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STANLIB Press Releases

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  • 1. STANLIB Press Releases Week ending 26 November 2004 View articles by date View articles by publication
  • 2. Recent Press Coverage (rolling): Sunday Times Business Times Money Fund to optimise dividend 07 November 2004 income The Citizen Gettting offshore 09 November 2004 investments right Finance Week Don’t miss out on that 9% 08 November 2004 Finance Week Importance of offshore 08 November 2004 diversification Finance Week Sound advice pays off 08 November 2004 Finance Week Portfolio management 08 November 2004 changes Financial Mail STANLIB Quants fund 05 November 2004 Finansies & Tegniek Goeie raad het gewerk 08 November 2004 Finansies & Tegniek Moenie kans op 9% misloop 08 November 2004 nie Money Marketing Volatility an opportunity November 2004 Money Marketing Changing markets show November 2004 value of linked concept Main Next
  • 3. Recent Press Coverage (rolling): Money Marketing Multi-managers gets FAIS November 2004 boost Money Marketing What the Olympics teach us November 2004 about investment risk Midrand Reporter Golf for Hospice Soweto 05 November 2004 PMR Stanlib committed to 01 November 2004 Guateng Confidence Problematic Markets have 01 November 2004 Investors Foxed STANLIB Main Previous
  • 4. STANLIB Press Releases Week ending 26 November 2004 Other Publications Main Sunday Times
  • 5. STANLIB Press Releases December 2004 Other Publications Main The Citizen Finance Week Financial Mail Finansies & Tegniek Money Marketing Midrand Reporter PMR Confidence
  • 6. STANLIB Press Releases December 2004 Sunday Times Business Times Money Main 07 November 2004
  • 7. STANLIB Press Releases December 2004 The Citizen Main 09 November 2004
  • 8. STANLIB Press Releases December 2004 Finance Week Main 08 November 2004 08 November 2004 08 November 2004 08 November 2004
  • 9. STANLIB Press Releases December 2004 Financial Mail Main 05 November 2004
  • 10. STANLIB Press Releases December 2004 Financies & Tegniek Main 08 November 2004 08 November 2004
  • 11. STANLIB Press Releases December 2004 Money Market Main November 2004 November 2004 November 2004 November 2004
  • 12. STANLIB Press Releases December 2004 Midrand Reporter Main 05 November 2004
  • 13. STANLIB Press Releases December 2004 PMR Main 01 November 2004
  • 14. STANLIB Press Releases December 2004 Confidence Main 01 November 2004
  • 15. 07 November 2004 Sunday Times Business Times Money FUND TO OPTIMISE DIVIDEND INCOME Unit trust company Stanlib has launched its Dividend Income Fund, which aims to optimize dividend income while providing liquidity to investors. The fund will invest in high-dividend-yielding preference shares with the balance of underlying investments being made up mostly of interest-bearing investments, ordinary shares and property. While the objective of the fund is to preserve capital, capital fluctuations will occur. The fund is deemed to carry a low to moderate risk profile. It is recommended that the fund be held for the medium to long term, meaning three to five years. The fund will be managed by Stanlib’s fixed-interest specialist, Henk Viljoen. The minimum investment in the fund is R10 000 and the minimum debit order amount is R1000. Main
  • 16. GETTING OFFSHORE INVESTMENTS RIGHT Many South Africans were badly burned taking money offshore a few years back. It seemed that no sooner had financial advisors recommended offshore investment then things went awry. The rand, after dipping to records lows in late 2001, rebounded strongly, the world economy was slammed by the impact of the September 11 terror attacks and by the time investors brought their cash back to SA many had lost about a third of their investment. It was enough to put you off for life. But since then things have looked better for offshore investment. The rand has trended stronger against the dollar since mid 2002, which means every rand spent offshore buys more assets than it did previously. World markets have recovered, led by a super-hot China, and the world economy will grow about 5% in 2004 according to the International Monetary Fund (IMF) – the fastest world growth rate. Stanlib asset managers are positive about investing offshore. “ We’ve been recommending people start investing offshore for about a year,” said Stanlib director of retail investing Paul Hansen. Hansen’s argument in favour of the move offshore is familiar – investors need diversification in their portfolios, so that when one aspect of their portfolio is under fire another will be benefiting. The broad asset allocation recommendation from Stanlib for offshore portfolios is: neutral on cash and equities, underweight on bonds and overweight on alternative types of fund – namely hedge fund of funds. But this is just a guideline, and investors should always consider their own particular risk profile. The Citizen 09 November 2004 Main
