of their mind is the number of employees that have financial difficulties and look to their employer to support them. It is also unfortunate that employees are challenged with daily issues that our country is facing. This leads to trauma, legal and medical issues that again affect employee productivity. Consequently, financial management is a challenge that most SMMEs face. Employers that have programs to educate employees, look after them and their families in times of need and help them manage through the challenges they face, will become known as an employer of choice.
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But developing employees and looking after their wellbeing is expensive and often SMMEs cannot afford this. The education program, Value Added Services and affordable employee benefits program we have to offer employers will assist them in achieving their goals. Then there is absenteeism. According to Christo Botes, Executive Director of Business Partners Limited, consequence of regular absenteeism for small and medium enterprises (SMEs) can really be detrimental, given that many of these businesses often employ less than 10 people. Botes points to figures released by Statistics SA, which reveal that absenteeism is costing companies more than R12bn annually. He says that a positive culture and personal engagement between SME entrepreneurs and their staff can limit absenteeism – more so than in larger businesses. However, an article written by Rise Staff indicates that ‘presenteeism’ (being absent even when you are at work) is a more concerning issue companies face. Presenteeism occurs when ongoing physical or mental conditions prevent employees from being fully productive at work. Productivity loss here is three times greater than losses caused by absenteeism and costs US businesses almost $230bn annually. What can insurers do? The cure for this is financial wellbeing and mechanisms to cope with the curve balls life throws at people – these are absolute necessities to help employees cope and be more present in the workplace. Liberty’s offering is an example of how insurers can help. Employers that partner with Liberty for their employee benefits program will automatically qualify for services – including medical, trauma and legal counselling, medical assist and financial educations programs – for their staff at no additional cost. These programs go a long way to assist employees with absenteeism and presenteeism issues they are facing, which will have a positive impact on their bottom line. Liberty Group Ltd is a Registered Long-term Insurer and Authorised Financial Services Provider (FAIS nr 2409). Liberty Corporate is a division of Liberty Group Limited.
Linda Schroeder Liberty Divisional Executive: Corporate Sales and Servicing
NASHALIN PORTRAG Head of FundsAtWork at Momentum Corporate
The impact of season change
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s we welcome Spring and get rid of the layers, we look forward to leaving the flu season behind. A change of season does not only bring transformation to our wardrobes, it also impacts our well-being. We may have made it through winter but we are not completely in the clear as with every change of season people suffer from upper respiratory infections (URIs), which includes flu or sinusitis. While this places a financial burden on the individuals themselves, it also has a significant impact on business productivity, with the cumulative cost of treatment running into billions of rand each year. According to a study by the Global Hygiene Council across 17 countries including South Africa, the average person misses 4.5 days of work due to URIs, resulting in a loss of R2bn to the economy every year. Momentum’s Effective Employee IndexTM also revealed that South African companies lose an estimated R25bn a year due to absenteeism. Over and above this exorbitant cost of absenteeism, is the cost of presenteeism, which refers to the unproductive time that employees spend at work due to being distracted. Considering that physical health distractors, such as headaches and flu, account for 19% of South Africa’s presenteeism, the cost of treating seasonal illnesses expands even further than what the absenteeism statistics suggest. With this kind of financial outlay at stake, South African businesses have a vested interest in keeping employees healthy throughout the year. South African companies should be more proactive in this regard. Employers need to take measures not only to reduce the instance of illness-related absenteeism in their workforce, but also the costly impact that presenteeism is having on employee productivity levels. This indicates that employers and their employees face a significant challenge when it comes to workforce incapacity. There are a number of ways to initiate these proactive measures, but the provision of innovative, bundled employee benefit solutions is always a good place to start. This highlights the important role financial advisers play in ensuring that their clients’ employee benefit offerings are appropriate and at the right level to protect their businesses and their employees against the financial impact of season changes. Financial advisers should consider partnering with a progressive employee benefits provider that offers integrated benefits specifically designed to cover the financial gaps that are caused by everyday sicknesses. This will enable advisers to craft and deliver fit-forpurpose solutions elegantly tailored around the needs of each unique client, and provide members with holistic financial advice. Partnering with a service provider who will bundle retirement, health and insurance solutions will ensure that the health and financial wellbeing of employees is covered, while allowing for innovative reward programmes that will benefit the body and pocket simultaneously.
