MoneyMarketing September 2021

30 September 2021 | www.moneymarketing.co.za

WHAT’S INSIDE YOUR SEPTEMBER ISSUE SPACs – BLANK CHEQUE OR BLIND FAITH? Unfortunately, there are several disadvantages to being a SPAC investor Page 7

OFFSHORE SUPPLEMENT MoneyMarketing’s guide to investing offshore in volatile times Page 15

EXPOSURE TO IMPACT THEMES NEEDS TO BE QUANTIFIED TO PROGRESS More and more investors want to make a positive impact with their portfolios Page 30

WHY DISABILITY INSURANCE IS FOR EVERYONE It is actually younger people who are more adversely affected by disability Page 34

@MMMagza

@MoneyMarketingSA

First for the professional personal financial adviser

What China’s regulatory crackdown means

BY JANICE ROBERTS Editor: MoneyMarketing

I

nvestors are trying to make sense of a series of regulatory crackdowns by the Chinese government that began in November 2020, when Chinese regulators suspended the $37bn IPO of Alibaba’s Ant Financial Group in Hong Kong and Shanghai on the grounds that it would increase financial risk. Since then, the government of President Xi Jinping has embarked on a clampdown of Chinese technology companies like Tencent, Meituan, Pinduoduo, and the ride-hailing app Didi. Next, the regulators turned on tutoring companies, prohibiting them from going public, or making profits.

For South African investors, the most significant issue has been the stricter regulation of Tencent – the leading investment in the Naspers/Prosus camp.

Tencent was recently ordered by Xi’s government to halt the acquisition of music licensing rights on an exclusive basis, for its music streaming service.

The company was also impacted when Beijing compared video games to ‘electronic drugs’.

The Chinese government’s crackdown on the tech and education sectors may be seen as part of Xi’s plans to impose even greater state control on the country’s

economy, and to ensure that the damage is felt by foreign investors, as part of China’s rivalry with the US. Mike Schussler of economists.co.za believes that Beijing is attempting to restamp its authority on a private sector that has become too strong. “What the Chinese government is doing, is installing more Communist party officials on the boards of private companies, while starving these companies of credit,” Schussler says. “Xi’s priority isn’t keeping foreign investors happy; rather, his concern is about staying in power. When a leader makes himself president for life, that’s not a good sign,” he adds, referring to a decision by the National People’s Congress in 2018 to remove the two-term limit on the presidency, effectively allowing Xi to remain in power for life, and making it hard to see him being challenged in any way whatsoever.

On the other hand, there is a view gaining traction that China’s actions are largely an attempt to increase social fairness. Mike Gresty, analyst/fund manager at Anchor Capital,

says one should resist the temptation to view China’s motives as nothing more than a backlash against growing Western opposition to China’s policies – hitting Western investors where it hurts most, so to speak.

“If one puts aside these geopolitical tensions for a moment and acknowledges that a long period of relatively light regulation undoubtedly aided the dynamism and growth of the Chinese tech sector, but also allowed for a range of inappropriate practices to proliferate, the need for a regulatory reset was probably due.”

Gresty’s colleague at Anchor Capital, fund manager Peter Little, sees the crackdown as perhaps the initial implementation of the latest long-term strategic initiatives of the Chinese Communist Party as its shifts focus to a new policy direction. He believes that the past decade has seen China successfully meet its goals of alleviating poverty, “but while the policies that enabled the rapid economic growth have clearly played a significant role in achieving the strategic goals of government over the past decade, it has become clear that unchecked economic growth has come at the cost of increasing inequality”.

Continued on page 3

I’m a single parent, on the go 24/7.

Then one morning, someone ran a red light …

PROTECT YOUR INCOME Pays out up to R250K a month for up to 24 months No two disabilities are the same and many are unexpected, like Colin’s* car accident that left him unable to work for months. So, if you rely on your income, protect it with Old Mutual’s Disability Insurance.

The time is now. Speak to your financial adviser, visit oldmutual.co.za/disability or call 0860 60 60 60 today.

DO GREAT THINGS EVERY DAY Old Mutual Life Assurance Company (SA) limited is a licensed FSP and life insurer. Ts & Cs at oldmutual.co.za/disability. *This is not a real customer and just a persona used for advertising purposes.

30 September 2021

NEWS & OPINION

Continued from page 1 He views the country’s latest fiveyear plan as an attempt to address this inequality by achieving what the authorities term ‘common prosperity’. This involves not only social and economic stability, but also national security as well as financial, environmental and geopolitical sustainability.

Michael Power, strategist at Ninety One, has a similar opinion, as he too believes that social equality is one of the Chinese government’s main objectives.

“The central authorities believe there is not enough sharing going on today in the country,” Power says.

“Some people are winning too much while others are not winning enough.

Of course, there can be winners, but they shouldn’t be excessive in their size, and they need to share. China doesn’t want to become America, where income equality is quite literally off the charts.”

For Power, the regulatory tightening around the education sector is connected to the issue of social equality. Chinese parents have been spending enormous amounts of money to make sure their children are competitive, and able to navigate the country’s college entrance exam that holds the key to success in social mobility. As children become more expensive to raise, this negatively impacts population growth at a time when the country is facing its most precipitous decline in population in decades.

“China doesn’t want to see a situation in which only the rich can afford to hire private tutors to get their children through these incredibly hard exams,” he adds.

“Beijing wants to see a good portion of its young population properly educated, not just an elite. The Chinese government believes that everyone needs to be educated and have, as it were, a more equal chance at succeeding.”

Another concern for the government is what it sees as children’s growing addiction to online video games.

Last month, an article appeared in the Economic Information Daily, a publication linked to the state-backed Xinhua Agency, comparing video games to ‘spiritual opium’. While Tencent was not named in the article, reference was made to its flagship game, Honour of Kings.

As Power explains, opium is a sensitive subject in China. The country ceded Hong Kong island to Britain ‘in perpetuity’ in 1842 at the end of the First Opium War, which was fought over Britain’s export of the drug to China, where addiction became rife. “By the

time the 19th century ended, around for global supremacy with the US. “In three quarters of China’s upper classes fact, as investors, we should welcome were addicted to opium. I don’t want to the long-term strategic thinking that will stereotype people, but we have noticed likely deliver sustainable growth, which throughout history that in China, a fad is a key element of successful long-term can grow to an extraordinary degree investment returns. The latest five– and online gaming is one of them, year plan also commits to increasing which is why it was called ‘spiritual access for foreigners to Chinese capital opium’ in the recently published article.” markets, so the breadth of investment Following the publication of the opportunities is going to keep growing.” article, Tencent acted quickly to provide He cautions that having a longassurances that it would introduce more term mindset is critical. “Regulatory measures to reduce minors’ time and policy is likely to be a recurring theme money spent on games. In addition, it for investors looking for Chinese called for a ban investment exposure. Investors need to on gaming for have the patience to ride out the cycles children under the of regulatory tightening.” age of 12. “The fact Gresty reminds investors that this is that they moved not the first time Chinese companies so fast means that have been subjected to regulatory if there’s further heat, and as hindsight from previous regulation of the periods of regulatory change shows, gaming industry it would be a mistake to panic. “These still to come, and companies adjusted their business there probably is, then Tencent won’t models in response to new regulations be hit too hard because they’ve shown and continued to perform well. We extreme willingness in terms of trying to still believe Tencent has great growth deal with the issue,” Power says. prospects in the world’s fastest-growing He explains that the crackdown also big economy.” reflects Beijing’s attitudes towards the tech sector that, on the one hand, See article on page 22 encompasses the internet, and on the other, fosters innovation and raises tech self-sufficiency. While Beijing thinks that soft tech like e-commerce is ‘nice to have’, it sees hard tech such as batteries and semiconductors as ‘need to have’.

“In the US, the FAANG stocks dominate the idea of what tech means – but there is so much more to tech than internet-related stocks. The way the Chinese see tech has been described as ‘more microchips and less TikTok cat videos’. It’s not just all about Facebook, Amazon, Google Alphabet or Apple.

China wants to see less of a focus on developing the latest video games, and more attention paid to R&D.” Stocks geared to the production side of the economy, broadly speaking, would Michael Power, Strategist, Ninety One be far less likely to be regulated, while stocks geared to the consumption side of the economy – that may encourage inappropriate practices – are more likely to be regulated, says Power. “I think companies like Tencent and Alibaba have been aware of this for a long time, but it’s difficult to turn a super tanker around in five minutes. I suspect both companies fully understand the Chinese government’s new priorities, and they’re going to do everything they possibly can to reengineer their offering.”

Little believes that investors should not be alarmed about China’s latest regulatory moves, as what is at play is clearly not a bunch of random acts of government ‘muscle-flexing’ or Peter Little, Fund Manager, Anchor Capital another salvo in the tit-for-tat battle

“As hindsight from previous periods of regulatory change shows, it would be a mistake to panic”

EDITOR’S NOTE

T

he most significant part of President Cyril Ramaphosa’s recent cabinet reshuffle was the appointment of Enoch Godongwana as finance minister.

Gondongwana is no stranger to journalists as he has chaired the ANC’s economic transformation committee for the last decade.

Neither is he a stranger to the investor community. For now, his appointment should be seen as positive, although he needs to show in next month’s Medium Term Budget Policy Statement that the Treasury remains firmly committed to fiscal consolidation as set out by his predecessor, Tito Mboweni.

Another important development has been the clarification by Treasury last month of the proposal to allow partial pre-retirement access to pensions during emergencies. The Treasury has been working on this for a while now, and it has proposed the creation of a ‘two-bucket system’ that will permit limited withdrawals, together with mandatory preservation – including stopping withdrawals when changing jobs.

ASISA has given a thumbs-up to the proposal, as it is sympathetic to the COVID-19 hardships endured

by South Africans, but it does warn that the shaping of this ‘two-bucket system’ will not be an overnight process. Certainly, those hoping to soon access part of their retirement savings while still employed, will be disappointed. Treasury has made it clear that the earliest that SUBSCRIBE TO OUR any changes would NEWSLETTER become effective for a new withdrawal bit.ly/2XzZiMV mechanism is 2022.

JANICE ROBERTS janice.roberts@newmedia.co.za @MMMagza www.moneymarketing.co.za

www.moneymarketing.co.za 3

30 September 2021

NEWS & OPINION

PROFILE

Omri Thomas Investment Manager, Abax Investments & Fund Manager, Nedgroup Investments Opportunity Fund

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

I started investing while still at school and always knew I wanted to be in investments. The JSE ran an investment competition at the time, and I was constantly managing my demo portfolio. I made some investments in small caps that really paid off. To this day, small caps remain one of my favourite parts of the market when it comes to picking up undervalued stocks.

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

Being an early investor in Naspers was one of my best financial moments. It is phenomenal to see the value that Naspers has created for the South African savings industry over the years.

One of my worst financial moments was when Marcus Jooste resigned as CEO in 2017 and the fraud committed at Steinhoff was exposed. This remains one of the lowest points in South African corporate history.

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

One of my first investments was the original M-Net, which housed Nasionale Pers’s electronic pay-television media business. Within this business, Multichoice was also born. I don’t have the stock anymore. Sadly, I sold my shares in 1991 to fund my 21st birthday party. This remains one of my most expensive parties, in hindsight!

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

Reminiscences of a Stock Operator by Edwin Lefevre was written in 1923 and was inspired by the colourful life of a share trader called Jesse Livermore. Many of the lessons expressed in the book are still valid today.

Red Notice by Bill Browder reads like a thriller, but it is a real-life account of corruption in Russia under Putin.

“It is phenomenal to see the value that Naspers has created for the South African savings industry over the years” What’s your view on Bitcoin and other cryptocurrencies?

Cryptocurrencies are referred to as digital gold. The attraction is limited supply, giving investors/holders the belief that real value is preserved. While I can see the attraction, it is difficult to see wholesale adoption of cryptocurrencies until transacting speed and ability is sorted out. Until then, they remain a fringe asset class dominated by speculators and illicit activity proceeds.

There have been plenty of crypto schemes, and investors need to tread carefully when investing here.

EARN YOUR CPD POINTS The FPI recognises the quality of the content of MoneyMarketing’s September 2021 issue and would like to reward its professional members with 1 verifiable CPD points/hours for reading the publication and gaining knowledge on relevant topics. For more information, visit our website at www.moneymarketing.co.za 4 www.moneymarketing.co.za

VERY BRIEFLY Jurgen Boyd has been appointed as an independent non-executive director of Sygnia. He retired from the position of Divisional Executive for Market Integrity Supervision at the FSCA at the end of March this year. After qualifying as a Chartered Accountant and before joining the regulator in 2000, he held various roles in the private sector as an accountant, auditor, financial manager, business consultant and financial director. At the FSCA he was responsible for conduct oversight of market infrastructures (including stock exchanges and central securities depositories) as well as over-the-counter derivatives providers and rating agencies. Prior to this he had executive, regulatory and supervisory responsibilities in different sectors of the financial services industry, including the pensions and collective investment schemes industries.

Independently owned international Multi Family Office, Stonehage Fleming, has agreed to acquire the Private Client Services business of Maitland, a privately owned global advisory, administration and family office firm. On completion of the transaction, which is subject to regulatory Chris Merry approval in a number of jurisdictions, the business will transfer to Stonehage Fleming, bringing legal, fiduciary, corporate and investment management services capability in nine locations worldwide. The transaction will add £1bn of AUM and £15bn of AUA, taking Stonehage Fleming’s AUM to over £16bn and AUA to over £60bn.

Chris Merry, Stonehage Fleming Group CEO, says, “This is an exciting time for Stonehage Fleming; we have the scale, the range of services and practical wisdom developed over many years to be the partner of choice for successful families and wealth creators.

We have known and admired Maitland’s Private Client Services business for many years and are looking forward to welcoming their management, people and clients to Stonehage Fleming.”

African law firm Bowmans has appointed tax specialist Mike Benetello as an executive in its Johannesburg tax practice, further consolidating its strengths in mining, corporate, M&A and international tax. Deputy chairman Ezra Davids says, “Over the past few years we Mike Benetello have concentrated on expanding our Africa-wide tax practice to meet the growing needs of our clients across the continent.

While we have made excellent strides in pursuit of this goal, Mike’s 22 years’ experience in complex taxation matters is another significant gain for our tax practice and our clients.” Benetello joins Bowmans from ENSafrica, where he was tax executive and joint tax practice head, focusing mainly on mining tax, corporate tax and international tax. He was previously at auditing firm PwC, where he was Africa - Head of Tax: M&A and Johannesburg head of corporate and international tax.

30 September 2021

NEWS & OPINION

Mergence makes changes to executive leadership team

B

outique asset manager Mergence Investment Managers has announced a number of high-level changes to its executive leadership team.

As part of the Mergence Group under the chairmanship of Masimo Magerman, Mergence Investment Managers currently has assets under management of R35bn.

“The new leadership structure will provide a streamlined and dedicated springboard from where to drive and accelerate the group’s business growth and succession planning strategies – in the interest of creating shared and sustainable value for our clients, investors, associates and employees,” says Magerman.

“We are particularly excited to announce the appointment of Yoza Jekwa in the position of chief executive officer of Mergence Investment Managers,” he says. “Not only does this underscore the group’s commitment to the advancement of female representation in the South African fund management industry, but also because she has been integral to our success and in directing our growth journey since her appointment as joint managing director in 2019.”

The strategic appointments within Mergence Investment Managers’ executive leadership fold are as follows, effective from 1 September 2021: Yoza Jekwa – CEO Yoza is being promoted to CEO, following her appointment as Joint MD of Mergence Investment Managers in November 2019, after 17 years of investment experience in private markets. Her executive priorities will include oversight of the corporate strategy development and

implementation, capital structure optimisation and key stakeholder liaison responsibilities. In addition to her responsibilities, Yoza will continue to oversee the Private Markets business and will also remain in her position as chair of the Investment Committee.