  • 17. Finance Week Main 08 November 2004 DON’T MISS OUT ON THAT 9% Government bonds and other fixed interest-bearing instruments are once again extremely popular worldwide. For example, the price of the comprehensive JP Morgan global bond index rose to a record level last week.JP Morgan attributes the renewed popularity of fixed interest-bearing investments to the realization that inflation is under control worldwide and that the increase in short-term rates is just a temporary adjustment. Remember, the price of a fixed interest bond rises when interest rates fall. South African investors would be well advised to note this international trend and make use of the Treasury’s excellent offer of 9% interest on five-year retail bonds while they can. The guaranteed rates on two- and three-year bonds are 8,25% and 8,5% respectively. However, it’s the 9% on the five-year bonds – compared with the 8,85% at which the popular R153 Government bond is trading – that’s special. After all, it’s not often that a small investor with as little as R1 000 has the opportunity to negotiate a better rate than SA’s large insurers or unit trust managers that invest directly on the bond market. But investors are urged not to delay in making use of the favourable 9% offer, because it probably won’t remain at that level indefinitely. In his latest survey of the interest rate market, Stanlib’s Paul Hansen says that though Britain’s bank rate was raised by 1,25% to 4,75% by the Bank of England in the past year, the rate on British 10-year Government bonds fell from 5% to 4,75%. In Germany, the rate on 10-year bonds is now 3,9%, compared with 4,4% a year ago. In the US, 10-year bonds are trading at 4,05%. Inflationary prospects in those three countries are currently not much better than SA’s, and the governments in all three have larger Treasury deficits to finance than SA has. Government bond rates in SA may therefore tend to also fall in the foreseeable future.
  • 18. Finance Week Main 08 November 2004 IMPORTANCE OF OFFSHORE DIVERSIFICATION With the rand at its present high level now’s a god time to diversify offshore if you haven’t already done so. But if you’re fully invested overseas don’t repatriate your assets. That practical advice comes from Stanlib Wealth Management client service director Anthony Katakuzinos. “We at Stanlib have long emphasized the importance of diversification offshore and we’ve found that our international partners place just as much emphasis on the concept. “ For example, 50% of British pension funds are invested in offshore markets. Diversification reduces your risk, enhances your returns and hedges you against poorly performing investments, countries and currencies.” Additional reasons are that you need to go far wider than a small emerging economy such as SA’s, which constitutes less than 1% of global capitalization, and diversification gives you exposure to industries and companies not prevalent in SA. Katakuzinos says that there’s little evidence of SA’s retail investors currently investing offshore. Reasons include that they’ve benefited from rand strength, booming SA markets, major offshore markets haven’t necessarily looked as attractive and many investors are still extremely risk averse and still experiencing poor returns in rand on their current offshore investments. He says that Stanlib is underweight on the US and neutral on Europe. “US share prices are ticking along, but they’re not cheap and nor are they exciting. Britain offers some value, with dividend yields of 2% to 3%. But Europe generally is sluggish. It still has several structure issues to deal with. “ Japan has been a lot more attractive during the past 12 months compared to the previous 10 years, but that in itself presents interesting opportunities. Most attractive now is south-east Asia, which, along with Japan, is largely benefiting from China’s huge economic growth. “ China is driving the resources market, coupled with huge consumption of oil and imports of machinery from countries such as Japan and South Korea. Another favourable factor is that the currencies of the region have not rerated yet.” Katakuzinos doesn’t recommend that the average unit trust investor opt for offshore regional funds but says instead that they should look to offshore general equity funds. “Among Stanlib’s offerings, more conservative investors should consider the Stanlib International Balanced Fund of Funds. It invests in a combination of equity and bond funds that’s benchmarked on 51% of the MSCI world index, 34% on Salomon Brothers G7 index and 15% on Alexander Forbes Money Market index.” More aggressive investors should look to the Stanlib International Aggressive Fund of Funds and the Stanlib International Equity Fund of Funds.