EMPLOYEE BENEFITS
30 September 2019
KINGSLEY WILLIAMS Chief Investment Officer, Satrix and MARIE DU PLESSIS Head of Pooled Investment Solutions, Sanlam
Unpacking the Satrix Enhanced Balanced Tracker Fund’s performance
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he Satrix Enhanced Balanced Tracker Fund FIGURE 1: PERFORMANCE OF SATRIX ENHANCED was launched over 10 years ago as an employee BALANCED TRACKER FUND AS OF 30 JUNE 2019 benefit pooled fund utilising Sanlam’s life licence to create market-linked investment products. It is ideally suited to investors with a longer-term investment horizon. Typically, these would be investors who are in the earlier stages of saving towards retirement and can afford higher volatility associated with larger allocations to equities. The fund has a proud history of delivering consistent returns to investors through its unique design of combining low-cost index tracking strategies and sensible tactical asset allocation. These are the key highlights regarding the fund’s Source: Satrix | Gross Total Returns | Returns for periods design and how it is managed: in excess of 1-year are annualised. • The fund is benchmarked to a strategic multiasset class benchmark, where the benchmark is TABLE 1: ASSET ALLOCATION CHANGES rebalanced monthly back to its strategic weights • The fund employs tactical asset allocation relative to the strategic weights within a +/-2% range • The fund is managed within a tolerance relative to the tactical asset allocation, with a view to minimise turnover in the fund. Only once an internal tolerance is breached in excess of the tactical asset allocation, will a trade be generated. This will typically be off the back of cash flows or extreme market movements • When trades are necessary, a weight is targeted relative to the tactical asset allocation, to further minimise turnover • Cash is actively managed to generate excess returns relative to the STeFI Composite Index returns within the multi-asset benchmark • Within each asset class, the fund tracks its respective asset class benchmark index, either through physical replication, synthetic replication, or a combination of the two. Synthetic replication facilitates excess This naturally gives rise to the question, what returns relative to the index by employing a portable specifically contributed to the outperformance after alpha strategy with enhanced cash returns. trading costs relative to the benchmark? It is also worth noting that a number of changes to the benchmark The fund outperformed its strategic asset allocation occurred over the periods analysed, as summarised in benchmark over the last one- and three-years, and Table 1. performed exactly in line over five-years, as indicated Over one-year, the outperformance is attributable to in Figure 1. asset allocation effects, primarily being underweight RNI-cpd.pdf
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on local equities and bonds relative to the benchmark. This was offset marginally by an underweight position in international asset classes. Within each asset class there is typically a degree of underperformance due to transaction costs, except for local cash, which typically outperforms the STeFI Composite index. Global assets also collectively managed to outperform their respective asset class benchmarks over the last year. Over three-years, the outperformance is again attributable to asset allocation effects, primarily driven by overweight allocations to local bonds and cash, and an underweight allocation to local equities. The underweight allocation to global equities and bonds detracted marginally from the overall positive allocation effect relative to the benchmark. Within each asset class, there was similarly a degree of underperformance due to transaction costs, except for local cash and offshore assets. Over five years, the asset allocation effect was marginally positive, which offset the marginally negative selection effect within each asset class, resulting in the fund performing in line with its benchmark. A key benefit of this fund is its ability to add value from its tactical asset allocation positioning, thereby offsetting the transaction costs associated with tracking a multi-asset class index. Furthermore, Source: Satrix the ranges and asset allocation tolerances the fund is managed within before a trade is triggered, help to minimise the turnover and transaction costs within the fund. Finally, the fund’s size (now in excess of R2bn) further helps to reduce transaction costs arising from flows as these are now relatively insignificant in relation to the size of the fund. For more information see http://bit.ly/2Zw1wRe.