Bradley Preston – CIO Bradley, who has been serving as Joint MD alongside Yoza for the past year, has been appointed to the position of CIO. Having been with Mergence for over 16 years, Bradley has unparalled experience in derivatives, absolute return and specialist equities.

As CIO, he will provide strategic and managerial leadership to the investment team to drive investment priorities. He is also responsible for the development of short- and longterm investment goals that will steer Mergence Investment Managers through its next phase of growth.

In addition, he will also focus on the investment manager’s macro strategy, adding value primarily through tactical allocation across asset classes, and assisting in strategic reallocation of alternative and long-only investment strategies.

His role will include providing input, direction and value to the Private Markets Investment team.

Fabian De Beer – CRO At Mergence since 2006, Fabian has fulfilled the roles of Investment Strategist, Chief Investment Officer and Director of Investments. In his new role as Chief Risk Officer, Fabian will focus on all investment risk and compliance matters across the firm, having gained over 32 years’ experience in senior and executive management positions, as well as

Yoza Jekwa, CEO, Mergence Investment Managers

directorships at major South African banks and retirement funds.

John Afordofe – CFO Previously Chief Operating Officer, in his new role of Chief Financial Officer, John will direct financial goals, objectives and budgets, and will execute capital-raising strategies to support our expansion. He will spearhead efforts related to enterprise risk management and oversee the investment of funds held by Mergence Investment Managers, weighing up and managing associated risks.

In addition, John’s responsibilities also include the development of our Information Technology (IT) systems and operations.

Semoli Mokhanoi – Director of SADC and Head of Business Development and Marketing Semoli will continue to serve in his capacity as Director of SADC and head of business development. He remains responsible for business expansion and exploring new opportunities in the African market, having achieved immense success in this area of business since joining Mergence in 2017.

Prudential achieves Level 1 B-BBEE status

P

rudential has attained a Level 1 Broad-Based Black Economic Empowerment (B-BBEE) rating. This follows its latest Financial Sector Council scorecard audit that was finalised in July 2021, based on its FY2020 financial results.

Improvements were seen across most elements of Prudential’s scorecard. Specifically, the investment manager improved in the Ownership, Management and Control, and Enterprise and Supplier Development categories, while maintaining the maximum available points in Socio-Economic Development.

Over the past 12 months, Prudential placed special importance on improving its rating from Level 2 to Level 1, in order to emphasise its commitment to diversity, inclusion and broad-based transformation of the South African economy.

This latest audit coincided with a strategic decision by Prudential’s global parent, the London-listed M&G Plc, to slightly increase its shareholding in Prudential’s Southern African business from 49.99% to 50.12%. Prudential staff voted to follow their rights on a pro-rata basis and increased their collective shareholding from 28.01% to 28.08% through a cashfunded transaction. These transactions were fully concluded on 2 July 2021.

“In addition to the recent minor changes in company ownership, we have also continued to improve our employment equity credentials, which contributed to an increase in black staff ownership,” explains Prudential CEO Bernard Fick.

“Combined with the fully black-owned Thesele Group’s 21.8% shareholding, Prudential’s BEE ownership has therefore increased to 31.3% in total. We are proud to say that 62.8% of our South Africa-resident shareholder base is currently owned by black people (excluding the strategic M&G Plc stake).

“We are very proud to have achieved this status – it reflects a real commitment from all parts of our business. For example, 80% of all new hires at Prudential over the past four-and-a-half years to 30 June 2021 have been employment equity candidates.”

Fick adds that although this is the highest level a company can achieve under the B-BBEE ratings structure in the Financial Sector, Prudential recognises that it can improve its contribution across some categories even further, and will be focusing its efforts on doing so over the coming year.

Bernard Fick, CEO, Prudential

Money Marketing Convention2021 Aug ad.indd 1 2021/08/10 09:00 5 www.moneymarketing.co.za

30 September 2021

NEWS & OPINION

‘We have a good foundation, but we must continuously develop’ How Metropolitan started transforming its business pre-pandemic, and how it still managed to continue that transformation over the last few months.

BY JAPIE MOSTERT Head of Channel, Metropolitan

S

ales are the life blood of any organisation. Simply put, there is no revenue without sales, and, without revenue, a business isn’t sustainable. The question that Metropolitan had to ask itself, in turning the business around and developing a new operational plan, was how to create an environment that was enabling for the salespeople. As Head of Channel, this was an area that I had focused on quite a bit and, as with other aspects of the business, the start of the journey was prompted by decisions made a few years ago.

While there was the process of defining who the right people were and getting them in, designing the best practices at adviser, branch manager, and regional manager level was also needed. We devised a Branch Manager Accelerator programme, where our branch managers developed a good understanding of best practices. In addition, it was all leader-led in that our own experts, not external facilitators, led the conversations on worksite marketing, client services, activations at worksites, etc.

A critical component of Metropolitan’s sales approach is the strong focus on worksites. This is where Metropolitan has an adviser, or even a service capability, on the premises of its business clients, where the employees of the business receive support and advice on financial matters. It was about ensuring that the channel, and the various sub-channels, clearly understood what was expected of them while providing the necessary support, which included a focus on worksite marketing.

Access to worksites is key to our success. It is an environment where the adviser can write more stop-order business (which ensures more stable premium income), has access to existing and new clients, and is able to build relationships. This is also why we make sure that we regularly add new worksites to serve.

The simple truth is that this stabilised our salesforce. Our advisers started earning more and there was lower staff

churn, which is costly because you continuously need to bring in and train new people.

When we redesigned our process, we made a deliberate choice to reward our performers. If you play your part, you are better rewarded. If you underperform, you need to feel the pressure. We have a tiered system where there are different levels one can move up, as an adviser, as a branch manager and as a regional manager.

Each person’s performance has a direct impact on personal and regional classification. The team determines its success, and that success is measured on a number of KPIs, such as volume and quality.

What is referred to as ‘daily cadence’ has gone a long way to turning things around. For a business that has a legacy as long as Metropolitan’s century of doing business, and over two million clients on its books, there was the risk of clients falling through the service cracks.

“We need to make sure we all get through this, and end up stronger than we were when we started” If I cannot check my business on a day-to-day basis, I cannot influence my business on a day-to-day basis. If you measure something once a month, you can only fix it once a month. Daily cadence is live data that enables the different layers of management to manage key measures, like productivity, stop-order ratios, product mix, quality of business, etc. It enables us to track progress, change behaviour and, where needed, remove barriers.

When COVID-19 hit, the belief in the strategy and operational plan was vindicated, despite the initial pressure from various quarters. The EXCO team recognised that this was part of a longer journey and not something that was expected to bear dividends in the short term. Obviously, the pandemic was new territory for everyone. No-one could have predicted that we would

6 www.moneymarketing.co.za

Japie Mostert

all be cooped up in our homes for a period of time.

Managing through COVID-19 was difficult because we couldn’t see clients face-to-face but, for example, with advisers already entrenched at worksites, and strong relationships with clients, it was easier to contact clients. We did our calculations and, with the backing of the CEO, CFO and EXCO team, decided to continue to compensate our advisers based on their pre-pandemic performance. Our advisers were enabled to execute their duties but also had to play their part in the process to validate and justify according to adjusted targets. With all the work done prior to COVID-19 in terms of raising the profile of each layer of staff, it didn’t make sense to lose them in the short term. Your sales staff is a huge asset and, if you lose, say, 20% of them, it’s eventually going to cost you three to four times.

These are people who stood by Metropolitan as it was going through its transition, and it is only right that it is reciprocated. It is about showing that Together We Can is not just a marketing slogan but rather something tied to the essence of the business.

It was a journey that everyone went through together, with all the little things done in different departments of the business adding up and ensuring that the business could find its way through the uncertainty of the global pandemic.

It hasn’t always been easy. In the early stages, there were huge drives to get masks out to staff, worksites and broader communities. The business pushed out sanitisers to all offices and since the drop in level from hard lockdown, the business operated a hybrid model, although there are some roles that, unfortunately, need people to be in the office.

Traditionally, when there was a death in the broader Metropolitan family, the branch and the region would be out in full force to provide support on the ground, which hasn’t been possible. Our Human Capital team has been providing guidance on how to manage it all.

A digital memorial service is just one example that assisted staff to deal with the loss of a family member, friend or colleague.

All we can do is to try to understand and show that we care. We learn every day. We don’t have all the answers, even now. I do also feel it’s important to understand that we still have a business to run. We have shareholders, clients and staff to look after. We need to be sensitive; we need to make sure we all get through this, and end up stronger than we were when we started.

Is this sustainable? Yes, I think so.

We have a good foundation, but we must continuously develop. We need to refresh, reimagine and keep moving forward. We are not at the finish line.

There’s still much more to be done.

30 September 2021

NEWS & OPINION

SPACs – blank cheque or blind faith?

BY PEARLENE GOVENDER Analyst, Absa Multi-Management

I

magine being approached to invest in a company by one of Wall Street’s most successful pundits, or even a famous movie star or sports personality. You’d be keen to know more, right? But what if it turns out there isn’t actually a company? At least not as yet, anyway.

How likely would you be to part with your money? This is the pitch being given by owners of special purpose acquisition companies, or SPACs, a deal structure that became exponentially popular over the course of 2020, with big names like former professional basketball player Shaquille O’ Neal, popstar Ciara and former US Speaker of the House Paul Ryan all jumping onboard the SPAC train.

Simply put, a SPAC is a vehicle through which private investors bring companies to public markets. It is a shell company, with no actual commercial operations, that is created for the sole purpose of raising capital through an IPO in order to acquire a private company. Also known as ‘blank cheque’ companies because they allow investors to contribute cash without prior knowledge of how their capital will be spent, SPACs have been around since the early 1990s, with the most recent resurgence reflecting investors’ search for better returns in a low rate world. SPACs are generally formed by individuals, or sponsors as they are called in this instance, who have a strong public profile, such as industry leaders, investment bankers or even celebrities, in order to attract investors and capital. They are registered with the SEC, meaning investors can buy shares in a SPAC before a merger or acquisition takes place.

Common stock in SPACs are generally sold for $10 apiece and initial investors also receive a kicker in the form of warrants, which give them the option to purchase more stocks at a fixed price later on. All the funds raised are ring-fenced in a trust until the sponsor identifies a company of interest, which will then be taken public through an acquisition using the capital raised in the SPAC IPO. Once the deal is approved and the merger takes place, the SPAC starts trading as a new company under a new ticker. Should the SPAC fail to merge with or acquire a company within the two-year deadline, it is liquidated and all investors receive their money back.

One of the biggest advantages of SPACs is that they are much faster in taking a company public than the traditional IPO route. While an IPO can take anywhere between 12 and 24 months to finalise, a SPAC merger can take place in five or six months as it doesn’t require a roadshow to entice potential investors. For private companies, the regulatory burden is reduced significantly as regulatory demands in a SPAC merger are much less onerous and less costly than in a traditional IPO. From the perspective of SPAC investors, they have the option of redeeming their shares if the acquisition is not to their liking, essentially giving them a money-back guarantee. In addition to this, the warrants received are akin to a risk-free bet on the success of the SPAC and may turn out to be worth a lot, depending on the acquired company. Another advantage for investors is the opportunity to own a much bigger stake in the merged company relative to the number of shares they would be granted in a traditional IPO, as a large number of these tend to be oversubscribed.

Unfortunately, there are several disadvantages to being a SPAC investor as well, the first of which is that investors essentially go in blind, with no idea as to what their acquisition target will be. Also, because companies that merge with a SPAC face less scrutiny, there is a real possibility of misrepresentation of the company in order

“Unfortunately, there are several disadvantages to being a SPAC investor”

to attract investors. SPAC sponsors can earn a significant profit from an acquisition, even if it proves unsuccessful for investors, so there is a high probability that conflicts of interest may arise. Another massive risk pertaining to SPACs was highlighted by the SEC in an alert to investors where they warned that “it is never a good idea to invest in a SPAC just because someone famous sponsors or invests in it or says it is a good investment”.

Research has shown that most SPACs actually do not fare very well and underperform the broader market after a deal is struck. The results tend to be far better for sponsors with a high level of expertise, however, such as former CEOs or industry experts. One of the more recent, noteworthy SPAC deals involved Richard Branson’s Virgin Galactic, where venture capitalist Chamath Palihapitiya in 2019 bought a 49% stake for $800m via his SPAC Social Capital Hedosophia Holdings. The biggest SPAC deal to date took place in July 2020 when Bill Ackman, the founder of Pershing Capital Management, sponsored his own SPAC, Pershing Square Tontine Holdings, raising $4bn in its offering.

Despite the risks, the long-running boom in private equity and venture capital, along with historically low interest rates, mean that more investors are willing to park their money in SPACs in the hope of getting lucky with an acquisition that pays off big. 2020 was a particularly significant year for the blank cheque market, with 248 deals totalling over $83bn, compared to 2019, which saw 59 deals worth $14bn. Given that 2021 has already seen the amount of capital flowing to SPACs top $97bn with almost 300 listings, it’s pretty clear that investors need to fasten their seatbelts and watch this space!

Pearlene Govender

Contact Johan van der Walt 011-728-5510 / 072-843-9239 or email: johanw@profile.co.za

The most up-to-date fund performance and fact sheet data in South Africa.

Fund Research

Portfolio Modelling

A ProfileData / FE fundinfo joint venture

Comparison & Analysis

Presentations & Reports

Contact Tracey Wise 011-728-5510 / 079-522-8953 or email: tracey@profile.co.za

www.profile.co.za/analytics.htm

www.moneymarketing.co.za 7

30 September 2021

NEWS & OPINION

Independent virtual Financial Planning Summit brings latest thought leadership to FAs

L

aunched in 2020, the inaugural Financial Planning Summit was an outstanding success, with nearly 1 000 delegates enjoying the market-leading content.

Delegates who attended the event commented:

Janice Roberts, Editor of MoneyMarketing: “I must congratulate the organisers for an event that was well planned, run to near perfection, and for bringing a breath of fresh air to the industry and profession with their approach. I must also say something about the technology to run and deliver the Summit – what an experience! Easy to navigate. Easy to interact. Easy to know where to go next.

Clean interface. High-quality video production that works on any device. The best I have seen yet! In my opinion, for the price of only R575 and CPD included, there is nothing out there that matches the value offered by The Financial Planning Summit.”

Russel Ho from Succession Financial Planning: “Thoroughly enjoyed the three days of insights from professionals in our industry, particularly those advisers that have been through it all and are willing to share their experiences. Definitely will attend future conferences like these.”

Francois du Toit from PROpulsion: “This platform and the great content is world class!”

The virtual conference will be brought to delegates in 2021 by The Collaborative Exchange and in conjunction

with Investec and Adviceworx as the lead associate sponsors. Discovery, Momentum, Glacier, Old Mutual Wealth, Iress and OUTvest are other associate sponsors.

The Collaborative Exchange is a specialist strategic advisory and research business that works with investment managers and wealth managers/financial advisers throughout South Africa. It also owns the intellectual property rights for arguably South Africa’s largest industry events, including The Investment Forum, Meet the Managers and The Investment Think-Tank.

The conference will cover the latest developments in the financial planning landscape during the COVID-19 pandemic, including the future of financial planning, the pros and cons of vertically integrated financial planning practices, how to set up your practice for continued growth and expansion, technology developments that are reshaping the industry, as well as many other relevant subjects. Leading local and international experts in their respective fields will be speaking at the event.

Ian van Schoor, the Chief Executive Officer of Adviceworx, says, “Advice innovation and disruptive business models are finding traction in the financial adviser market as more and more financial advisers evaluate the future of their own tied or independent practice. Advisers are taking a more serious look at their ‘own businesses’, with a growing urgency to improve client outcomes and future fit client propositions. A far more fundamental interrogation of issues, such as efficient operating models, technology integration, data analytics, client experience, sustainable practice management and succession models, are the critical issues of the modern practice today.”