  • 19. Finance Week Main 08 November 2004 SOUND ADVICE PAYS OFF Stanlib’s best performers on a three-year review The JSE Securities Exchange’s all-share index has risen a spectacular 62% since April 2003, when Stanlib’s Wealth Management client services director Anthony Katakuzinos urged investors to get back into equities. The past quarter in particular was exceptional, with an approximate 20% improvement. Stanlib funds that have really outperformed include the Stanlib Value Fund (up 94% on three years), Small Cap Fund (90,9%), Gold Fund (89%), Capital Growth Fund (78%), Prosperity Fund (72,7%), Industrial Fund (71,4%), Quants Fund (67%), Stability Fund (63%) and Wealthbuilder (53%). The Property Fund is up 31% on one year. Says Katakuzinos: “In April last year it wasn’t a call, but Stanlib Asset Management just felt that there was tremendous value in the market and suggested that people look at equities. At the time many were extremely afraid, having burned themselves post 11 September. Those who did take our advice have done extremely well.” Interestingly, Stanlib’s sales figures reflect that the swing from fixed interest investments to equities over the past 18 months was not as dramatic as might have been expected. Many investors continue to be risk-averse and are sticking with their property real return and fixed interest investments despite interest rates having moved down considerably during the period. “ While short-term data may show that cash and lower risk investments have performed strongly over the long term, equities are a clear winner,” says Katakuzinos. “Many investors have become more conservative as a result of their experience in recent years. “ Each investor’s unique circumstances must be considered in constructing a portfolio. However, it should be noted that while equities may be adversely affected by volatility, cash also has a downside in the form of lower long term returns, especially in a lower inflationary environment. “ For a young investor with little or no financial obligations, an overly conservative approach could impair long-term returns. Ideally, the emphasis should be to switch to income and capital conservation in our later years. An element of risk is acceptable early in our investment years, because we have time to recover from a downturn.” There’s still modest value in select sectors, he says, pointing out that Stanlib’s forecast in June was that returns on equities in the ensuing year would be around 20%. “ Even with this latest run we still believe that there’s upside. We don’t think that equities are overvalued (still below their 20-year average price:earings), though obviously we don’t think that there’s as much upside as previously. “ Now would be a good time for investors to take some profits and revert to more conservative, absolute-type portfolios like our Stanlib Managed Flexible Fund. But you mustn’t be out of the market totally. Next
  • 20. Finance Week Main 08 November 2004 We think that there’s another 20% in the market in the next 12 to 18 months, but it may more sideways for a while.” The Barclays-Absa issue has created much market interest, he says. “Moreover, numerous foreign asset managers are looking at emerging markets, including SA, to get better yields than those on offer in the more established markets. Consequently, we’ve seen some tremendous volumes on the JSE in August and September 2004. There have been days with R4bn traded, which you don’t normally see besides the futures closeouts.” Katakuzinos gave some of Stanlib’s views on random sectors and/or funds:  General equities and value : “There’s still scope in these sectors, though you won’t get the returns you’ve just seen. However you should get modest returns above inflation over the next 12 to 19 months.”  Industrial : “There’s still strong underlying growth in industrial and consumer stocks. That’s underpinned by the economy’s strength and we don’t think that interest rates will go up significantly for at least the next 12 to 18 months. If inflation remains under control and the oil price doesn’t get out of hand, you may even see a 0,5% cut in interest rates early next year.”  