RISK
30 September 2019
Make your impact, protect your clients’ income
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t FMI, we believe your clients’ income is more than the money they earn. It provides for their lifestyle today and their future plans. Priorities may change as life changes, but the one constant is your clients’ need to earn an income. It not only impacts their own lives, but those they love and the world around them. Their income has a ripple effect that extends further than just supporting their families. Consider the impact if they weren’t able to pay their landlord, who has a bond to pay; or their employees, who have families to support. Right now, the South African savings rate is shockingly reflected as -10%1. This figure indicates that most individuals are spending more than they earn, which means they do not have savings tucked away to take care of any interruptions in their monthly income. It’s one of the reasons why, at FMI, we believe risk planning starts with protecting your clients’ income against their most likely risk of a temporary injury or illness. “At FMI, we believe life insurance should protect 100% of your clients’ income first – so they can go on to enjoy the life they live today and
create the life they want tomorrow, for themselves and their families, without having to worry about an injury or illness derailing those plans,” says FMI CEO, Brad Toerien. “Our role as an industry is to start by really understanding the mindset of our clients and their needs at each stage of their life in order to provide the very best cover possible,” Toerien stresses. “It goes without saying that we, as insurers, have an obligation to provide product solutions that are relevant to an individual’s particular life stage – solutions that adapt as their life changes and for as long as they need.” The invaluable role of sound financial advice can never be overstated. As a financial adviser, you have the opportunity to make an impact in your clients’ lives by ensuring they have the right cover in place to protect them against all of life’s risks. They rely on you to inform them about income benefits. According to FMI’s 2018 #RealityCheck Consumer Survey, almost half (50%) of our respondents believed income protection to be some form of retrenchment cover. And many of those who do understand what income protection is, believe it’s
a benefit only available to business owners or professionals. So, what can you do as an adviser to change these misperceptions? Start with informing your clients about income benefits and the many advantages over lump-sum cover: • Income benefits mimic the income stream your clients are trying to replace, making them easier to understand and therefore easier to sell • Income benefits simplify planning and reduce advice risk as they don’t require you to calculate the lump sum required to provide a future income. This also makes servicing the policy simpler in the long term • Income benefits can save your clients money because they’re more affordable than the lumpsum equivalent • Income benefits mitigate investment and inflation risks because your clients do not need to worry about investing a lump sum of money, and the future impact of inflation • Income benefits mitigate longevity risk because your clients do not need to worry about running out of money before they die • Income benefits mitigate behaviour
risk because your clients will not be tempted to spend large sums of money on expensive cars or luxury holidays • Income benefits are less likely to lapse. According to FMI’s 2017 Lapse Report, lump-sum-only benefits are 66% more likely to lapse in their first year, compared to income-only benefits. “Highlighting these advantages to your clients will help shift the perception that income protection is retrenchment cover. It will help shift them from seeing life insurance as a grudge purchase by reframing it as something that protects them in life, not just death, by putting their income first,” concludes Toerien. According to the latest Statistics South Africa Survey, the South African savings rate is -0.10%. 1
Brad Toerien, CEO, FMI
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RISK
30 September 2019
Rewarding clients for living a healthy lifestyle
Offering simplicity and convenience to the broker MoneyMarketing recently attended the Johannesburg launch of 1Life’s new digital intermediary platform that takes a new approach to the market.
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arlier this year, Liberty introduced a wellness bonus for its customers to add on to their Lifestyle Protector risk products. Now, clients can receive cash-back benefits after five years. Liberty hasn’t launched its own wellness programme but has rather chosen to recognise two external wellness programmes and use client data from both the Discovery and Momentum wellness programmes. Liberty’s Divisional Executive: Retail Solutions Shared Value, Nalen Naidoo, sees his company’s wellness bonus as a major innovation in the way long-term insurers reward their clients for living a healthy lifestyle. “Critical here is that we think customers should have the freedom to choose whichever wellness programme they want to take part in. They shouldn’t have to have the same provider for their wellness programme and for their life cover. And they should be free to share their data.” Explaining how the Lifestyle Protector Wellness Bonus works, Naidoo says a client must have a Liberty Lifestyle Protector policy with qualifying benefits and be a member of a wellness programme that Liberty recognises. When a Lifestyle Protector Wellness Bonus feature is added to a Lifestyle Protector policy, the client will contribute an additional 5% of qualifying monthly premiums. To get the most out of the Lifestyle Protector Wellness Bonus, a client should engage in healthy behaviour, have it measured through his/her wellness programme, and look to improve or maintain his/ her Liberty Wellness Score. During the development of the Lifestyle Protector Wellness Bonus, Naidoo says Liberty noted how clients appreciated having guaranteed life cover that wouldn’t unexpectedly change over time. He adds that some traditional solutions that incorporate wellness programmes and insurance products give customers a potential upside but also usually have downside risks, such as
future premium increases or reductions in cover, relative to original quotes. This impacts most on people who, despite good intentions, are not able to manage their wellness status into the top tiers, sometimes for reasons out of their control. “If something happens and you can no longer engage in a healthy lifestyle, we don’t think you should be penalised,” Naidoo says. He explains that while doing research to develop the Lifestyle Protector Wellness Bonus, clients indicated that they did not want yet another rewards programme, but they still wanted to enjoy rewards. Off the back of this, it was decided that clients could use the wellness status from other programmes, such as the ones provided by Discovery and Momentum. “Our customers told us they wanted choice, and that is what we are giving them,” Naidoo says. Discovery, however, is unhappy and is taking Liberty to court, arguing that Liberty is appropriating its intellectual property. Liberty sees this as action by a competitor as an attempt to limit competition in the long-term insurance market. “Independent legal experts have already opined on intellectual property law and we think the situation is very clear. The core discussion here is that customers have rights of access and portability around their own data,” Naidoo says. “Our strong view is that if you are contributing to a program and putting in all the hard work to live healthily, then surely the measure of how hard you’ve worked should belong to you – and you can use it wherever you wish, including coming to get life cover at Liberty,” he adds.