René Grobler, Head of Investec for Intermediaries, says, “In an increasingly competitive and complex world, the need for financial advisers to help their clients navigate uncertainty has never been greater. For this reason, Investec for Intermediaries is excited to partner with The Collaborative Exchange and the financial adviser community in this thought leadership event. This conference provides a unique platform for the best minds in the industry to join forces and look into the future of financial planning to help crystallise the opportunities and the challenges ahead.”

The conference will include the latest developments in the financial advisory landscape: • Five industry trends reshaping financial advice around the world • Solving for efficiencies in your practice and client reporting • The critical questions financial advisers should be asking investment managers, platforms and other such providers to your clients’ benefit • Why mergers in financial advisory practices sometimes fail • The future of wealth management and how companies are innovating to keep ahead • Who will buy your practice when it’s too late to plan for succession?

• How you can scale your advice practice through the effective use of technology.

Further details about the event can be found at www.financialplanning-summit.co.za or by emailing info@financialplanning-summit.co.za

Income Tax Act legislative cycle ushers in important changes

BY HERNA-DETTE VAN DER ZANDEN Junior Associate, AJM Tax

T

he Income Tax Act is amended annually to keep pace with change, and when Treasury wants to close certain perceived loopholes.

The way it works is the Finance Minister delivers the Budget Speech in February, and the framework of certain amendments are provided as part of Annexure C of the Budget Speech. The Draft Taxation Laws Amendment Bill is then made available for public comment during June or July of every year. This is where we currently find

DE WET DE VILLIERS Director, Private Clients, AJM Tax

ourselves, with the bill published for public comment on 28 July 2021.

Following this, the Final Taxation Laws Amendment Bill is made available for public comment during September or October and the Taxation Laws Amendment Act is ultimately promulgated during December of the same year, or January of the following year, often with amendments that take effect and change the provision of the Act from the date of publication of the Draft Taxation Laws Amendment Bill.

8 www.moneymarketing.co.za

Two proposed amendments on the table, and relevant to those acting in a financial advisory capacity, are the taxation of retirement funds on emigration and anti-avoidance measures for loan transfers between trusts.

Proposed changes on emigration The ongoing exchange control reform has led to a proposed amendment whereby an individual emigrating from South Africa for tax purposes will be deemed to cash in or withdraw their retirement savings, giving rise to a tax liability.

Up to now, retirement funds, along with cash and South African immovable property, would have fallen outside of the so-called ‘exit charge’ levied when an individual ceases to be a South African tax resident. It is proposed that going forward, the tax liability in relation to the retirement fund is calculated on the day before the individual ceases to be a South African tax resident. The tax liability will be deferred (with interest) until the funds are actually withdrawn and against which PAYE will then be automatically withheld by the product provider paying out those cash proceeds.

This is to be regulated by a newly inserted provision of the Act, section 9HC which, if promulgated, will come into operation on 1 March 2022.

Important changes to Section 7C The other section to receive attention is the anti-avoidance measures for loan transfers between trusts, as contained in section 7C of the Act. Changes are proposed to ensure that the anti-avoidance measures of the said section also apply in respect of any loan, advance or credit that a trust, directly or indirectly, provides to another trust in relation to which its (the trust providing the loan, advance or credit) beneficiaries or founder are connected persons. This proposed change significantly expands the scope of application of section 7C. The proposed amendment, if promulgated, will be effective from 28 July 2021.

The Draft Taxation Laws Amendment Bill contains many other amendments that also need to be monitored. Taxpayers are encouraged to contact their registered tax practitioners and use the opportunity provided by National Treasury to comment on the proposed amendments.

30 September 2021

NEWS & OPINION

Are you gearing towards ESG?

BY RICHARD RATTUE Managing Director, Compli-Serve SA

E

nvironmental, Social and Governance (ESG), once a term we heard about only sometimes, has moved into mainstream conversation. Concern over the impact of climate change is growing, particularly with the reality check of the floods in Europe and heatwaves in the US. These matters are further compounded by rising social and financial inequality, as felt by recent looting and violence in South Africa, or painful international issues such as Black Lives Matter. The injustices are more under the microscope than ever before and change is on course, even if it will take some time. The investment world can, and must, do its part to help facilitate change – it’s no longer nice to include ESG in your mandate, it should be part of your main strategy. The setting of concrete ESG goals means we’re all going to feel the effect of this shift in investment momentum too.

The WEF knows best Proposed by the World Economic Forum are core and expanded goals aligned to four pillars or themes, namely Principles of Governance, Planet, People and Prosperity, with various deliverables per theme. These should also align with the six United Nations Sustainable Development Goals: • Clean water and sanitation

• Affordable and clean energy • Responsible resource consumption and production • Climate action • Life on land • Life below water.

change than others. Investors are likely to look to more sustainable investing, given the crisis we face without it, so it’s not going to be something one can wait to see play out. Options to grow and evolve (and improve) need to be available.

Local is lekker, but global is good too (and often worldwide approaches apply in the end anyway) International approaches are likely to apply to South Africa in time. Looking at the EU Sustainable Finance Disclosure Regulation, funds could be categorised according to ESG status. The three proposed categories are: • Funds without any sustainability integrated into the investment process (these could extend to being invested in stocks such as tobacco companies or thermal coal producers, which are of course examples that exclude ESG). The marketing of these funds will need to clearly state that they are non-sustainable, which could impact investor interest against more sustainable options.

• Funds that are inclusive of ESG factors (such as companies with good governance and environmental practices).

• Products or funds targeting sustainable investments (sustainable investment would be the core objective, with an index designated as a reference benchmark).

Growing the network of good globally All G20 countries have been called on by the Financial Stability Board (FSB) to specifically address the financial risks climate change will create. A comprehensive roadmap to address these risks and what needs to done in the next few years to prepare, has already been actioned. There are four key policy areas: disclosures, data, vulnerabilities analysis, and regulatory and supervisory approaches. The International Financial Reporting Standards Foundation programme of work aims to develop a baseline global sustainability reporting standard too, which the FSB supports. This would be under ‘’robust governance and public oversight, which would enable the development of climate-related disclosures that are globally consistent and comparable”, according to the programme.

What are you waiting for?

There is an urgency to get ESG factors right globally, and the COVID-19 pandemic has truly highlighted why it is important to improve the way many people live, as well as the outlook for the environment of the future. There are several global and local concerns that resonate, and these have been a wake-up call for many of us. Addressing these issues should be everybody’s responsibility, even though it’s easier for some to encourage and make

“It’s no longer nice to include ESG in your mandate – it should be part of your main strategy” It may be trendy for the powers that be, but pop culture is to thank too The ultimate global citizen and champion for the environment, Sir David Attenborough, has opened our eyes to the realities of climate change, and the narrative has truly spread, helped by influencers and activists like Greta Thunberg. These are not new names, nor are they telling new stories, but they are consistently keeping climate change on the agenda and helping

to bring about recognition of what needs to be done. Global awareness of the problem is one thing; changing how we act is the next vital step.

Nedbank, as one example, is no longer investing in companies who use fossil fuel. The eradication of diesel-powered vehicles is a big trend, electric vehicles are said to match (if not beat) the cost of fossil-fuelled cars by 2024, and this story is backed up by what car manufacturers are actually doing on the ground. More opportunities to invest better to live better are presenting themselves.

Get compliance on track Ensuring an effective and comprehensive compliance programme is in place, is essential for FSPs, which should factor in what is coming in terms of ESG-impacted legislation and customer demand. The goals are just that – what we need to work towards – and in time, complying with ESG guidelines and principles will be as relevant as any compliance requirement today, and as meaningful, if not more important, than achieving stated returns.

In fact, failure to take ESG into account may leave a manager with a portfolio of stranded assets, with no value (no-one wants to buy them), and so meeting returns may only be possible with the right ESG focus.

It is also worth mentioning that ESG returns are not necessarily lower than nonESG returns, and as they gain popularity, they are likely to present even more opportunity.

Are you on board?

It’s best to get on board sooner rather than later, as the ESG train is already pulling out of the station. Being left behind might mean limited chances to catch up as the industry begins to embrace a better investment landscape for all. Few can deny the important consequences of ignoring ESG altogether (for our earth and the investment returns to come).

Damn good financial advice is priceless!

REGISTER NOW www.financialplanning-summit.co.za

22 & 23 September | Virtual Event

www.moneymarketing.co.za 9

FINANCIAL PLANNING

Helping you take your business further

F

inancial planning requires you to have meaningful conversations with your clients to get to know them, and to understand their financial goals. Through personal interaction, you’ll be able to determine the investment strategy that’s right for them – and one that has the flexibility to change, just as clients’ needs change. Incorporating an approach that involves coaching will enable you to ask the right questions to help clients identify solutions that underpin their investment objectives.

“The guiding principles of the coaching team are to understand, disrupt and inspire with every opportunity”

The essence of coaching As financial planning specialists, we take a very different approach to dealing with our clients in order to influence their financial futures. At Old Mutual Wealth, we have a team of financial planning coaches that train financial planners to carry out coaching conversations with their clients. This helps planners to engage in a way that enables the client to clearly articulate the life they want to plan for, as well as to contemplate how their money can best support their plans. Planners who understand their role as financial coaches allow clients to independently consider financial planning questions without influencing them in a particular direction.

“Coaching moves into the realm of interpersonal and relationship-building capabilities” Coaching is about asking a correctly structured question to assist clients in finding their own solutions to the financial situations they are trying to solve. Questioning has its own benefits and should be considered a useful alternative to the advice or guidance of a mentor/consultant role.

What is coaching?

Coaching is not psychotherapy or counselling, as these focus on resolving deep psychological and emotional issues.

Coaching is also distinct from mentorship. Financial planners often confuse mentoring with coaching, and this comes as no surprise, as most planners are comfortable to impart their technical skills in the form of knowledge, advice and teachings to their clients. Planners then recommend solutions and outcomes that are based on their own interpretation of the facts and figures that are collected, analysed and presented to clients.

Coaching moves into the realm of interpersonal and relationship-building capabilities. Here,

10 www.moneymarketing.co.za

facilitating and demonstrating empathy, good listening skills, good questioning skills, emotional intelligence and building rapport with clients are key.

Quite simply: Coaching is a conversation. It is a conversation that has an impact on the individual and it engages with the client directly. It helps clients to think through situations, gain clarity and insights around these situations, and to ultimately move forward to achieve a specific outcome or goal.

Coaching is, therefore, the best method of taking a client on a journey from where they are now to where they want to be.

The coach is merely the facilitator, the guide, the custodian, the steward and often the partner of the client who is visually guided on this journey.

Good coaches make clients the drivers, allowing them to navigate a clear path to reaching their ultimate destinations.

Why coaching?

When it comes to talking about money, we often feel strong emotions, even stress. When we feel stress, our limbic system takes over and we are unable to think rationally. This can happen to all of us, no

matter how self-aware we are. We ask ourselves, “Should I go offshore? Should I save more money?

Or should I cash in my pension fund?” All too often these questions come from things we’ve read or maybe heard other people talking about.

A planner’s role is to help clients through this; to hold up a mirror so that clients observe what’s really happening. By asking questions that make sense in the moment, clients strip out the emotion and talk to the facts rather than assumptions. In short, coaching helps to bring clients back to a place where they can make good decisions and manage their behaviour around money.

Coaching as part of the advice framework At Old Mutual Wealth, we have entrenched coaching into the advice process, including the tools and solutions that planners deliver to their clients. We have developed a client engagement process that makes up part of the advice-led integrated wealth

30 September 2021

“Coaching helps to bring clients back to a place where they can make good decisions and manage their behaviour around money” planning proposition. We have made our advice framework available as part of the value proposition we offer to financial planners.

This proposition is successfully in use by accredited financial planners. The concepts developed are based on robust, tested and proven international best practice standards that are continually reviewed to stay current and relevant. We enable planners to overlay the advice framework with the ‘softer skills’ of coaching that will automatically assist them in engaging with clients on a much deeper level. This means that planners will be able to differentiate themselves effectively as part of the value they offer to their clients.

Our coaching programmes At Old Mutual Wealth, our focus is to help you capitalise on opportunities and, ultimately, build a profitable practice that is sustainable over the long term. We offer courses, modules and workshops designed to incorporate coaching methodologies and best practices that help to develop and enhance your client relationships.

Our team of qualified financial planning coaches is professionalising the industry by assisting planners with their client conversations and processes, and by supporting them in delivering a unique client experience.

The coaching specialists at Old Mutual Wealth believe that coach-led financial planning is a life-changing philosophy that generates passion for possibility, rather than living a life of fear or limitation.

Their approach to lifestyle financial planning is to champion positive futures every day. They coach, mentor, train and inspire financial planners to leverage the philosophy of integrated wealth planning and to give clarity to clients about their lives and how their finances fit into them. The guiding principles of the coaching team are to understand, disrupt and inspire with every opportunity.

By engaging with you to develop client conversations, models, processes and services that are unique to you and your role as an adviser/ planner, our coaching specialists are able to present a client experience that is authentic to you, and profitable and attractive for your business.

Partnering with an Old Mutual financial planning coach will: • Enable you to recognise your clients’ individuality by focusing on realising their goals and aspirations over time.

• Allow you to coach, educate and empower your clients to make informed decisions and keep track of their plans.

• Ensure that you are delivering on promises by providing a plan and solutions that are directly aligned with your clients’ goals, as you manage expectations and deliver reliable outcomes.

Contact us to find out more about coaching and how it can benefit you and your clients by emailing us at futurefit@omwealth.co.za

“Our focus is to help you capitalise on opportunities and, ultimately, build a profitable practice that is sustainable over the long term”

www.moneymarketing.co.za 11

TBWA\HUNT\LASCARIS 930202

Your clients work hard for their money.

Let’s make it count.

GROW their money Young professionals are driven to grow their careers and build a better lifestyle. Help them protect their income and accumulate wealth with our fit-for-purpose risk and investment solutions. Our products provide the flexibility and suitable pricing that young professionals can afford to help them achieve their goals.

As Financial Advisers, we can help you talk to your clients about how to GROW their hard-earned money.

PROTECT their lifestyle Clients with established careers are focused on improving their earning potential in order to secure their family’s future. At this stage in their lives, they are looking to protect their money to ensure they stay afloat no matter what, as well as to provide a good education for their children. As Financial Advisers, we can help you talk to your clients about how to PROTECT their family’s lifestyle through our risk and investment solutions and affordable pricing options.

MAXIMISE their wealth Mature professionals are at the life stage where they have accomplished their career goals despite major setbacks like the loss of a partner or the loss of an income. They are looking for value and ways to maximise their savings and build a legacy when they retire, not just for themselves but for their loved ones as well. As Financial Advisers, we can help you talk to your clients about how to MAXIMISE their wealth before retirement through our risk and investment solutions specific to their retirement needs.

To help your clients build, protect and maximise their wealth, visit www.liberty.co.za today.

Liberty Group Ltd is a Licensed Insurer and Authorised Financial Services Provider (no. 2409). T’s & C’s Apply.

30 September 2021

FINANCIAL PLANNING

Providing solutions for every stage of a professional’s working life

W

hile busy professionals are focused on their careers, they also need to grow their wealth and protect their incomes. At Liberty we know they work hard for every cent they earn, and we believe their efforts should be protected. We want to make their hard work count.

Liberty has solutions that meet the needs of all professionals: from those still establishing their careers, to others who have achieved high levels of expertise and excellence in their careers, and those who have accomplished most of their professional goals and are considering their financial independence in retirement.

Young professionals aged 25 to 35 have attained their education, and have started out in their new careers.

They are focussing on growing their money, improving their lifestyle and ultimately achieving wealth and financial independence. They have independent living arrangements, while their student loan debts are in the process of being repaid. While these young professionals are different to their parents’ generation, they understand the link between sound financial advice and their financial wellbeing, and they have started asking questions like: • What do I do if a serious illness or accident takes away my ability to do my job?

• How would my family cope if I was no longer around or able to support them?

• What happens if I get retrenched, and can no longer afford my bond repayments?