Financials : “Banks are not overly expensive. You’re still sitting on average p:es of around 10, which is not very expensive. The long-term medium average of banks has been around 12. Their profits are set to be good, given that they’re benefiting from the massive consumer run, bank accounts are being actively used, people are spending on credit and the mortgage business has been exceptional. “Meanwhile, the stronger stock market is also benefiting the life industry. There are questions about the ability of life companies to grow quickly, but a major contributor to their earnings remains the underlying investments.”  Resources : “Worth considering as a speculative investment – if you’re confident in your outlook for the world economy, especially China, reckon that the tremendous demand for resources will continue and believe that the rand will return to US$1/R7/R7,50 levels in the foreseeable future. With that scenario, you should see significant upside in resources share price. There will be a gearing effect, with margins and profitability increasing tremendously.”  Property : “We’ve moved from overweight to neutral. We should see a slowdown in returns to about 12% in the next 12 months. The prices of our property funds are at an all-time high and had to be closed in early September after reaching the R1bn mark. “ The Collective Investment Schemes Control Act regulates the maximum positions that can be taken in any single listed property company and currently there’s insufficient capacity in the listed property sector to meet demand from retail investors. Demand can only be satisfied by new listings or significant expansion of currently listed properties.” Previous
  • 21. Finance Week Main 08 November 2004 PORTFOLIO MANAGEMENT CHANGES Several portfolio management changes have taken place at Stanlib. One is that Ian Woodley is now managing the Prosperity Fund instead of Daryll Castle. One of Stanlib’s star managers, Woodley (38) graduated with a mining degree from Leeds University and began as a trainee mining engineer with Gencor in 1987. In 1992 he left mining to study for an MBA at UCT and in 1994 joined Martin & Co as a mining analyst. He moved to Liberty in 1997 as an analyst on the resources team and has held several senior management positions since. Castle, who qualified as an engineer, will concentrate more on the resources side and has been given overall responsibility for the Stanlib unit trust team. The Prosperity Fund that’s invested in the full range of JSE Securities Exchange shares has outpaced the all-share index for several years and generated a 72% return over the past three years. It follows the Growth at a Reasonable Price approach, focusing on adding value through market cycles by investing in companies that represent value in the growth universe. Errol Shear (47) has been appointed fund manager of another of Stanlib’s general equity funds, the Wealthbuilder Fund, succeeding Imtiaz Ahmed, who recently left the investment house to start a “financial engineering business. Shear is one of the group’s most senior portfolio managers, with an excellent track record, especially with the Value and Managed Flexible funds. He joined Liberty Asset Management 19 years ago after graduating with a business science degree at UCT and qualifying as a chartered account at Ernst & Young. The Wealthbuilder Fund is similar to the Prosperity Fund, except that is has a significant offshore exposure and predominantly invested in large capitalization shares. It generated a 53% return over the past three years – considerably less than the Prosperity Fund, mainly because it was hamstrung by negative offshore exposure.
  • 22. Financial mail Main 05 November 2004 STANLIB QUANTS FUND Domestic all assets flexible Worth a closer look Unit price: 160c Total assets R84m Top ten holdings:* JD Group, Edcon, BHP Billiton, Ellerine, Sappi, Super Group, Foschini, Grindrod, African Bank, Kumba. Asset allocation: Equities 68%, Cash 32%. Sector breakdown: Resources 15%, Financials 11%, Industrials 74%. Top Sectors: General retail 21%, Transport 7%, Specialty finance 5%, Mining houses 5%, Electronics 1 2%, Banks 2%, Support services 2%. *As at September 30 2004. ** At start of period. Using quantitative methods that can include market momentum technical analysis and sentiment indicators, Stanlib Quants (SQ) has built a record of consistency while keepings its unit price validity below average. Manager Jacques Pretorius upped equity from 50% to 68% in the third quarter and says he is looking for buying opportunities that will continue to focus on growth stocks. SQ is a fund warranting closer investor attention.