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Nalen Naidoo, Divisional Executive: Retail Solutions Shared Value, Liberty
“In a market that is dominated by incentive-based reward, there is often not enough focus by insurers on providing solutions that improve broker productivity and deepen client engagement through an easier, shorter and less expensive client journey,” says Kobus Wentzel, Head of Distribution at 1Life. He was speaking at the launch of 1Life Vantage, a new digital intermediary solution for brokers and financial advisers. “We identified a core need to service this market more effectively and, through technology, we are enabling speed and efficiency in the underwriting and financial advice process and believe that 1Life Vantage is a technology solution that will lead the way.” 1Life Vantage is aimed at enabling financial advisers to provide superior financial planning, product advice and ongoing product service to customers for long-term insurance and investment products. Wentzel explains that it’s “a revolutionary mobile application currently on tablets and notebooks – to be made available via smartphones and desktop in the near future - that enables a holistic view of the client and enables in-depth conversations leading to the delivery of the right financial products and superior advice, for ultimate peace of mind and sound financial strategies. Furthermore, not only does it offer endto-end simplicity and convenience, but the process is fast connecting the right information to the right people.” He adds that it’s critically important, however, that 1Life understands and recognises that the adviser is the expert in advice and as such, 1Life Vantage is a solution that simplifies and supports the financial advice process by enabling speed and efficiency. The solution also aims to provide advisers the opportunity to service more clients through a robust, integrated technology solution that enhances face-toface engagements. “This is critical today, where advisers are operating in an onthe-go culture with an ever more demanding customer base,” Wentzel explains. Through the digital and paperless, cloud-based application 1Life has reinvented existing processes to deliver straight through processing, speed and convenience. Furthermore, the solution offers a simplified, real-time underwriting process – allowing products to be structured without intensive administration. “This makes insurance easier to buy and improves the access and affordability of products,” he adds. Critically important for advisers, however, is that through the four commission models available to advisers, not only is 1Life able to provide daily commission payments as well as – through its premium commission model – provide advisers with protection against commission risk, but the model also provides the adviser with simplicity and convenience in a structure that suits how they wish to run their own individual business. “The solution also ensures real-time access and amendments to be made to client portfolios, as well as provides instant and interactive diary management – directly from the application,” Wentzel says. However, critical to this is that trust is central to this process and so, 1Life ensures no disintermediation by ring-fencing advisers’ clients so that they cannot fall into the direct 1Life channel. “Technology evolution is critical in the insurance space and, as a business backed by a global brand, we are focused on delivering solutions that are technology centric, but that also provide ease and convenience so that we can change lives. However, we also realise that the technology transformation we are encouraging advisers to take can be overwhelming and so, 1Life Vantage provides all advisers with relationship consultants to ensure that the onboarding of such technology and the transition is smooth and that any queries or questions can be addressed in real-time,” continues Wentzel. He believes that 1Life Vantage will become a catalyst for change in the insurance sector in the near future, as advisers become familiar with the technology, use it and reap the benefits of its speed and convenience. “As this shift happens, I believe we will see the market Kobus swing in the same way and we look forward to what Wentzel, this solution can offer the insurance sector and, of Head of course, the client base that we serve,” he adds. Distribution, 1Life
HEALTH
30 September 2019
Sophisticated technology heralds era of predictive, more proactive healthcare
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echnology is changing our lives through streamlining and automating processes that previously would have been far more expensive and time-consuming. Through enhanced integration and artificial intelligence, health and financial services, human capital and rewards can now better serve beneficiaries and employers alike – often predicting and pre-empting needs before they arise. Technology expert and thought leader on the new digital economy, Herman Singh, points out that the fourth industrial revolution has brought about a fundamental shift in the nature of business and customer expectations. “Information is powerful, and with the rapid acceleration in information technology it is now possible to capture, send, store and process information more easily than ever before and these processes are now virtually instantaneous and increasingly effortless,” he