Fortunately, Liberty is here to partner with you, an accredited financial adviser, to provide sound financial advice to young professionals. This advice, along with our risk solutions such as income protection, life insurance, disability cover and critical illness cover, enable these young professionals to protect themselves against the negative impacts of any traumatic life event.

This group will also shift their focus away from their immediate needs to investing in their futures, considering their dreams and their financial goals. But as their plans evolve, they still want easy access to their funds, such as when the funding needed for side hustles and projects that generate additional income becomes a reality.

The needs of professionals change as they approach the 35 to 45 years age group, as they’ve now become

14 www.moneymarketing.co.za

experts in their profession.

Most hit the peak of their careers and are approaching the height of their earning capacity. As some of them become parents and breadwinners, they’re thinking of the needs of their family.

Ensuring their children’s education happens in the way they envisioned, no matter what, becomes a priority. That’s where a combination of Liberty’s EduCator risk benefit and Education Builder investment fits into their financial planning to help them secure their children’s education in the long term.

The need for drawing up a valid will that accurately reflects their wishes is also of utmost importance. The financial impact of winding up an estate on the death of a breadwinner means these professionals should also be looking at ways to ease their tax burdens, ensure they have sufficient liquidity for estate-related costs, and settle any debts due on their death, as far as possible. The coronavirus pandemic has also emphasised the importance of having an emergency fund to provide for unexpected circumstances.

This age group is aware that they have around two decades and a limited number of pay cheques until their retirement at age 65. For them, knowing exactly how much they’ll need to retire comfortably is important. Liberty’s Exact Income Fund and High-Water Mark Guarantee features, in our retirement solutions, will allow them to live with confidence, knowing today how much retirement income they will have. These features also provide the reassurance that their investments are protected against market volatility – something that

has become far more prevalent in markets in recent years.

Those who fall into the 45 to 65 age group have accomplished their career goals, even though they still have the responsibility of looking after children who might be studying at university.

This group’s financial planning remains critically important as this is the time for them to take a thorough look at their future, and make some critical decisions. If their retirement savings plans are on track, this will provide peace of mind; however, it is important for them to continue growing their investments where they can, for example by diversifying their wealth with Liberty’s offshore investment solutions. As they edge closer to retirement age, they’ll be keen to accelerate their retirement savings to secure a comfortable retirement, through Liberty’s Life and Living Annuity solutions. And once they reach the precipice of starting their retirement, our unique Life Annuity with Capital Protection product gives the comfort of a guaranteed income, combined with the certainty of leaving their dependants with an inheritance.

Whether professionals are in their 20s or 50s, financial planning around wealth generation and ensuring financial security for themselves and their loved ones is critical. Recognising the effort and considerable commitment that professionals make in doing the work they do, Liberty continues to partner with them on every step of their journey, providing solutions and suitable pricing for individuals at every stage of their careers.

As a financial adviser, you can reach out to us at Liberty for product solutions that are suitably tailored and priced for your clients.

“Whether professionals are in their 20s or 50s, financial planning around wealth generation and ensuring financial security for themselves and their loved ones is critical”

The information contained in this article does not constitute advice by Liberty.

Any legal, technical, or product information contained in this document is subject to change from time to time. This document is a summary of the features of certain Liberty products as at the time of publication. If there are any discrepancies between this document and the contractual terms and conditions the latter will prevail. Any recommendations made by a financial adviser or broker must take into consideration their clients’ specific needs and unique circumstances.

Liberty Group Ltd is a Licensed Insurer and an Authorised Financial Services Provider (no. 2409). Terms and Conditions apply.

For more details about benefits, definitions, guarantees, fees, tax, limitations, charges, premiums/contributions or other conditions and associated risks, please refer to the technical specifications of the relevant product(s).

Offshore SUPPLEMENT

WHAT’S INSIDE ...

Focus on quality companies that can weather shortterm inflationary pressures

How platforms help to navigate the complex investment landscape

The financial planning advantages of offshore endowments

In the second half of 2021, a range of economic factors are front of mind for investors and asset managers alike

The most effective way to invest offshore is to use the services of a reputable and established offshore investment platform

An endowment ensures the investor’s estate is not subject to foreign inheritance tax

Page 18

Page 20

Page 25

30 September 2021

OFFSHORE SUPPLEMENT

It’s not just about investment returns

BY WAYNE SOROUR Head: Sales and Distribution, Old Mutual International

A

s the world continues to grow into a global network, so do the global tax laws applicable to investors’ worldwide assets. Even though we have universally become much more integrated, failing to carefully consider the tax implications of where one invests could create unnecessary costs and expenses for the investor and their heirs.

The importance of diversification It makes sense for South Africans to invest a portion of their wealth offshore and take advantage of the benefits of diversification. The primary benefit is the diversification associated with investing in global asset classes. The role of an investment portfolio is to reduce risk, which is particularly relevant when the assets outor under-perform at different points in the market cycle.

But more than this, in offshore markets investors have access to markets and sectors that are either simply not available in South Africa, or provide more choice through which South African investors can access a world of growth opportunities.

The purpose of investing offshore is to reduce the concentration risk that comes with exposing all your investments to one market.

Tax considerations High-net-worth individuals (HNWIs) should take their annual allowance of R10m offshore. SARS and SARB clearance is required for this amount, it can be done every year, and there is no lifetime limit. So over ten years, they could invest R110m offshore as an individual or R220m as a couple. Clients can also use their discretionary R1m a year, which requires no clearance, to get that diversification and exposure. Money externalised in this way never has to be repatriated.

It can be invested offshore or kept in a bank account for use when travelling. Also, a lot more South African children are getting educated and living abroad, and many families are establishing an education fund abroad for that purpose.

UHNWIs can apply to take out more than R10m a year if they submit a Special Concession application

16 www.moneymarketing.co.za

to SARS & SARB. A Tax Clearance Certificate, in the prescribed format, must always accompany the application, and they need to ensure that their tax affairs are 100% in order.

Rand hedging is also a factor, as many investors continue to measure their portfolio performance in rand rather than hard currency.

Estate considerations Potential investors should look at the estate planning implications when investing offshore. Many people simply look for the best returns – but tax and inheritance issues are equally important. We have legal mechanisms that make offshore investing easier, with beneficiaries being nominated to inherit the assets abroad.

Jurisdictions such as the US and UK are increasingly eyeing the estates of non-citizens investing in certain assets physically situated within their jurisdiction, called the situs tax.

On death, South African residents are liable for estate duty based on their worldwide assets. Estate duty is currently levied at a rate of 20% in the case of an estate less than R30m, and at a rate of 25% on the value above R30m. However, both the UK and the US also levy an estate duty on certain situs assets. In the UK, this is known as inheritance tax, and in the US it’s called estate tax. Collectively, they are known as situs taxes.

In the UK, 40% inheritance tax will be levied on situs assets over the value of £325 000 (including fixed property). Any amount falling below the £325 000 threshold is known as ‘the nil rate band’ and is free from situs tax. Each individual receives this £325 000 exemption. In the US, the threshold for estate tax is much lower at only US$60 000. The top bracket for estate tax is 40% on US situs assets. In contrast to the UK, the US offers no spousal exemptions or rollovers, unless the spouse is a US citizen.

On death, HNWIs may be liable for 20% South African estate duty, as well as a potential 40% situs tax on their US and UK situs assets. Although there are double taxation agreements in place, this would still result in payment of a net tax of 40%, instead of the 20% estate duty payable in South Africa.

Asset swaps Investors also need to ensure they have access to capital abroad, which is the primary reason for taking funds offshore. If the investor’s sole interest is the offshore return (as in the case of a pension fund), then an asset swap mechanism is the preferred vehicle. The major difference between capital physically taken abroad, and capital using an asset swap mechanism, is that in the case of the latter the money ultimately must be repatriated, having earned offshore returns in the interim.

Asset swaps are more convenient for smaller amounts where there is little point in the effort of going through SARS and being audited.

At Old Mutual International, we focus mainly on the direct route, but can access asset swap capability through relationships we have with several investment houses that do not use their full capability.

“Many people simply look for the best returns – but tax and inheritance issues are equally important” With an asset swap, an investor buys a randdenominated unit trust through a South African financial institution. The unit trust company then uses its asset swap capability to invest the funds offshore. The investment returns are repatriated and paid out in rand.

Asset swaps are ideal for investors who do not need to physically move their funds offshore but would still like to profit from investing in overseas markets.

In conclusion, like every financial decision, investing offshore needs to be tailored to investors’ needs. To find the right fit, an investor must evaluate different scenarios in terms of their investment goals – and this should be done with the assistance of a financial planner to customise a unique plan for an investor’s lifestyle plan.

99.5% OF THE WORLD’S MARKETS ARE WAITING. EXPAND YOUR PORTFOLIO WITH US. There’s never been a better time to consider diversifying your offshore investments into our Investment Portfolio+.

Benefits include: ■

Investing and managing your assets in hard currency.

■

Ease of tax administration.

■

No UK or USA inheritance tax implications (situs).

■

Appointed beneficiaries have immediate access to capital and can take ownership of the policy or surrender it, all while saving on executor fees.

If you’d like to find out more about Investment Portfolio+ and our wide range of offshore solutions, contact your financial adviser, your regional offshore specialist or visit www.omi-int.com

INTERNATIONAL DO GREAT THINGS EVERY DAY Old Mutual Life Assurance Company (SA) Limited is a licensed FSP and life insurer.

30 September 2021

OFFSHORE SUPPLEMENT

Focus on quality companies that can weather shortterm inflationary pressures

Thematic investing can better position portfolios for the future

BY KENNY RABSON CEO, Discovery Invest

I

n this changing world, trends are emerging that are set to transform investment markets globally.

Four ‘megatrends’ are widely recognised as macroeconomic forces that will fundamentally shape the world going forward. In so doing, they are set to have a profound influence on how we address some of society’s biggest challenges and they will create immense opportunity.

The South African equity market, which represents less than 1% of the global equity market, does not offer much exposure to these global megatrends, so the new Discovery Global Megatrends Fund is an option for unlocking these opportunities and for providing diversification in portfolios.

Discovery Invest recently partnered with Goldman Sachs Asset Management to introduce a new investment opportunity, giving access to a range of thematic equity portfolios designed to give exposure to global megatrends.

Goldman Sachs Asset Management is a global leader in the thematic investing space, with over 20 years of experience and a strong management track record.

“Trends are emerging that are set to transform investment markets globally” The Discovery Global Megatrends Fund is available on both Discovery Invest’s local and global platforms. The Fund provides clients with unique exposure to these four global megatrends by allocating investments equally in four Goldman Sachs Asset Management equity portfolios, each aligned to one of these

megatrends. The four megatrends are: • Technological advancement: Increased connectivity and data are enabling machine-driven insights that will transform how we operate. With younger generations’ increasing comfort in using technology, new business models and opportunities will emerge.

The artificial intelligence market will grow to a $190bn industry by 2025, as MarketsandMarkets™ analysis shows.

• Environmental sustainability: The urgent threats of climate change and damage to the environment leave global economies with no choice but to turn to green alternatives for energy, food and transport. There is an urgent need for green alternatives – the United Nations predicts a 40% shortfall of available global water supply by 2030.

• Future of healthcare: Genomics and precision medicine are set to revolutionise healthcare. With continued innovation in gene mapping and sequencing, paired with the decreasing cost of doing so, personalised treatments with improved outcomes are becoming the way forward.

• New-age consumer: Millennials have become the world’s most powerful consumer force. With 2.3 billion people, millennials are the largest consumer cohort. As they enter their prime earning years and increase their spending, they will drive a new age of consumption. Millennials are creating a potential long-term, secular growth opportunity for investors.

18 www.moneymarketing.co.za

I

n the second half of 2021, a range of economic factors are front of mind for investors and asset managers alike. Most important, perhaps, are the shorter-term inflationary pressures we are currently facing, and the longer-term macroeconomic challenges that underpin the search for a global recovery from the pandemic. At Marriott, our key focus is to identify companies that are well suited to the long term, and that can effectively deal with shorter-term inflationary pressures.

It is no surprise that recent inflation numbers, such as the 5.4% headline CPI in the USA, have been elevated. Base effects, global shipping challenges, manufacturing bottlenecks and unprecedented economic stimulus are all contributing towards higher inflationary numbers.

In order to effectively combat input cost inflation, companies must be able to utilise pricing power to maintain their margins.

Although inflation and the reopening of economies have been areas of focus for market commentators, we must still consider the underlying global macroeconomic conditions. In 2020, global debt climbed to an all-time high: approaching $300tn.

Further, it has become evident that the pace of economic recovery is very uneven across the globe. China’s economy managed to surpass pre-pandemic levels during 2020, and the US economy is expected to do so in the near future, if it hasn’t already.

The UK, however, is only due to recover to pre-pandemic levels in the middle of 2022, and many other countries may not recover until 2023 or beyond. The elevated debt levels and uneven global recovery are likely to weigh on global growth.

Should investors be worried? It depends on the type of companies they are invested in. Proctor & Gamble, for example, a company held in our international equity portfolios, has an excellent track record of growing dividends even through market and economic turmoil – as demonstrated in the graph below. They have increased dividends 65 years in a row, including a 10% increase earlier this year (compared to a double-digit decline globally).

BY SCOTT COOPER Investment Professional, Marriott

Aside from an excellent track record, the company boasts a strong balance sheet, is diversified across countries and product lines, and holds market-leading positions resulting in powerful brand loyalty and pricing power. Last year, Proctor & Gamble was able to grow its organic revenue and core earnings per share by 6% and 11% respectively despite the pandemic and, looking forward, has already announced price increases for key product lines later in the 2021 calendar year.

At Marriott, we believe there are a range of companies that are well suited to the long term and which can effectively deal with short-term inflationary pressures. Companies of this nature tend to be less volatile and more resilient, meaning that outcomes for investors are more predictable. Our international equity portfolios contain many such companies.

These portfolios can be accessed via: • Marriott’s offshore share portfolio (International Investment Portfolio) • Marriott’s international unit trusts (using your annual individual offshore allowance of R11m) • Marriott’s local feeder funds, which invest directly into our international unit trust funds (rand-denominated).

International Investment Portfolio Invest offshore in high quality, dividend-paying companies.

More Predictable Investment Outcomes Contact our Client Relationship Team on 0800 336 555 or visit www.marriott.co.za

30 September 2021

OFFSHORE SUPPLEMENT

A well-diversified, all-weather portfolio

2

020 was a powerful year for select consumer discretionary, technology and digital-related companies, where the COVID-19 pandemic provided an acceleration in take-up of their products and services. Against this backdrop, returns from the PPS Global Equity Fund were particularly strong as investments in companies such as Tesla and Amazon generated strong returns over the year.

From early November 2020, following the announcement of several effective vaccines, markets turned their attention to companies that had been previously neglected during the relatively narrow market rally of 2020. As inflation expectations normalise and economic activity is forecast to rebound following the pandemic shock, the economic backdrop is likely to be supportive of a broader range of companies. For portfolio managers in the PPS Global Equity Fund, current investment opportunities are not considered a binary choice; cyclical and secular growth opportunities co-exist in the portfolio, which is underpinned by a broad base of core investments.

The portfolio is built on a companyby-company basis by a team of portfolio managers who are given the freedom to make individual high-conviction, long-

term investment decisions. The portfolio construction has been deliberately designed to achieve cognitive diversity and ensure a well-diversified portfolio.

The result is a portfolio with more than 300 stocks, which remains balanced and diversified across regions, sectors, industries and, very importantly, investment styles.

Against the current market backdrop, companies that the fund invests in can be categorised as follows: economically sensitive companies (e.g. JPMorgan Chase, Airbus and LVMH), companies aligned with long-term secular growth trends (e.g.

Tesla, Amazon, PayPal, TSMC), and broad foundations, a core set of investments that provide a broad and stable foundation to the portfolio (e.g. Nestle, Microsoft).

Long-term resilience Over the longer term, prolonged growth or value-driven market cycles have not mattered for the strategy when it comes to generating positive excess returns.