  • 23. 08 November 2004 Finansies & Tegniek GOEIE RAAD HET GEWERK Só lyk Stanlib se beste presteerders oor drie jaar. Die JSE Sekuriteitebeurs se indeks van alle aandele het sedert April verlede jaar met ‘n skouspelagtige 62% gestyg toe Anthony Katakuzinos, Stanlib Welvaartbestuur se kliëntediensdirekteur, beleggers dringend versoek het om terug te keer na aandele. Die afgelope kwartaal was veral buitengewoon, met ‘n verbetering van sowat 20%. Van die Stanlib-fondse was werklikbeter gevaar het, is Stanlib Waarde (94% hoër oor drie jaar), Klein Markkapitalisasie (90,9%), Goud (89%), Kapitaal Groei (78%), Welvaart (72,7%), Nywerheid (71,4%), Quants (67%), Stabiliteir (63%) en Welvaartskepper (53%). Die Eiendoms Inkomste-fonds het in een jaar met 31% gestyg. “ In April verlede jaar was aandele nie op die radarskerms nie, maar Stanlib Batebestuurder het net gemeen daar was geweldig baie waarde in die mark en het voorgestel dat mense aandele oorweeg. Destyds was baie beleggers geweldig bank gewees omdat hulle hul vingers verbrand het ná 11 September. Diegene wat wel ons raad gevolg het, het geweldig goed gevaar,” sê Katakuzinos. Dis egter interessant dat Stanlib se verkoppsyfers toon dat die verskuiwing van vasterentebeleggings na aandele die afgelope 18 maande nie so groot was as wat verwag kon word nie. Baie beleggers is steeds risikosku en hou by reële opbrengs op eiendomme en vasterentebeleggings, al het rentekoerse in die tydperk heelwat gedaal. “ Al wys korttermyndata dalk dat kontant en laerisikobeleggings goed gepresteer het, is aandele op lang termyn duidelik ‘n wenner,” sê Katakuzinos. “Baie beleggers het versigtiger geword weens hul ervaring die laaste paar jaar. Elke belegger se unieke omstandighede moet oorweeg word in the samestelling van ‘n portefeulje. Mens moet egter daarop gelet dat hoewel aandele nadelig beïnvloed kan word deur wisselvalligheid, kontant ook ‘n nadeel het in die vorm van laer langtermynopbrengs, veral in ‘n omgewing van laer inflasie. “ Vir ‘n jong belegger met min of geen finansiële verpligtinge nie, kan ‘n oormatig konserwatiewe benadering die langtermynopbrengs knou. Die ideal is dat die klem in ons later jare na die behoud van inkomste en kapitaal verskuif word. ‘n Element van risiko vroeg in ons beleggingsjare is aanvaarbaar, want ons het tyd om van ‘n afswaai te herstel.” Matige waarde kom steeds voor in uitgesoekte sektore, meen hy en sê Stanlib se voorspelling in Junie was dat die opbrengs op aandele in die volgende jare sowat 20% sal wees. “ Selfs met die jongste lopie glo ons dat opwaartse potensiaal steeds bestaan. Ons dink die aandele is oorwaardeer nie (steeds onder hul 20-jaar gemideddelde pry/ verdienstes-verhouding), hoewel ons noodwendig nie dink daar is soveel opwaartse potensiaal soos voorheen nie. Dis nou ‘n goeie tyd vir beleggers om ‘n bietjie wins te neem en oor te skakel na konserwatiewer, absolute portefeuljes, soos on Main Next
  • 24. 08 November 2004 Finansies & Tegniek Stanlib Bestuurde Veelsydige-fonds. Maar mens moet joy nie heeltemal aan die mark ontrek nie. Ons dink die mark kan in die volgende 12 tot 18 maande met nog 20% styg, maar dit kan ‘n tyd lank sywaarts beweeg.” Die Barclays-Absa-kwessie het heelwat belangstelling in die mark gaande gemaak. “Daarby oorweeg talle buitelandse batebestuurders ontluikende markte, waaronder SA, om ‘n beter opbrengs te kry as wat beskikbaar is in die geverstigder markte. Gevolglik het daar ‘n paar keer geweldige verhandelings-volume op die JSE in Augustus en September vanjaar voorgekom. Daar was dae van verhandeling van R4 miljard wat mends nie normaalweg kry nie, behalwe by die volkome afwikkeling van termynkontrakte. Katakuzinos gee van Stanlib se beskoudings oor verskillende sektore en/of fondse:  Algemene aandele en waarde : Geleenthede bestaan nog in dié sektore, hoewel mens nie die opbrengs sal kry wat pas ervaar is nie. Mens sal egter waarskynlik matige opbrengs bokant inflasie in die volgende 12 tot 18 maande kry.  