said, speaking at a recent think-tank hosted by health, financial services, human capital risk management and technology solutions investment group, Agility. Jacques Snyman, says that technology underpins “This is changing our lives in phenomenal ways. the powerful intelligent systems Agility has A few years ago, if I wanted to buy a book I would developed, which go further than merely predicting need to get in my car, drive to the bookshop, park risk to proactively assisting companies and the car, physically enter the shop, look for the book individuals reduce the risks they may face. and – assuming I was lucky enough to find it at “If you can measure risk, you can actively manage the first bookshop I visited – stand in a queue and it. As technology advances, we are able to do so pay for it, before driving home. This process could with ever-greater precision. Agility has been a easily take an hour or more,” he added. research- and evelopment-focused company since “Let’s examine the impact technology is having inception, and all data at a granular level has been in value-chain compression. Thanks to the developed to ensure that clinical evidence translates enhancement of technology, I can download entire into stakeholder benefit for patients, funders and books to my personal device in a split employers alike,” Dr Snyman notes. second and technology even predicts “This is evidenced by the most which books I’m likely to be interested recent industry information, which IF YOU CAN in and brings them to my attention shows that Agility’s operating MEASURE before I even ask. subsidiaries’ clients’ patient hospital RISK, YOU “In addition, if we consider the admissions rate per thousand price of a newly printed book and the CAN ACTIVELY beneficiaries was an astounding petrol it took to get it in the past, as 45% less than the industry average. MANAGE IT well as the value of my time – these Furthermore, only 15% of Agility are expenses that are now either members were re-admitted to unnecessary or hugely reduced.” hospital, compared to the industry average of 37%, Singh noted that the convenience and highly indicating the effectiveness of the Agility approach. individualised nature of such interactions has “This is thanks to the superior technology we use, raised customer expectations, which gives rise to whereby the identification of potential risk enables fresh possibilities such as how technology can be pro-active management based on need, rather than used to better serve the needs of the health and want, thereby balancing supply and demand for financial sectors more proactively. enhanced sustainability. This has a unique ability to “Sophisticated technology has brought about a highlight risks by running algorithms, and we are world of change in what is possible – for example, then able to reach out to at-risk members, and offer where an individual’s risk of a heart attack can be the necessary assistance to improve outcomes.” predicted through the application of technology. Agility’s patented Patient Driven CareTM We are constantly creating data, without necessarily programme identifies at-risk members and being aware of it, in our everyday lives. provides individualised clinical management to “Insurance companies can now score risk far pre-empt health risks. Personal health coordinators, better at individual level. Insurance used to be who provide such members with the healthcare about averaging risk-per-bucket of customers, but equivalent of a private banker’s service, ensure with the proliferation of data available and the that at-risk members are managed holistically technology that allows for billions of processes to and receive targeted care to improve their health create meaning and predictions from this data, and, in many cases, mitigate the need for potential it is possible to predict my individual risk – not hospitalisation. the risk of a group of people like me, but my “This is contrary to the market norm whereby individual risk.” members are grouped according to disease, and Director of product development and worldthese categories are managed through a silo-based renowned pharmacologist at the Agility group, Dr approach with numerous contact points for the
member, which can be time-consuming, confusing and frequently leads to multiple points of failure, often at the expense of the individual’s health and productivity,” Dr Snyman explains. “From a group risk and employee benefits perspective, it makes sense to integrate all contributing elements of risk for a more effective, holistic solution – which not only reduces administration costs but can also serve as a basis for negotiating lower group risk premiums, as the efforts to mitigate such risks are both tangible and demonstrable. “Our technologically-powered systems also enable us to provide the same level of service to individuals and employers in remote rural areas, as well as those living in large cities. This ultimately means that irrespective of a client’s geographic location, they can expect the same access and excellent outcomes,” Dr Snyman says. “One of the most powerful implications of the fourth industrial revolution is that technology extends our capacity to protect human health, as our sophisticated agile systems are becoming increasingly adept at predicting and proactively addressing risks for better health outcomes and enhanced productivity,” concludes Dr Snyman.