The strategy employed has outperformed the global equity market during every major growth and valuedriven market cycle over the last 46 years, with the exception of a short period in the mid to late 1980s, which was largely a

“The portfolio construction has been deliberately designed to achieve cognitive diversity and ensure a welldiversified portfolio” consequence of being underexposed to Japanese companies at the height of the Japan equity market bubble.

During its lifetime, the strategy has navigated energy crises, runaway inflation, swings in exchange rates, multiple recessions (and recoveries), financial market bubbles, central bank monetary policy experiments, changing patterns of global trade, and a global health pandemic. Its consistent results have not been achieved by correctly timing inflection points in markets or having a distinct (and in favour) investment style.

Instead, the consistency of the strategy’s excess returns lay in its long-term investment horizon and a well-diversified core portfolio.

The PPS Global Equity Fund is managed

by partnership manager Capital Group. For more information, visit www.pps.co.za Disclaimer: This information is not advice, as defined in the Financial Advisory and Intermediary Services Act. Collective Investment Schemes in Securities (CIS) are generally medium- to long-term investments. The value of participatory interests (units) may go down as well as up, and past performance is not necessarily a guide to future performance. CIS are traded at ruling prices and can engage in borrowing and scrip lending up to 10% of the market value of the portfolio to bridge insufficient liquidity.

The manager does not provide any guarantee either in respect of the capital or the return of a portfolio. Certain funds may be exposed to foreign securities and as such, may be subject to additional risks brought about by this exposure. The PPS Global Equity Fund is registered and approved for marketing in South Africa under section 65 of the CISCA. The PPS Global Equity Fund is a sub-fund of the Prescient Global Funds ICAV. For more information visit www.prescient.ie. PPS Multi Managers has appointed the Capital Group as the Investment Manager of the PPS Global Equity Fund. PPS Investments Group is a division of PPS, a Licensed Insurer and Financial Services Provider.

PPS Investments Group consists of the following authorised Financial Services Providers: PPS Investments (Pty) Ltd(“PPSI”), PPS Multi-Managers (Pty) Ltd(“PPSMM”) and PPS Investment Administrators (Pty) Ltd(“PPSIA”); and includes the following approved Management Company under the Collective Investment Schemes Control Act: PPS Management Company (Pty) Ltd (RF)(“PPS Manco”). This document is for information purposes only and does not constitute or form part of any offer to issue or sell or any solicitation of any offer to subscribe for or purchase any particular investments. Opinions expressed in this document may be changed without notice at any time after publication.

We therefore disclaim any liability for any loss, liability, damage (whether direct or consequential) or expense of any nature whatsoever which may be suffered as a result of or which may be attributable directly or indirectly to the use of or reliance upon the information. There are risks involved in buying or selling any financial product.

How platforms help to navigate the complex investment landscape

BY ROBERT RHODES Managing Director, Momentum Wealth International

I

n a world of ever-increasing investment complexity, platforms are evolving to help advisers and investors make sense of the global investment landscape.

The reasons for investing offshore are well documented and include valuable diversification benefits through exposure to different countries, industries, companies and currencies.

However, the global toolbox for investing is extensive.

Advisers need to make complex decisions apart from the product decision – which mix of countries, asset classes, industries and companies has the highest probability to deliver the required investment outcome for their clients.

It is no wonder that many advisers look to investment professionals to help them with some of these decisions.

But complex choices remain. In South Africa, there are around 1 700 collective investment schemes; globally, there are more than 126 000 regulated funds1. How do you start to construct a portfolio of funds given all this choice?

A key decision is how much control the adviser and client want over currency and asset allocation. You can

20 www.moneymarketing.co.za

retain a high level of control by investing in a mix of funds and exchange traded funds (ETFs) that are asset class, region or sector specific. Or leave some of the decisions to an investment manager by investing in global asset class funds such as global equity or global fixed income. Or you can leave all these decisions to an investment manager and invest in balanced funds.

Whichever route you take, one or more investment managers need to be selected, which is an equally complex decision. Should a local investment manager be selected for the job, or a global investment manager, or a local investment manager who has partnered with a global investment manager? And the complexity doesn’t stop there.

Not all funds are created equal. Funds come in different legal forms such as unit trusts, corporate structures, and partnerships, with each offering different levels of investor protection. Funds also use different administrators, custodians and auditors. As with everything, there are A-league players and B-league players. And the jurisdiction of the fund is also important.

All of these decisions affect the probability of a successful investment outcome for your clients and their personal investment goals.

The most effective way to invest offshore is to use the services of a reputable and established offshore investment platform.

Momentum Wealth International was established in Guernsey in 1999. It offers an efficient regulatory and fiscal framework together with investor protection policies, and provides choice, simplicity, transparency and aggregation benefits. Platforms have continued to develop to stay relevant as technology and the

investment world changed – offering access to a broader range of assets classes and investment options, including ETFs and shares, and sophisticated portfolio management systems to power discretionary fund managers (DFMs) – all in a digitally enabled and ‘always on’ world.

“The most effective way to invest offshore is to use the services of a reputable and established offshore investment platform” However, with the complex choices facing advisers, platforms must play a key role to help advisers and their clients make sense of the complexity of choice. An offshore platform provides up-to-date information and tools to enable advisers not only to construct the most suitable investment solutions for their clients, but also to provide a personalised service as efficiently as possible.

This helps advisers focus on what is important – their relationship with clients and helping them to achieve their personal investment goals.

1

https://www.asisa.org.za/ and https://www.statista.com/ 2 August 2021

Momentum Wealth International Limited (FSP 13495) is an authorised financial services provider in terms of the Financial Advisory and Intermediary Services Act No 37 of 2002 in South Africa. Momentum Investments is part of Momentum Metropolitan Life Limited, an authorised financial services (FSP6406) and registered credit (NCRCP173) provider.

Celebrating 25 years of helping people on their investment journey to success.

At Momentum Wealth, personal relationships and strong partnerships are in our DNA. With us, financial advisers and clients are not just numbers – they are our friends and our family.

Together we help people make their dreams and aspirations come to life with their personal portfolios. When something is personal, it really matters. That is why with us, investing is personal. Here’s to 25 years of continual innovation and investment excellence!

Speak to your Momentum Consultant or visit momentum.co.za Momentum Wealth (Pty) Ltd (FSP 657) is an authorised financial services provider.

Momentum Investments is part of Momentum Metropolitan Life Limited, an authorised financial services and registered credit provider (FSP 6406) (NCRCP173).

Momentum Investments

@MomentumINV_ZA

Momentum Investments

MW-859-AZ-7009-CL

30 September 2021

OFFSHORE SUPPLEMENT

Unpacking the risks from regulatory change in China For Chinese companies, regulatory change is a perennial risk. In July, the government gave investors a stark reminder of that risk when it announced sweeping changes to China’s online tutoring industry. Amid other headlines, this led to a broad sell-off of Chinese technology stocks. Was this panic warranted? Rob Perrone, a member of the team of Investment Counsellors at Allan Gray’s offshore partner, Orbis, discusses.

BY ROB PERRONE Investment Counsellor, Orbis

C

concerns. Gaming remains a great business for NetEase and Tencent.

Looking across recent Chinese regulatory headlines, some common threads emerge: Don’t squeeze families, customers, employees, or small businesses.

Don’t abuse a monopoly position to hurt competition. Don’t raise capital without the local regulator’s blessing. Don’t be greedy or sloppy when collecting personal data. Be responsible corporate citizens.

Many of these actions mirror rules already in place in the US and Europe.

Of course, the rule-making process in China is less transparent, less predictable, and often more sudden. That increases risk, which we manage with one eye on valuation and the other on portfoliolevel exposures. If we could buy these businesses in the US, we would be willing to pay more for them and hold more in

them. But they are in China, and while we continue to find our Chinese holdings very attractive, we have resisted the urge to add materially to the Orbis Global Equity Fund’s already-large overall exposure.

The good news, however, is that we do not believe the Chinese government is out to destroy the tech sector. Here, we have been encouraged by the efforts of China’s state media to calm local investors, and by the securities regulator telling international banks that the country wants to regulate – not ban – foreign listings and so-called variable interest entities (VIEs).

If anything, the experience of NetEase, Tencent and Alibaba over the years suggests that innovative companies can do well even under tighter rules. China’s technology leaders have proven themselves to be highly adaptable, and those that continue to adapt should continue to thrive.

4366

hina’s top government bodies recently issued new guidance overhauling parts of the tutoring industry. The changes were announced in an unusually abrupt way, so uncertainty is unusually high. The news naturally hit shares of online tutoring services, but the pessimism extended to far larger companies as well.

For Chinese technology company NetEase, along with larger peers like Tencent and Alibaba, the regulatory fear is not about what has happened, but what could happen next. (Tencent is the key underlying holding of Naspers, a large position in several Orbis and Allan Gray funds, and Alibaba is a significant holding in some funds.)

The rapid pace of regulatory scrutiny is unusual, but the broader regulatory push is not new. Alibaba has been under intense scrutiny since last November, when the government abruptly scrapped the IPO of its affiliate Ant Financial.

Alibaba has met with regulators, paid fines, and ceased practices like forcing merchants to ‘choose one of two’ e-commerce platforms. E-commerce remains a great business for Alibaba.

Tencent has also weathered scrutiny, and has likewise met with regulators, paid fines, and changed some of its advertising practices. Advertising remains a great business for Tencent. And a few years back, both NetEase and Tencent faced a suspension in video game approvals.

They worked through it, adding new player verification and child protection measures to address government

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) (Pty) Ltd (the “Management Company”) is registered as a management company under the Collective Investment Schemes Control Act 45 of 2002. Allan Gray (Pty) Ltd (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. The value of participatory interests or the investment may go down as well as up and 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 fund. 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 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.

4366_ORBIS 1%_2021_Chapel_155x220.indd 1 22 www.moneymarketing.co.za

2021/08/06 08:32

30 September 2021

OFFSHORE SUPPLEMENT

Passing the point of maximum liquidity should concern investors

BY PHILIP SAUNDERS Co-Head: Multi-Asset Growth, Ninety One

M

arket participants have been fretting about inflation risks since the global economic recovery gained real momentum. The prevailing narrative is that the Federal Reserve has lost its inflation discipline and is determined to ‘run the economy hot’. Headline inflation prints seemed to have fuelled this anxiety, but they mainly reflect low base effects, caused by the COVID-19 plunge in prices.

Supply chain disruptions have also pushed up inflation.

Central banks have generally viewed higher inflation as transitory, and their focus has been on offsetting the potentially depressionary plunge in demand. They argue that supply constraints, caused by the COVID-19 shocks and the strength of the recovery, have given rise to short-run inflation pressures, which will dissipate. However, this has evidently not allayed the concerns of market participants that we may be witnessing a structural shift in inflation, which is being entrenched by ultra-loose monetary policies.

While global headline inflation rates have increased sharply, shortterm concerns around inflation seem overdone. US breakeven inflation rates

have already risen substantially to reflect a higher long-term inflation outcome than the Fed’s target rate. As is often the case, the consensus is arguably conflating short- and longerterm inflation risks. We believe the headline inflation numbers will now flip to surprise positively over the balance of the year as base effects fall away. But the debate will continue to rage. The idea that the Fed has given up on its target of anchoring inflation expectations on average around 2%, and that as a consequence we have entered a world of perpetual dollar debasement, is questionable. While we expect inflation to move higher than it was in the post-Global Financial Crisis period, we do not believe that we are going back to the high-inflation world of the 1970s. We believe inflation risks are fully priced into markets, at least on a medium-term basis.

The post-COVID-19 economic recovery has been more dramatic than most market participants expected. The recovery is set to continue over the next 12 months. Vaccine rollouts are well underway, which should allow a return to normal social conventions across major developed market nations in the second half of the year. The rosy growth outlook and higher inflation projections have recently sparked a more hawkish tone from the Fed, bringing the prospect of tapering closer. The market had previously

Find opportunity in change Partner with an investment manager who understands change, knows how to respond to it and even get ahead of it. That’s when change changes… to opportunity.

anticipated news on tapering only in December, but the Fed is likely to get on with it and release details on how it intends to curb its bond purchases as early as September. US real yields are likely to rise from here as the Fed moves towards tapering, with implications for asset markets.

What’s more, the Fed has signalled that there may be at least two interest rate hikes in 2023, again much sooner than previously expected. The Fed’s more hawkish tone has come as a wake-up call to investors who are in danger of becoming addicted to liquidity.

Investors need to pay close attention to policy and policy shifts. The Fed is telling the market that it will not be replenishing the liquidity ‘punch bowl’ ad infinitum; it will be progressively reducing the level of quantitative easing support over time. We still have very loose monetary conditions. Growth is very buoyant but given the ‘primacy of liquidity’, inflections in liquidity conditions at the margin often have a disproportionate impact. This policy change should give investors who remain very long risk assets, pause for thought – especially given current valuations. Credit spreads are again at historically low levels and equity market valuations are elevated, leaving markets potentially more vulnerable to bad news.

In conclusion, the size of fiscal and monetary policy responses remains significant, but it appears that we have passed the point of maximum liquidity. Policy shifts in the US – and elsewhere – will impact liquidity, which in turn is likely to create headwinds for growth rates and risk assets.

Investing for a world of change

Start your investment journey ninetyone.com/change-changes Ninety One SA (Pty) Ltd is an authorised financial services provider.

www.moneymarketing.co.za 23

30 September 2021

OFFSHORE SUPPLEMENT

Why global multi-asset class funds are a must-have moving into a post-COVID world

SOPHISTICATED THINKING GOING INTO HOW WE INVEST BEYOND EQUITIES

BY CHRISTO LINEVELDT Investment Specialist, Coronation

I

nvestors seeking offshore exposure may be wondering how best to go about it when traditional global asset classes look fully priced and many risks dominate the news flow. We believe that maintaining a well-diversified portfolio that comprises more than just one asset class remains the most appropriate way to navigate a challenging investment environment.

Here’s what investors need to consider: Pressures are building Most developed market economies are in the midst of a robust economic recovery that has provided tailwinds for equity markets and raised the prospect of higher global inflation.

The two factors driving these recoveries are the amount of stimulus injected into these economies and the

progress these countries have made in vaccinating their populations.

Savings rates are up, balance sheets are in good shape, interest rates remain low and economic lockdowns over the past year have meant significant pent-up demand is waiting to be fulfilled as conditions improve.

Against this backdrop, it’s not surprising that inflationary pressures are building up.

Diversification and active management as a better forward-looking strategy With inflation among many risks facing global investors, we believe alphageneration through selectively identifying attractively priced shares, in addition to diversification into other asset classes, will be a better forward-looking strategy than just owning the index. Our multi-asset class portfolios typically have exposure to 40 - 60 shares, carefully selected out of a universe of 2 500 - 3 500, which means they don’t look anything like the index or our peers. This level of diversification is hard to replicate on an individual basis.

Our multi-asset class funds are further differentiated in that we hold many investment opportunities outside the traditional 60% equity/40% bonds multiasset portfolio in order to sweat every basis point of potential returns. Thus, while we continue to believe that it’s essential to have exposure to equities, we believe it is also important to include other assets – such as infrastructure, high yield income, global property and absolute return investments – in our multi-asset class

SOPHISTICATED THINKING GOING INTO HOW WE INVEST BEYOND EQUITIES Investment-grade fixed income Absolute returns

EQUITIES REMAIN THE FOUNDATION WITH WHICH TO ACHIEVE EQUITIES REAL RETURNS REMAIN THE FOUNDATION WITH WHICH TO ACHIEVE REAL RETURNS

Investment-grade fixed income Inflation protection Absolute returns Equity High-yield fixed income Inflation protection

Equity

R

24 www.moneymarketing.co.za

NON-EQUITY EXPOSURE

High-yield fixed income Real assets

Source: Coronation

Source: Coronation

funds. This is especially important in an environment where, in our view, the global bond index as a whole offers a negative real return over the next several years.