Nywerheid : Sterk onderliggende groei kom nog voor in nywerheid- en verbuikersaandele. Dit word ondersteun deur die ekonomie se krag, en rentekoerse sal waarskynlik nie in die volgende 12 tot 18 maande beduidende styg nie. As inflasie in bedwang behou word en die oliepryse nie buite beheer raak nie, is ‘n halfpersentdaling in die rentekoerse vroeg aanstaande jaar selfs moontlike.  Finansiële maatskappye : Banke is nie buitensporig duur nie. Hulle het steeds ‘n gemiddelde prys/verdiensteverhouding van tien, wat nie baie duur is nie. Die langtermyngemiddelde vir banke was sowat 12. Hul wins sal waarskynkok goed wees, want hulle trek voordeel uit die geweldige verbruikerslopie. Vrae bestaan oor die vermoë van lewensversekeraars om vinnig te groei, maar ‘n groot bydraer tot hul verdienstes is steeds die onderliggende beleggings.  Hulpbronne : Dit is die moeite werd om dit te oorweeg ás jy vertroue het in joy beskouing van die wêreldekonomie, veral van China, dat die geweldige vraag na hulpbronne gaan voortduur, en dat die rand in die afsienbare toekoms na die vlak van R7-R7,50 teenoor die dollar sal terugkeer. In dié scenario kan daar beduidende opwaartse potensiaal in hulpbronne se aandeelpryse wees.  Eiendom : Stanlib het met sy beleggings van oorgewig na neutral beweeg. In die volgende 12 maande kan die opbrengs verlangsaam tot sowat 12%. Main Previous
  • 25. MOENIE KANS OP 9% MISLOOP NIE Staatseffekte en ander vasterentedraende instrumente is wêreldwyd weer besonder gewild. JP Morgan skryf die hernude gewildheid van vasterentebeleggings toe aan die besef dat inflasie wêreldwyd in bedwang is end dat die styging in korttermynkoerse net ‘n tydelike regstelling is. Onthou dat die prys van ‘n vasterrenteeffek styg wanneer rentekoerse daal. Plaaslike beleggers kan gerus van die internasionale tendens kennis neem en steeds die tesourie se uitskekende aanbod gebruik van ‘n rentreopbrengs van 9% op kleinhanddelstaatseffekte vir ‘n vaste termyn van vyf jaar. Dis immers nie aldag dat kleinbeleggers met slegs R1 000 die geleentheid kry om ‘n goeie opbrengs te beding nie. Maar beleggers moenie tyd mors om die gunstige 9%-aanbod aan te gryp nie, want dit sal waarskynlik nie onbepaald op dié vlak bly nie. In sy jongste oorsig van die rentekoersmark wys Paul Hansen van Stanlib daarop dat hoewel die Britse bankkoers die afgelope jaar deur sy sentrale bank met 1,25% verhoog is tot 4,75%, die koers on Britse staatseffekte met ‘n looptyd van tien jaar van 5% tot 4,75% gedaal het. Die inflasievooruitsige in dié land is nie veel beter as in SA nie en Brittanje se regering het groter skatkistekorte as SA om te finansier. Die koerse op plaaslike staatseffekte kan dus ook in die afsienbare toekoms laer neig. Finansies & Tegniek Main 08 November 2004
  • 26. VOLATILITY AN OPPORTUNITY Trurman Zuma, head of Single Manager Unit Trusts at Stanlib, sees opportunity in volatility. As he points out, you can smooth out the bumps in the market while getting clients into the investing habit. Volatility is a permanent feature of the market. What should advisers and their clients do about it? Switching at the first hint of a downturn is hardly the answer. Why not ignore fluctuations altogether? In fact, this can be a remarkably successful strategy. The key concept is ‘cost averaging’. Most advisers will be familiar with it, but may not communicate it as strongly as they might. Some investors actually adopt the strategy without realizing it. They use a debit order to make regular monthly investments into a unit trust and forget about it. Over time, this ‘drip-feed’ approach evens out the bumps in the market. When the market is down, the debit order buys more units (exploiting a ‘value opportunity’ in market parlance). When the market is riding high, the debit order’s purchasing power falls, but the value of the investment has accumulated nicely. Other investors and their advisers make more deliberate use of the concept; for example, when a client receives a bequest and decides to buy shares. In this scenario, a devotee of cost averaging will shy away for lump sum investment on a single day. Instead, he will divide the bequest by 