Dr Jacques Snyman, Director: Product Development, Agility Group
Herman Singh, CEO, Future Advisory
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OUT & ABOUT
IMAGES: WWW.RUSSELLROBERTSPHOTOGRAPHY.COM
30 September 2019
Alexander Forbes Women's Day Brunch
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oneyMarketing last month attended the Alexander Forbes #BalanceForBetter Women's Day Brunch at Summer Place in Johannesburg where the central points that provide balance for women were explored. An insightful panel discussion was held, chaired by tv anchor Leanne Manas who spoke to Trudi Makhaya,
economic adviser to President Cyril Ramaphosa; Tanya Cohen, former Chief Executive of Business Unity South Africa (BUSA); Thabile Ngwato, young entrepreneur and cofounder: Newzroom Afrika, and Butsi Tladi, Alexander Forbes Executive: Clients. The audience was also addressed by Dawie de Villiers, CEO of Alexander Forbes.
Above left to right: Trudi Makhaya, economic adviser to President Cyril Ramaphosa; Tanya Cohen, former Chief Executive of Business Unity South Africa (BUSA), Thabile Ngwato, young entrepreneur and cofounder: Newzroom Afrika, and Butsi Tladi, Alexander Forbes Executive: Clients.
Tv Anchor, Leanne Manas.
Janice Roberts, editor of MoneyMarketing and Trudi Makhaya, economic adviser to President Cyril Ramaphosa.
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Dawie de Villiers, CEO of Alexander Forbes.
EDITOR’S BOOKSHELF
30 September 2019
The Creating Success series covers a wide variety of topics in every area of business, management and personal development. Whether you’re looking to brush up on your presentation skills, write a comprehensive business plan or even learn how to deal with difficult people, you’ll find reliable advice in these practical books on essential business skills. These are just some of the books in this popular series: HOW TO WRITE A BUSINESS PLAN This book allows readers to gain essential skills for career development and craft a winning business plan to secure the support they need. It’s a one-stop guide to producing the most professional and convincing plans possible. HOW TO WRITE REPORTS AND PROPOSALS If you want to perfect your skills at writing winning reports and persuasive proposals, look no further than this book. It offers clear, concise and practical guidance on how to write succinctly and with impact across different media, as well as on deciding what to include in a report. DECISION-MAKING AND PROBLEM-SOLVING Written by the leadership guru and best-selling author John Adair, the book provides tried and trusted methods to evaluate your own decision-making processes and facilitates the implementation of decisions.
BOOKS ETCETERA
ESSENTIALS OF RETIREMENT FUND MANAGEMENT BY JAMES AB DOWNIE Essentials of Retirement Fund Management explains in clear and practical terms the various aspects of the retirement fund industry in South Africa and provides practical steps to achieve effective retirement planning. An essential guide for trustees of retirement funds, this work was originally developed from retirement fund training course material. It covers everything from the documents and legal principles governing retirement funds to the duties and responsibilities of retirement fund trustees. It also deals with the rules that control the inflow and outflow of money in a retirement fund, as well as investment performance surveys and investment principles without going into any great depth on investments. It offers easy reference material and the style of writing and presentation appeals to all levels of trustees. It includes the full text of the Pension Funds Act and regulations. Win a copy of this book by emailing your name, address and mobile number to janice.roberts@newmedia.co.za with Essentials of Retirement Fund Management as the subject line.
Don’t miss the LexisNexis online Spring Sale from 2 September.
DEVELOP YOUR PRESENTATION SKILLS If you need to face your performance demons, improve your skills and enhance your career prospects, this book is for you. It provides in-depth advice on how to cultivate successful interaction with an audience, find an authentic voice, and judge what’s expected of a presenter.
SUDOKU ENTER NUMBERS INTO THE BLANK SPACES SO THAT EACH ROW, COLUMN AND 3X3 BOX CONTAINS THE NUMBERS 1 TO 9.
HOW TO MANAGE PROJECTS The book provides a complete, jargon-free introduction to the principles and practices of project management, along with practical tools and checklists to use in real life. THE STELLENBOSCH MAFIA: INSIDE THE BILLIONAIRES’ CLUB BY PIETER DU TOIT About 50km outside of Cape Town lies the beautiful town of Stellenbosch, nestled between vineyards and blue mountains that stretch to the sky. Here reside some of South Africa’s wealthiest individuals: Johann Rupert, Jannie Mouton, Markus Jooste and Christo Weise, to name a few. Julius Malema refers to them scathingly as ‘The Stellenbosch Mafia’, the very worst example of white monopoly capital. But who really are these mega-wealthy individuals? Author Pieter du Toit begins by exploring the roots of Stellenbosch, one of the wealthiest towns in South Africa, the birthplace of apartheid leaders, intellectuals, newspaper empires and more. He then closely examines this ‘club’ of billionaires. Are these individuals connected? He also looks at the collapse of Steinhoff: what went wrong, and whether there are other companies at risk of a similar fate.
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