Each of our global multi-asset class funds benefits from exposure to these non-traditional assets, with the extent of their exposure in the portfolios dependent on the risk budget of the fund. This ranges from around 30% in the Global Capital Plus Fund, with a cautious risk profile, to 25% in the Coronation Global Managed Fund, a moderate risk balanced fund, and around 15% in the more aggressive Global Optimum Growth. The same funds have effective equity exposure of 28%, 59% and 80% respectively, with the balance held in cash and selected fixed income instruments.

Montenegro Citizenship-by-Investment programme to close at end of year esidence and citizenship planning firm Henley & Partners has announced its milestone submission of 100 applications for the Montenegro Citizenshipby-Investment Programme. Of these, 33 international investors and their families have already received both their citizenship and their passports, despite the ongoing disruptions caused by the coronavirus pandemic. This highly sought-after citizenship-by-investment programme is due to close at the end of this year.

Rade Ljumović, Director at Henley & Partners in Montenegro, says the programme offers high-networth investors a significant opportunity in a dynamic regional market but there are only a few months left to apply. “One reason for Montenegro’s success is that it caters for investors with a diverse range of interests and requirements. Investors can choose between glamorous seaside resorts where they can invest in new hotels that are being established by reputable developers, including cutting-edge options such as the SIRO brand by Kerzner International and InterContinental. Alternatively, they can opt for the northern parts of the country, where there are exclusive ski and mountain resorts in advanced stages of construction, such as Swissôtel.”

Montenegro is currently on the EU’s ‘safe list’ of

Real assets

NON-EQUITY EXPOSURE

countries with relatively low rates of COVID-19 infection, and its passport ranks 45th on the Henley Passport Index, providing its holders with visa-free or visa-onarrival access to 124 destinations worldwide, including Hong Kong, Russia, Singapore, Turkey, the UAE, and the countries in Europe’s Schengen Area. As well as being a NATO member, Montenegro is a recognised candidate for future membership of the EU, with the government’s chief negotiator, Zorka Kordic, recently giving 2024 as the target timeline for Montenegrin accession. Last month, the EU Information Centre in Montenegro published research findings showing that 73.8% of the population supported EU accession, and 86.9% would vote in favour of joining the EU should there be a referendum on the question. The EU ambassador to Montenegro, Oana Cristina Popa, recently noted that the trust of Montenegrin citizens is motivating to the EU and encouraging for Montenegro’s accession.

Applicants to the Montenegro Citizenship-by-Investment Programme are required to make a defined economic contribution to the country. In exchange, and subject to a stringent vetting and due diligence process, including thorough background checks by specialised firms, applicants and their families are granted Montenegrin citizenship. The main applicant must be over 18 years of

Building well-diversified portfolios Building portfolios that span six asset classes and look nothing like the index takes extensive research and a significant amount of investment experience and expertise.

It is the combination of this expertise and our robust and tried-and-tested investment approach that enables our multi-asset class funds to provide investors with exposure to a wealth of opportunities in traditional and non-traditional asset classes, actively balancing risk and returns to deliver on our investors’ various objectives across the fund range.

Coronation is an authorised financial services provider.

age, meet the application requirements, and contribute EUR100 000 to the Government of Montenegro, designated for the advancement of local under-developed, selfgovernment units. In addition, applicants can invest at least EUR450 000 in an approved development project in the capital Podgorica, or in the popular coastal region of Montenegro. Alternatively, they can invest a minimum of EUR250 000 in an approved development project in the northern or central regions of Montenegro (excluding Podgorica). Additional government processing fees and other application fees apply.

CEO of Henley & Partners, Dr Juerg Steffen, says the resulting increase in business activity and new employment opportunities created by the programme will benefit all Montenegrins. “Investment migration enables sovereign states such as Montenegro to tap into a new source of sustainable revenue without becoming overleveraged. In the current pandemic environment, as in the wake of previous disruptions such as the 2008 financial crisis, residence and citizenship programmes create significant value both for investors and for sovereign states in need of alternative revenue streams.”

Rade Ljumović, Director: Henley & Partners, Montenegro

30 September 2021

OFFSHORE SUPPLEMENT

The financial planning advantages of offshore endowments

S

outh Africans continue to look for investment opportunities outside of their local market, says Andrew Brotchie, MD of Glacier International.

“The local market is tiny, making up less than 1% of the global market. It’s natural that local investors want to diversify – and that’s what we at Glacier International are offering, in the most efficient and effective way that we can.”

Offshore wrappers, like Glacier International’s flagship offshore endowment policy, the Global Life Plan, hold assets on the investor’s behalf, providing very good financial planning benefits. “Obviously investors’ access to international investment opportunities is relatively unfettered, but it’s really around things like foreign inheritance tax that there are benefits, making it easier to pass on wealth to future generations,” he adds.

By investing in the Global Life Plan, investors are structuring their international investments in a manner that means they don’t need an offshore will. An endowment also ensures that the investor’s estate is not subject to foreign inheritance tax, such as the situs tax that is levied on deceased estates in the US and the UK. “If you’re invested in an asset in either of those countries, they have the right to impose a tax on you upon death, with tax rates of up to 40%, but by using a wrapper like the Global Life Plan, you can mitigate against this,” Brotchie says. “It doesn’t remove the requirement to pay inheritance tax, but it brings the investor back into the local space where tax of 20%, rather than tax of up to 40%, is payable.” Investors can also appoint a nominee for ownership or nominate a beneficiary for proceeds, he adds.

Another benefit of investing in an offshore wrapper is that the life company, rather than the investor, is responsible for any tax due, so the investor has no personal tax to administer.

In addition, after a period of three years from inception date, the endowment will not form part of an investor’s insolvent estate and cannot be attached by a creditor.

Research shows that around 20% of financial advisers who are advising their clients to invest internationally make use of offshore endowment wrappers for their clients, while 80% use a more simplified approach to international investing, says Brotchie. “This talks to the numbers, but I don’t think it necessarily talks to the size of the use of the different products. I say that because you’ll find that the Global Life Plan is more relevant to clients who have larger offshore portfolios, because of the issues they have when it comes to situs tax and probate.”

Brotchie says endowment wrappers are actually priced very competitively when compared with other investment options clients may have. “While fees were something that you wouldn’t want to talk about a decade ago, clients today are more likely to want to engage further on the topic. Now there’s transparency that enables clients to understand exactly what they are paying for. You’ve got the product administration fees, you’ve got the asset management fees, and you’ve got the adviser fees.”

While clients have always had access to exchange traded funds (ETFs) through share portfolios, those without share portfolios can now also invest in a select range of ETFs directly on the Glacier International platform. “We’ve

made sure that we can offer a full range of investment options, while also addressing the cost issue,” Brotchie explains. “This eliminates some of the complexity and costs of being able to get access to ETFs, something that has been growing in popularity among our clients and advisers for a number of years now. Costs are becoming more important and if you can give investors alternatives that reduce costs, it’s something you should be doing.”

Glacier International’s offering is made up of core ETFs that cover the main markets in the world, including the MSCI World, MSCI Emerging Markets, S&P 500, Euro Stoxx 50, FTSE 100, Japan, and Developed Markets Property Yield.

“We also have China and tech ETFs, because investors may want to take exposure to something that interests them, but they don’t necessarily want to go to an active manager.

They just want exposure, and an ETF is an easy way to achieve that. Our research team selects the ETFs, while we also work with reputable providers. For example, we offer iShares from BlackRock.”

Andrew Brotchie, MD, Glacier International

Gain convenient and efficient access to world markets Glacier International now offers direct access to Exchange Traded Funds.

Diversify your portfolio across different sectors and geographies, through direct and cost-effective access to a selection of core Exchange Traded Funds, or ETFs, including the MSCI World, MSCI Emerging Markets, S&P 500, Euro Stoxx 50, FTSE 100, Japan, and Developed Markets Property Yield.

Visit www.glacierinsights.co.za for more information.

Glacier Financial Solutions (Pty) Ltd and Sanlam Life Insurance Ltd are licensed financial services providers.

Glacier International is a division of Sanlam Life Insurance Ltd, a licensed financial services provider.

GLC2

www.moneymarketing.co.za 25

30 September 2021

INVESTING

The most exclusive club is open, but where is the door?

BY MICHAEL TITLEY Business Development, Laurium Capital

F

or many years, hedge funds in South Africa were unregulated and available to only the wealthiest via complicated structures.

This changed with the introduction of the Hedge Fund regulation under CISCA in 2015, essentially opening the door to retail investors. With South African hedge funds being some of the most regulated and transparent in the world, the black box risky label that has been internationally attached to the asset class is unwarranted. Fortunately, hedge fund managers in South Africa have proven themselves to be more conservative than their international counterparts – there are several experienced SA hedge managers in the country, including Laurium Capital, that have 10- to 20-year consistent track records to prove it.

Hedge funds are obviously not without risk and it is very important how this risk is managed. Risks like liquidity, leverage limitations and net positioning, are all regulated

and integrated into the portfolio risk management on a daily basis. The relatively small size of the hedge fund industry (R73bn according to the 2020 HedgeNewsAfrica report) versus the long-only R3tn, makes it highly flexible when taking positions. As hedge funds carry a sizeable cash position at all times, the fund does not need to sell a position in order to take advantage of a new opportunity.

This magnifies the nimbleness to exploit the full breadth of the liquid market and its broad investable mandate.

Reporting has significantly improved with the regulation of hedge funds. Governed by CISCA, hedge funds are required to report fact sheets, total expense ratios and positioning. A concerted shift has been made by the SA hedge fund industry to meet investors’ requests for more information.

The combination of the improved regulation, successful performance and improved understanding of hedge funds is driving increased demand in South Africa currently. In our recent webinar poll on hedge funds, 78% of the audience voted that hedge funds should receive a weighting of between 5% and 20%. The question asked by these interested parties now is: how does one access hedge funds; where is the door?

Given the current wording of Board Notice 90, unit trusts cannot make an investment into a hedge fund. The industry remains hopeful that this will be amended in the much-

anticipated revamp of Board Notice 90. In the interim, the inclusion of hedge funds for financial advisers can either be done directly into the fund or via a model or wrap fund.

Going direct can be quite onerous for retail investors, given the minimum investment requirements and the choice of funds. A better solution would be gaining access to a pre-approved select list of funds via the LISP platforms.

This would provide comfort to allocators that the hedge funds have passed due diligence processes and carry the LISPs’ approval. They can then make a choice of the hedge fund strategy they require, and split their allocation across a few funds. Although unlimited for discretionary investors, Regulation 28 limits single manager hedge funds allocations to 2.5% and fund of funds to 5%. With the overall hedge limit being capped at 10%, an allocator could split fund their allocation to hedge across four different funds equally.

This has not been possible up until now as no one could find the door to a LISP with a selection of approved hedge funds available. This is changing as several LISPs are seeing the demand for hedge funds, allocating the research time, and adding their preferred funds to their platforms. If you are interested in adding a great diversifier to your portfolios, offering equity-like net returns at lower volatility or elevated returns at market-like volatility, please contact your preferred LISP consultants to motivate for hedge funds to be added to their platforms.

“Unit trusts cannot make an investment into a hedge fund”

Where next for credit markets?

BY MATTHEW DUGGAN Head: Syndicate, Absa Corporate and Investment Banking

T

he year 2020 was a historically challenging one for all market participants. Investors and bond issuers alike watched as charts spiked, graphs dipped, and markets reacted to the unfolding economic crisis. “In the markets, we saw unprecedented volatility across every asset class,” says Matthew Duggan, Head of Syndicate at Absa CIB. “This was greatly exacerbated by challenging liquidity, which ultimately resulted in the central bank taking action in the government bond market.”

That illiquidity was most apparent in the corporate credit market. “Now, six to twelve months later, there are still elements of that ‘muscle memory’ from an investor perspective,” Duggan says,

JONATHAN BURNETT Head: Structured Trading, Absa Corporate and Investment Banking

adding that investors have responded to the crisis environment by requesting longer lead times into primary issuance.

“They are no longer willing to participate in what could be deemed to be ‘stale’ financials. Understandably, enhanced credit work is required to participate in this market environment.”

Primary market recovery Primary markets, which enable issuers to raise new debt, have started to recover in 2021 after a significant drop-off in activity during the height of 2020’s crisis period.

But in the face of a wider issuance spread environment, many corporate issuers were initially reluctant to come to public markets for fear of resetting their credit

26 www.moneymarketing.co.za

curves. “In the current uncertain economic environment, we are also seeing much greater differentiation from a credit pricing perspective,” Duggan adds. “We expect this trend to continue in the near term.”

One bright spot in all of this is that issuance by banks has been particularly strong and well supported. “As concerns around bank credit quality have alleviated, there has been strong demand and spread tightening for the instruments that reference a lower part of the capital structure,” Duggan says, pointing to the Additional Tier 1 and Tier 2 instruments that ensure a bank’s capital adequacy.

Secondary market snapshot Meanwhile, Jonathan Burnett, Head of Structured Trading at Absa CIB, says that while secondary market volumes on the JSE were “decent” in 2020, 2021 has seen a slight drop-off. He believes that volatility in the yield curve and a “wait-and-see” approach from investors are contributing factors.

“Bank and high-quality corporate spreads have somewhat retraced the drastic flight to quality tightening that we saw post-COVID,” he says. “Corporate spreads for good names have been tightening, but – speaking in mid2021 – the jury is still out as to whether this is a sustainable trend for the rest of the year.”

Creating a virtuous circle Absa sees an opportunity to provide increased secondary liquidity in this space, which would help both issuers and

investors. “As a bank, we have dedicated more resourcing and balance sheet to the activity of market-making South African corporate credit,” says Burnett. “We hope this will better price discovery, liquidity and confidence in what we know is a key part of our economy’s capital market.”

Burnett says that a more liquid and efficient secondary market will help arrangers to demonstrate best execution for primary issuance, and provide a compelling alternative to the loan market.

“Historically, primary auctions and private placements have provided price leadership compensating for stale mark-to-market levels,” he says. “But we are starting to see a more balanced market emerge as banks and brokers look to generate more trading activity. For example, the recent spread compression for bank capital instruments has largely been a function of exceptionally strong secondary market appetite.”

“Ordinarily, one would naturally use the secondary market as the pricing reference point for any primary activity, but this is impeded by stale pricing and a buy-to-hold mentality on the investor side,” adds Duggan. “We have spent a lot of time improving liquidity from a secondary market perspective, which will help in terms of price discovery. It then becomes a virtuous circle, where investors feel confident around the functioning secondary market, which is a massive benefit in terms of our ability to encourage issuers to come to the primary market.”

Credit Trading Access higher yields by investing in Credit We aim to provide liquidity to allow investors to buy and sell Corporate Bonds - helping them realise their investment objectives in the Credit asset class. Complementing this, our team provides Structured Credit solutions to provide tailored investment and hedging opportunities that are not available in the Corporate Bond market.

The bravery to imagine. That’s Africanacity.

30 September 2021

ESG FEATURE

ESG – merely measuring or driving real change?

BY MOHAMED MAYET CEO and Portfolio Manager, Sentio

E

SG has possibly become the most oversold and misunderstood concept in the investment world.

The reasons seem simple: demand from institutional clients who are under pressure from asset owners to show they are doing ‘something’ to be good stewards of capital; and pressure from younger retail audiences (Gen Z and millennials) who genuinely want to be better humans. But this often leads to inauthentic practices by fund managers to ‘do the right thing’. The result: we think we are doing good when in fact we’re not doing much!

Our mantra at Sentio is ‘invest for good’ – not only because we think investing can be a positive change driver in society (the greater good) but also because our industry can influence longer-term prosperity. Our approach to driving real societal change and positive alpha for investors is very practical and authentic.

What do we mean by practical and authentic?