12 and make 12 monthly investments; in effect, paying the average share price for the year. There is no guarantee cost averaging will outperform lump-sum investing, but at least the client and adviser avoid the disappointment that is felt when the timing turns out to be disastrous. The following diagram shows the effect of cost averaging. This hypothetical case uses American market experience. It assumes that the investor initially had $3 000 or $250 a month. The January share price is $10 (25 shares). By April the share price is R15 (16.67 shares), but then falls until it reaches $7 in October (35.71 shares). By year-end, the share price has steadied at $10 once again. Over the year, the investor bought 302.13 shares at an average price of $9.93. The total investment is now worth $3 021.30c – a small gain, but the foundation for future growth is place. This illustrates how fluctuations can be evened out while the habit of regular investment takes hold. The hypothetical investor has removed the biggest worry that attaches to market timing – that you might get it horribly wrong. This is bad for the investor and can be bad for the credibility of the adviser. Money Marketing Main November 2004
  • 27. CHANGING MARKETS SHOW VALUE OF LINKED CONCEPT Market shifts are ramming home the value of the linked investment concept, with the spotlight increasingly falling on the cost-efficient flexibility of linked product design. The trigger according to Mike Galloway, head of Stanlib Linked Investments, is the changeable investment climate and the demand for mechanisms that enable risks to be managed or balanced. Linked investments are often marketed to high net worth individuals as ‘an entire portfolio in one product’. Several investment types can be contained in a single wrapper. For example, a life product, bank zero-coupon bonds (or coupon-paying bonds) and pooled collective investment scheme products can be linked. Within a linked product an investor can achieve diversification across sectors, investment styles and asset classes in one go. Diversification such as this is the key to risk management, says Galloway, especially in volatile times. Switching between investment managers usually attracts high fees, reducing net returns. With linked investments, as Galloway points out, investment manager switching can occur as often as an investor wishes at zero product fees or for much reduced initial fees. In the last year, the benefit of cost-efficient switching has been showcased by several market shifts, including: Successive interest rate cuts, especially the most recent which came as a major surprise to many investors;  A revival in JSE share values;  A stronger rand;  Signs of recovery in several major markets and strong resource demand from China. Movements like this often trigger a tactical response by investors, either to avoid loss or optimize profit. The linked concept facilitates the process. The alternative - spreading investments across several products or categories – can penalize it as several switching fees become payable. Investors tend to become more engaged in their investments when markets shift. They demand timely reports. Collating reports from several managers can be unwieldy. The linked investment manager provides a single, consolidated report across all investments in the package. “This tidies up the entire reporting issue,” says Galloway. Stanlib’s linked investment specialist acknowledges that cost-efficient flexibility ceases to be an advantage if clients fail to make use of it. A linked product provider manages the mandate, calculates values and provides reports. It doesn’t proactively re-write the mandate when markets move. That is the responsibility of the investor and his adviser. A passive investor served by a passive adviser still enjoys the benefit of diversification offered by ‘an entire portfolio in one product’, but fails to benefit from cost-efficient flexibility. Says Galloway: “The product rewards astute active management. Therefore, investors should select knowledgeable, experienced