Much of the ESG efforts currently being driven by gatekeepers seem to be well intentioned but obsessed with measuring. Measuring everything from Board

Sentio_MM_ESG_Sep 2021.pdf

7

2021/08/10

C

M

Y

CM

MY

CY

CMY

K

28 www.moneymarketing.co.za

attendance and carbon footprints to registers for ESG interaction. Institutions have set up entire departments to deal with the ‘ESG’ function. There is nothing inherently wrong with this, except we would simply ask: what are we doing with this data and information? We suspect the logic is ‘if you can measure it, you can manage it’. The problem is that, particularly in SA, the strategic framework behind this seems too biased towards the ‘feel-good factor’ and often lacks the financial return imperative.

Requests for reems of data on ESG metrics alone, without any link to specific outcomes, in our view, will not achieve the desired outcome. Specifically, we would argue that the current approach of ‘measure everything’ misses the point of ‘what are we trying to achieve?’

So, what is ESG trying to achieve?

Our view on what we should be trying to achieve is the following: measure corporate behaviours and industry dynamics that result in adverse risks on all ESG factors, and link these to outcomes and their impact on investment risks. What we are looking for is a change in negative risks to society and ultimately to shareholders, and for these to constantly improve over time. You want polluters to find clean and efficient ways of doing business, you want businesses like mines to be invested in the communities in which they operate, and you want corporate cultures that reject bribery and poor governance. Why? Not because you want 15:39

“We see ESG as an investment outcome and managing it leads to better alpha and better societal outcomes” to show you measured it, but because it is a business and societal risk that results in poor performance and ultimately negative alpha and investment returns for all stakeholders. This is about practical change in risks, not the mere measurement of ESG data. In our view, ESG risks are becoming (and potentially already are) a compliance function relegated to a corner in the building.

At Sentio, we have fully integrated our proprietary ESG processes into our investment philosophy since inception.

We see ESG as an investment outcome and managing it leads to better alpha and better societal outcomes. We managed to avoid the ESG ‘stock bombs’ of Steinhoff, Lonmin, EOH, Resilient and ABIL due to this framework and approach. Good ESG processes add alpha in the medium to long term (we have seen tangible results of this) and symbiotically also lead to a better society, but this requires an authentic approach that goes beyond a mere data collection and tick-box exercise.

RESPONSIBILITY BEGINS IN THE BOARDROOM.

With so many companies severely affected by Covid-19, we’ve all seen the importance of good governance. That’s why Old Mutual Investment Group is always clear about what we expect from the companies we invest in. It’s how we encourage greater industry collaboration around key ESG factors like transformation, ethical leadership and Green Growth. And it’s an approach that helps us lead the way in responsible investing, delivering sustainable, long-term returns to our clients and making a positive impact along the way.

Invest for a future that matters.

Visit oldmutualinvest.com to find out more.

INVESTMENT GROUP DO GREAT THINGS EVERY DAY Old Mutual Investment Group (Pty) Ltd (Reg No 1993/003023/07) is a licensed financial services provider, FSP 604, approved by the Financial Sector Conduct Authority (www.fsca.co.za) to provide intermediary services and advice in terms of the Financial Advisory and Intermediary Services Act 37 of 2002. Old Mutual Investment Group (Pty) Ltd is wholly owned by the Old Mutual Investment Group Holdings (Pty) Ltd

30 September 2021

ESG FEATURE

The opportunity to drive impact in listed markets

BY TEBOGO NALEDI MD, Old Mutual Investment Group

O

ver the past decade, the global appetite for sustainable investing has steadily gathered momentum.

Most recently, the impact of the coronavirus pandemic has laid bare the vulnerability of societies when there are elevated levels of unemployment and poverty – and, this, as we have experienced first-hand, can rapidly lead to social unrest.

Impact investing is largely associated with private or unlisted investments into the likes of renewable energy, education, healthcare or affordable housing projects.

These projects have immediate and direct

environmental and social impacts. Within listed markets, investors have readily influenced governance practices, but environmental and social impacts have been more difficult to effect and quantify.

Around 98% of all South African retirement assets are invested in the listed markets (predominantly in listed equity). Investment of these savings drives future economic growth and, as such, asset managers need to integrate more environmental, social and governance (ESG) considerations into their investment decisions. This points to the need to have universally accepted frameworks for defining impact, such as the UN Sustainable Development Goals (UN SDGs), which speak to the economic system that we are trying to shape, and provide a strong framework in which we can operate and measure impact.

The key is effective measurement For listed asset managers, integrating impact thinking into equity portfolios is broadly carried out in two ways. Firstly, we can invest in companies that make a direct positive contribution, such as renewable energy related businesses, providers of

quality education or large employers.

Secondly, we can favour listed companies seeking to reduce harmful practices, such as combatting water or air pollution.

However, we need to be sure that impact investing is both real and measurable and is not compromising financial returns. Using cutting-edge research, we have developed an in-house proprietary ESG signal that provides a measure of the ESG risk profile of a listed company, as well as a sustainability lens through which to identify ESG performance leaders and laggards. This signal is continually reviewed to ensure it is consistently relevant and adds value over time.

Our proprietary ESG Profile Score is used in varying ways across our investment processes, such as identifying

“The ability to track and measure a range of ESG factors allows us to actively respond to issues”

portfolios with bespoke, mandated ESG tilts, relative to a benchmark, and carbonrelated outcomes, as well as tracking across a range of climate risk metrics and companies’ B-BBEE progress relative to both their sector peers and the benchmark.

This ESG data capability positions us to expand our client reporting beyond the risk and return attributes and to include aspects of the portfolio’s ESG impact.

Active ownership enhances long-term value The ability to track and measure a range of ESG factors allows us to actively respond to issues by engaging companies to effect change through a stewardship approach.

Broadly, we look at how we can influence policy or the direction of capital within those companies. As significant investors in the SA listed markets, we have an equally important role to play as unlisted investors in shaping and driving the impact agenda for the benefit of our economy and to enhance future returns within our portfolios.

This thinking shapes how we manage our clients’ assets, execute our stewardship functions, and ultimately influences the products we develop.

Exposure to impact themes needs to be quantified to progress

BY ADAM BENNOT Head: Responsible Investment, RisCura

O

ften the best place to start with a new initiative is to first determine where you are.

With the need for impact investing becoming increasingly critical in South Africa, more and more investors want to make a positive impact with their

portfolios. But before they do, it makes sense to assess any existing impact theme exposure. That way they’ll not only know how much exposure they have, but also what development areas they’re addressing.

They can then pursue new impact investments strategically and with intent.

To assist retirement funds in South Africa, RisCura has developed an impact theme exposure reporting tool for its institutional clients that considers the objectives of both the South African National Development Plan (NDP) and the UN’s Sustainable Development Goals (SDGs). The objectives and goals were mapped and weighted according to South Africa’s critical developmental needs. Out of this process, 10 key impact themes have emerged: • Affordable housing • Inclusive finance • Clean energy • Natural resources and conservation • Health and wellness • Infrastructure development • Quality education • Sustainable agriculture • Water and sanitation • Environmental preservation.

We calculated impact points for each theme above, based on the action points in both the NDP and the SDGs. From there, a portfolio’s overall score can be calculated. There are further steps in the process, but

30 www.moneymarketing.co.za

for the sake of simplicity, the methodology enables us to calculate an overall impact score that reflects the percentage of the total portfolio allocated to impact themes.

This score is then calibrated to understand what a good score is versus a poor score, based on a representative universe of pension funds.

While the report doesn’t yet go into finer details, such as how many schools or learners may have benefitted from the current investment programme, the overall impact theme exposure within a portfolio does become clearer, shedding light on which areas need more consideration.

RisCura is a purpose-driven company, and the core of what we stand and work for can be summed up in the phrase ‘invest with care’. As such, impact investing is a critical focus for us, and we are engaging with it on many levels. It’s vital to futureproof the world we will live in, and making impactful investments is therefore no longer a nice-to-have. Imagine if the environment pension fund members retire into is unliveable? The investment decisions taken today will influence what tomorrow will look like, and all investors have a role to play in the success of the outcome.

“More and more investors want to make a positive impact with their portfolios”

30 September 2021

ESG FEATURE

Guernsey – leader in green finance and jurisdiction of choice for sustainable investing Guernsey is a leading specialist financial services jurisdiction with close ties to SA. The sector specialises in funds, private wealth and is also a leader in ESG/ green and sustainable finance as a member of the UN Financial Centres for Sustainability, the Network for Greening the Financial System, and home of the Guernsey Green Fund, the world’s first regulated green fund regime.

BY STEPHANIE GLOVER Green Finance Manager, WE ARE GUERNSEY

G

uernsey has for many years enjoyed synergies with SA, with around 28 registered SA-based companies operating on the island and a community of ex-pats who have chosen to put down roots there.

Guernsey has long been regarded as a leading financial services market in investment funds and private wealth for SA. At the start of 2021, those ties became even closer with WE ARE GUERNSEY, the promotional agency for Guernsey’s specialist financial services industry, appointing Grant McLeod its first dedicated business development representative in the country. He has spent more than 20 years in financial services in SA, and since joining in March, has built on significant developments made by Guernsey in SA over the past few years in areas including investment funds and private wealth, through open-ended fund

structures, trusts, pensions and other vehicles. For anyone who is unfamiliar with Guernsey, it’s a self-governing island of just 25 square miles, with a close working relationship with the UK but remaining outside the UK and EU. It has built an excellent reputation as a jurisdiction of stability and substance, with financial services expertise dating back five decades, and most recently emerging as a leader in green and sustainable finance.

Guernsey is not just a facilitator of global investment, but also an efficient investor into causes that generate a genuine and tangible social return, with much philanthropic and charitable activity, as well as impact and ESG funds, benefiting from this economic efficiency. There has been a significant growth in interest in responsible investment in SA, and practitioners in Guernsey have seen this interest focused in particular on the social aspect of ESG and the rise of impact investing.

In 2018, Guernsey launched the world’s first regulated green fund regime – the Guernsey Green Fund – which is regulated by the Guernsey Financial Services Commission.

As ‘green-washing’ comes further to the fore, the Guernsey Green Fund is a robust and clear reminder that Guernsey is serious about mitigating climate change.

2021 has been a very busy year for Guernsey in the green and sustainable finance space, with the launch of the world’s first ESG insurance framework for on-island member firms of the Guernsey International Insurance Association.

It also saw Sanne, a local leading fund administration business, launch Sanne Rio – a next-generation ESG reporting platform. Graeme Rate, Head of Sanne South Africa and Malta, explains, “Being at the forefront of providing seamless technology solutions to ESG funds is also something Guernsey is leading in. Guernsey partners with a wide variety of professional services businesses that deal with cross-jurisdiction ESG and alternative asset fund structuring. Sanne proudly launched its ESG reporting platform, Sanne Rio, to the market in January 2021, putting Guernsey further on the map as a leading financial jurisdiction of choice for fund managers in SA.” WE ARE GUERNSEY recently produced a series of educational materials for practitioners, including Impact Investing and Sustainability: A Practitioner’s Guide to Engaging Families on Impact Investing and Sustainability, and Sustainable Investing for Private Wealth and Family Offices, Guidance for Developing Sustainable Trust Deeds, further supporting Guernsey’s position as a leader in green and sustainable finance, and aiming to help family offices and private wealth practitioners develop sustainable finance practices and knowledge.

The island’s reputation and expertise in this field is increasingly becoming a key reason as to why business activities are either being launched from, or moving to, Guernsey.

Energy keeps us motivated, to find you new solutions.

As a PRI signatory, Sanne is a leading fund administrator offering ESG advisory and reporting services through its Sanne Rio platform.

We stand for professionalism, innovation and quality, and work in partnership with our clients to make every day count.

Let’s talk...

Information on Sanne and details of its regulators can be accessed via sannegroup.com

sannegroup.com

www.moneymarketing.co.za 31

Putting our promises to the test Jenny Ingram, Head of Product Development for Momentum Retail Life Insurance states that, “We exist to pay claims and our enduring track record supports our approach of always looking for reasons to pay valid claims.”

Although the COVID-19 virus has caused devastation for many people, the risk of dying, becoming critically ill or disabled can have an equally negative impact on peoples’ lives. Therefore, having the support of a sound risk partner, that provides claim certainty for clients, has arguably never been more important than now.

She elaborates by saying that “This is why treating clients fairly will always remain a priority for us and we make every effort to ensure that our internal claim processes, including that of our independent claims committee, complies with rigorous industry and regulatory standards to safeguard a fair claim assessment process. This will continue, even though our claim experiences indicate that the COVID-19 pandemic has drastically altered claim trends during the past 17 months.”

The impact of COVID-19 on future claims “As we battle the impact of the third wave of the COVID-19 pandemic, statistics clearly indicate that the fear of contracting the virus prevents many people, from consulting with their doctors or specialists regarding treatment for chronic diseases; especially for the four most common types of chronic diseases including cardiovascular disease, cancers, diabetes and chronic respiratory disease,” according to Jenny.

She adds that, “This trend was also highlighted by The Hospital Association of South Africa, which mostly represents private hospitals. On a global scale, the number of new oncology patient registrations has decreased by 50% year-on-year during periods of severe COVID-19 increases in countries with established oncology care programmes. In all likelihood, this will result in an unusual increase in the number of claims for critical illnesses going forward.”

Momentum Retail Insurance paid individual insurance claims to the value of R5.5 billion, which is 19% higher compared to the previous year.

R4.2 billion in death claims Largest death claim R70 million

R605 million in critical illness claims

Momentum Retail Insurance individual risk claims paid from January 2020 to December 2020:

Largest critical illness claim R5.7 million

Total paid R5.5 billion

R198.8 million in income protection claims Largest income disability claim R3.7 million

R486 million in disability claims Largest disability claim R19.6 million

Death claims The major causes for death claims during 2020:

Cardiovascular disease Cancer Respiratory

28% 25% 19%

The largest amount paid for a single death claim was R70 million and the cause of death in this case was COVID-19 related.

Death claims due to respiratory complications increased by 145% - this increase is directly linked to COVID-19. Another interesting trend that was observed during 2020, was the fact that Myriad death claims, to the value of R10 million or more, almost doubled in value from the year before.

Terminal illness claims Terminal illness refers to an advanced stage of a disease with an unfavourable prognosis, no known cure and life expectancy of less than one year. Payouts for terminal illness claims are made while the clients are still alive. This provides them with the unique opportunity, during a very difficult time of their life, to settle their affairs before the inevitable happens.

During 2020, we paid a total of 79 terminal illness claims and 96% of all terminal illness claims paid were related to cancer. The youngest person to whom a terminal illness claim (death benefit) was paid was a 38-year-old female, for Stage 4 breast cancer.

Critical illness claims

Longevity claims

The major causes for critical illness claims during 2020:

Longevity is already a reality, with life expectancy in developed and developing countries increasing steadily. In fact, according to the 2019 World Population Prospects, published by the UN, they estimate that by 2050, one in six people in the world will be over the age of 65, up from one in 11 in 2019.

Cancer

45%

Cardiovascular disease

24%

Nervous system

13%

Cancer remains the biggest contributor to our critical illness claims and our claim statistics indicate that, on average, women are diagnosed earlier than men.

The 2020 claim statistics represent a decade of consecutive longevity claim payouts where we paid 37 Longevity Protector claims to the value of R7.9 million. Another 56 new claims were triggered during 2020, which started the countdown to the first payments (30 for critical illness and 26 for lump sum disability).

Critical illness claims for children Critical illness cover for children is automatically included in the parents’ critical illness cover on Myriad policies. During 2020, we paid a total of 51 critical illness claims for 38 children. For 11 of these children, we paid claims from both parents’ policies because both parents had critical illness cover. The ages of the children ranged from one and a half months to 17 years old and Leukemia was the leading cause for child related cancer claims.

Lump sum disability claims The major causes for lump sum disability claims during 2020:

Nervous system

23%

Musculoskeletal

21%

Cancer

18%

We are often asked what types of musculoskeletal events lead to a permanent disability type of claim. For disability benefits, it would typically be very serious chronic neck and back pain (e.g., caused by cervical spondylosis) despite medical interventions. Our 2020 claim experience also indicates that strokes dominate the vast majority of the nervous system claims.

Income disability claims The major causes for income disability claims during 2020:

Musculoskeletal Nervous system Cancer

27% 14%

We make it count, every time Our claims process was not designed to be just another generic process but rather one that addresses client requirements in a very straight-forward, yet compassionate manner. Being in the “people business” we make it count and walk our talk which resulted in us paying a total of 9 102 claims in 2020. On average, this amounts to more than R21.9 million linked to 36 claims, every working day; or more than R2.9 million per working hour.

Jenny concludes by reassuring you and our clients that, “There are no exclusions on any of our Myriad life insurance benefits (life-, critical illness- and disability cover) with regard to the Coronavirus which means that clients’ cover remains intact, regardless of the virus and where they have travelled or intend to travel to. As always, we will continue to make it our business to pay all valid claims.”

13%

Most income protection claims were paid to clients in the age group 30 to 39 years, which is very unsettling considering these ages being highly productive years, and equally distressing is the fact that 28% of these claims were permanent in nature. The youngest adult to claim on their income protection benefit was a 23-year-old male farm manager for fractures and hospitalisation. The oldest adult to claim was a 75-year-old female social worker who claimed for cancer under a Functional Protector benefit.

Terms and conditions apply. Momentum is part of Momentum Metropolitan Life Limited, an authorised financial services and registered credit provider. Reg. No. 1904/002186/06

30 September 2021

RISK

Why disability insurance is for everyone

T

he pandemic has highlighted the financial vulnerability of people living in South Africa. Amidst a lagging vaccination programme and a resurgent third wave of infections, it is clear that the catchphrase ‘it won’t happen to me’ no longer carries the same confidence it once held.

Old Mutual’s Claims Statistics Report 2020 has revealed a significant rise in the number of disability income claims year on year, as well as a 3.5 times increase in sickness income claims under the disability insurance category.

The highest cause of sickness income claims was ‘infectious diseases’, under which COVID-19 falls.

Despite the increase in disability income claims and growing concerns about health, Priya Naicker, Head of Strategic Retail Marketing at Old Mutual, says that many South Africans do not have disability insurance.

“Traditionally, when people think of disability insurance, there is a common misperception that it applies only to those working in dangerous industries, or in high-risk jobs,” she says. “However, this could not be further from the truth.

Disability insurance is virtually for everyone. It means being able to help cover the costs that come with being disabled and unable to work or take care of yourself because of an

“It is actually younger people who are more adversely affected by disability”

illness or injury. It also lets you carry on providing for yourself and your loved ones, preventing you from becoming a financial burden on someone else. In the context of those suffering from COVID-19-related health issues for extended periods of time, disability insurance can help you and your family maintain monthly obligations without financial stress, which is critical for a smooth recovery.”

According to the Association for Savings and Investment South Africa’s Insurance Gap Study 2019, the total existing shortfall in disability insurance was a staggering R19.3tn, which equates to R1.2m per average South African earner.

However, this gap is substantially wider for earners younger than 40.

“While younger people rarely think about dying or becoming disabled, or even see the need for disability insurance, it is actually younger people who are more adversely affected by disability because they have not had as much time to accumulate wealth and create a financial buffer,” says Naicker.

The latest Claim Statistics report showed that the average age of disability claimants sits in the family provider age group, with the average age for male claimants at 47 and for females at 43. However, within the claims category for infectious diseases and trauma and lifestyle, which was the most prevalent cause for claims under sickness income, the ages 20 - 30 and 30 - 40 each contributed to 36% of sickness income claims.

“It makes good financial sense to have cover that suits the life stage you’re at,” says Naicker. “Not having disability insurance only increases your risk of going into debt, which

Life insurer sees 60% increase in funeral claims

I

n 2020, Sanlam Individual Life paid out 99% of all death and funeral claims.

It paid R4.75bn in total claims, with R3.97bn for death and funeral claims; R398.9m for disability, loss of income and impairment claims; and R386m for severe illness and injury claims.

“COVID-19 has been an incredibly hard time for many people, and we extend our deepest condolences to those who have lost family and friends,” says Petrie Marx, Product Actuary at Sanlam Individual Life.

“We paid out R458.95m in pandemicrelated claims in 2020. With the second wave, we surpassed this significantly, and paid out R622.66m for COVID-19 claims in Q1 of 2021.”

The number of claims for COVID-19 fatalities in 2020 for Sanlam Individual Life was initially relatively low, with most COVID-19 claims being for sickness and income protection. Claims for death and funeral benefits increased to make up the majority in December 2020, January 2021 and February 2021. Following the second wave, the first three months of 2021 saw significantly more death and funeral claims, with the Individual Life business paying out its highest number of COVID-19 claims in any month in

February 2021: R8.25m for sickness and income protection and R422.73m for death and funeral claims.

“It’s clear the second and third waves are having a greater impact on our Individual Life client-base,” Marx adds.

“But it should be noted that Sanlam Sky and Sanlam Corporate (our employee benefits business) were already hit hard in wave one.”

34 www.moneymarketing.co.za

Petrie Marx, Product Actuary, Sanlam Individual Life

could have serious consequences on your future financial security. It could mean risking your home, your car, and the ability to continue with your retirement or even shorter-term savings goals. For those with families, it may affect parents’ ability to fund their children’s education.”

In the case for disability insurance, an Old Mutual customer who is an accountant was diagnosed with colon cancer and booked off work. During this period, his disability income insurance provided him with an income that allowed him to focus on his recovery, without additional financial worries.

“While many younger South Africans may question the idea of paying for disability insurance, thinking they will never need it, or perhaps wondering if they can afford it, a more pertinent question may be to ask whether they can afford not to have it,” says Naicker. “It is important that we do not underestimate the value of disability Priya Naicker, insurance and the role it Head: Strategic can play in protecting Retail Marketing, your future and the Old Mutual financial wellbeing of your family.”

In 2020, death claims resulting from ‘diseases of the respiratory system’ increased to 21%, from 11% in 2019.

COVID-19 was also the single biggest factor behind the 60% year-on-year increase in funeral claims. The pandemic also had less obvious implications, including 60% fewer claims under the accidental death benefit, while lump sum disability claims for mental disorders went from 8% in 2019 to 19% in 2020.

“Aside from the increase in claims resulting from COVID-19, the main effect we saw in 2020 was a decrease in accidental claims for all benefits. This may well have been the result of the strict lockdown regulations. It was also evident in the breakdown of disability claims. COVID-19 has had a massive impact on people’s mental and financial wellbeing, although it’s difficult to make a direct link from just one year’s statistics,” Marx says.

He notes that the 2020 claim statistics did not include the impact of the second and third wave, so Sanlam expects to see a different outcome in 2021, where lockdown laws were looser, and its main client-base was more affected. “There is also speculation that 2021 may see an increase in claims as a result of late diagnosis of, say, cardiovascular disease

or cancer, or from people suffering from ‘long-COVID’ – but we have not yet seen this coming through in our claims.”

In total, Sanlam Individual Life paid R29.95m in claims for people being booked off work for COVID-19. This hints at what absenteeism may have cost the country. Positive COVID-19 cases have once again peaked in the third wave, which SA has experienced over the last few weeks, and Sanlam is currently experiencing an influx of claims as a result of the third wave. Marx says some provinces such as Gauteng, the Northwest and Limpopo are showing a decline in positive cases, while coastal provinces such as KwazuluNatal continue to show an increase in infections.

“We’re hoping the coastal provinces will follow suit and record a decline in cases, but can’t predict it with any certainty at this stage.”

The Sanlam Individual Life claim statistics also made it clear that it is imperative not to lose sight of the other main causes of severe illness in the country. “Cancer remains the main cause of severe illness claims; in the last six years, it’s accounted for 60% of all the severe illness claims paid annually. We’re also seeing trends from previous years continue, like the continued rise in breast cancer in women.”

“COVID-19 has been an incredibly hard time for many people”

EDITOR’S

30 September 2021

BOOKS ETCETERA

BOOKSHELF

The Asian Financial Crisis 1995-98 Birth of the Age of Debt

By Russell Napier In the space of a few months, across Asia, a miracle became a nightmare. This was the Asian Financial Crisis of 1995-98.

In this economic crisis, hundreds of people died in rioting, political strongmen were removed, and hundreds of billions of dollars were lost by investors. The crisis saw the US dollar value of some Asian stock markets decline by 90%. Why did almost no one see it coming?

The Asian Financial Crisis 1995-98 charts Russell Napier’s personal journey during that crisis as he wrote daily for institutional investors about an increasingly uncertain future. Relying on contemporaneous commentary, it charts the mistakes and successes of investors in the battle for investment survival in Asia from 1995-98. The book is not just a guide for investors navigating financial markets, but also an explanation of how this crisis created the foundations of an age of debt that has changed the modern world.

Rescue From Global Crisis To A Better World

By Ian Goldin Rescue is an optimistic vision of the future after COVID-19 by a leading professor of globalisation at the University of Oxford.

Ian Goldin believes that we are at a crossroads. The wrecking-ball of COVID-19 has destroyed global norms.

Many think that after the devastation there will be a bounce back. For Goldin, this is a retrograde notion. He believes that this crisis can create opportunities for change, just as the Second World War forged the ideas behind the Beveridge Report. Published in 1942, it was revolutionary and laid the foundations for the welfare state, alongside a host of other social and economic reforms, changing the world for the better.

In Rescue, Goldin tackles the challenges and opportunities posed by the pandemic, ranging from globalisation to the future of jobs, income inequality and geopolitics, the climate crisis and the modern city. It is a fresh, bold call for an optimistic future – one we all have the power to create.

Start At The End How Reverse-Engineering Can Lead to Success

By Dan Bigham Start At The End explains the power of applying reverse-engineering to all areas of life, from a cycling champion who has proven its success. Dan Bigham is the captain of an amateur British track cycling team who rose from obscurity to beat professional, multi-million-pound teams at the highest level. Alongside hard work and dedication, Bigham credits his success to one thing: reverse-engineering the result.

In this book, he uses his own story, as well as wider examples and case studies from the worlds of business, personal development, and other sports, to demonstrate how this approach can help people succeed in any walk of life. Following each stage of the process, from setting goals and assessing tools to developing the plan and delivering optimum performance, this book fully explains how to set out and enact the system. Start at the End is a fascinating exploration of how success can be achieved, and proof that no goal is impossible.

SUDOKU

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

The Power Of Geography Ten Maps That Reveal The Future Of Our World

By Tim Marshall In this revelatory new book, Marshall explores ten regions that are set to shape global politics in a new age of greatpower rivalry: Australia, Iran, Saudi Arabia, the UK, Greece, Turkey, the Sahel, Ethiopia, Spain and Space. He explains why Europe’s next refugee crisis is closer than it thinks as trouble brews in the Sahel; why the Middle East must look beyond oil and sand to secure its future; why the eastern Mediterranean is one of the most volatile flashpoints of the twenty-first century; and why the Earth’s atmosphere is set to become the world’s next battleground.

Delivered with Marshall’s trademark wit and insight, this is a gripping exploration of the power of geography to shape humanity’s past, present and future.

SUBSCRIBE TO

GET A 12-MONTH SA SUBSCRIPTION FOR ONLY R494!

(SA postage only, including VAT)

EDITORIAL EDITOR: Janice Roberts janice.roberts@newmedia.co.za LAYOUT & DESIGN: Julia van Schalkwyk SUB EDITOR: Anita van der Merwe DIGITAL CONTENT ASSISTANT: Lebohang Malaka

ADVERTISING ADVERTISING SALES EXECUTIVE: Mildred Manthey Direct: +27 (0)11 877 6195 | Cell: +27 (0)72 832 5104 mildred.manthey@newmedia.co.za © Copyright MoneyMarketing 2021

DISTRIBUTION & SUBSCRIPTION Felicity Garbers felicity.garbers@newmedia.co.za

PUBLISHING TEAM GENERAL MANAGER: Dev Naidoo PUBLISHING MANAGER: Sandra Ladas sandra.ladas@newmedia.co.za PRODUCTION MANAGER: Angela Silver angela.silver@newmedia.co.za ART DIRECTOR: David Kyslinger Published by New Media, a division of Media24 (Pty) Ltd.

CONTACT FELICITY GARBERS Email: felicity.garbers@newmedia.co.za Tel: +27 (0)78 758 6227

MANAGEMENT TEAM CEO NEW MEDIA: Aileen Lamb COMMERCIAL DIRECTOR: Maria Tiganis BRAND STRATEGY DIRECTOR: Andrew Nunneley CHIEF FINANCIAL OFFICER: Venette Malone CEO MEDIA24: Ishmet Davidson MoneyMarketing is printed and bound by CTP Printers – Cape Town.

Johannesburg Office: Ground floor, Media Park, 69 Kingsway Avenue, Auckland Park, 2092 Postal Address: PO Box 784698, Sandton, Johannesburg, 2146 Tel: +27 (0)11 877 6111 | Fax: +27 (0)11 877 6198 Head Office: New Media, a division of Media24 (Pty) Ltd, 8th floor, Media24 Centre, 40 Heerengracht, Cape Town, 8001 | Postal Address: PO Box 440, Green Point, Cape Town, 8051 Tel: +27 (0)21 4062002 | newmedia@newmedia.co.za

Unless previously agreed in writing, MoneyMarketing owns all rights to all contributions, whether image or text.

SOURCES: Shutterstock, supplied images, editorial staff. While precautions have been taken to ensure the accuracy of its contents and information given to readers, neither the editor, publisher, or its agents can accept responsibility for damages or injury which may arise therefrom. All rights reserved. © MoneyMarketing. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, photocopying, electronic, mechanical or otherwise without the prior written permission of the copyright owners. © MoneyMarketing is not a financial adviser. The magazine accepts no responsibility for any decision made by any reader on the basis of information of whatever kind published in the magazine.

www.moneymarketing.co.za 35

IT’S NEVER TOO LATE TO SENSIBLY DIVERSIFY YOUR INVESTMENTS.

Offshore investing is a means to diversifying your investment portfolio. Diversification across different asset classes, asset managers, geographical locations or investments strategies means your portfolio is better able to withstand fluctuating market conditions and reach your long-term investment goals.

Invest in the PPS Global Equity Fund (USD denominated) and PPS Global Feeder Fund (ZAR denominated) to gain access to a top international investment manager with a proven track record through various market cycles - because it’s never too late to invest in yourself.

Contact your PPS Investments accredited financial adviser or us on 0860 468 777 (0860 INV PPS) or at clientservices@ppsinvestments.co.za.

Collective Investment Schemes in Securities (CIS) should be considered as medium to long-term investments. The value may go up as well as down and past performance is not necessarily a guide to future performance. CIS’s are traded at the ruling price and can engage in scrip lending and borrowing. A schedule of fees, charges and maximum commissions is available on request from the Manager. There is no guarantee in respect of capital or returns in a portfolio. A CIS may be closed to new investors in order for it to be managed more efficiently in accordance with its mandate.

CIS prices are calculated on a net asset basis, which is the total value of all the assets in the portfolio including any income accruals and less any permissible deductions (brokerage, STT, VAT, auditor’s fees, bank charges, trustee and custodian fees and the annual management fee) from the portfolio divided by the number of participatory interests (units) in issue. These funds are exposed to foreign securities and as such may be subject to additional risks. Performance has been calculated using net NAV to NAV numbers with income reinvested.

The PPS Global Equity Fund is registered and approved for marketing in South Africa under section 65 of the Collective Investment Schemes Control Act 45 of 2002.

For any additional information such as fund prices, brochures and application forms please go to www.prescient.ie.

PPS Investments (39270) and PPS Multi-Managers (28733) are licensed Financial Services Providers. PPS Management Company is a licensed collective investment scheme manager I terms of the Collective Investment Schemes Control Act. A schedule of fees, charges and maximum commissions are available on request.

pps.co.za/invest