advisers who give proactive input. Optimum benefit is derived when an investor partners with an adviser to exploit market change.” Linked investments tend to be sold to sophisticated investors who often commit R100 000 or more. The sliding fee scale is off-putting for smaller investors. Galloway notes: “The high net worth individual is usually a sophisticated investor who is quite capable of exploiting the advantages of flexibility. If you snooze you lose part of the value proposition. “The challenge when markets shift as they have done this last year is to stay on top of your position via consolidated reports and make full use of your adviser-partner.” November 2004 Money Marketing Main
  • 28. MULTI-MANAGERS GET FAIS BOOST The multi-manager investment model is receiving assistance from an unusual quarter – the Financial Advisory and Intermediary Services (FAIS) Act. This is one explanation for a continuing upsurge in demand for multi-manager products, according to Stanlib Multi-Manager, one of the leading proponents of this investment approach. The multi-manager versus single-manager debate has raged for years in the investment industry. The single manager model involves a single asset manager who invests funds across all asset classes in a portfolio. A multi-manager selects the best specialist managers in each asset class and then brings together a compendium of top performers to create a portfolio. In other words, a multi-manager takes on the job of objective selection. This ‘talent-spotter’ role has become especially prized as FAIS nears implementation, says Gert van Rensburg, head of Stanlib Multi-Manger. FAIS places new obligations on intermediaries, including the duty to give ‘best advice’ when recommending investment products or strategies. If an investor suffers a loss and believes it resulted from self-interested, flawed or bad advice, a complaint can be made to the FAIS Ombud. Stiff penalties apply to advisors who transgress. However, in the multi-manager scenarios the expert observers of manager performance across asset classes take on the job of picking the best mix of managers. Van Rensburg points out: “In effect, this area of ‘best advice’ responsibility passes to the multi-manager. The advisor is not, therefore, exposed to the risk of action by the Ombud. “ The case for multi-manager investment was growing in any event. However, in the period from January to August this year we have seen an increase of 58% in new business compared to the same period of 2003. The closer we get to FAIS implementation on October 1, the higher the inflows become. “ It seems likely therefore that FAIS is a key factor in the growing acceptance of the multi-manager model.” November 2004 Money Marketing Main
  • 29. WHAT THE OLYMPICS TEACH US ABOUT INVESTMENT RISK What can the recent Olympic Games in Athens teach us about constructing risk-profiled portfolios questions Malcolm Holmes , portfolio manager at Stanlib Multi-Manager. Risk profiling has become a major financial industry trend, with many investment product providers offering risk-profiled portfolios. The concept is simple. Investors complete a risk profile questionnaire, which identifies their overall risk tolerance. The product provider then creates portfolios to match generic risk tolerances – aggressive, moderate or conservative. The level of risk in each portfolio is determined by its asset allocation. In general, equities are the most risky asset class. Therefore, greater equity exposure implies greater risk. The beauty about risk-profiled portfolios is that they reduce the risk through exposure to all asset classes (equity, bonds, property, income and cash). But what sets one providers’ range of risk-profiled portfolios apart from another? What are the variables to look for when selecting a range of risk-profiled portfolios? More topically, what can the recent Olympic Games in Athens teach us about constructing risk-profiled portfolios? To answer these questions we must examine some key methods of portfolio construction. Asset Allocation There are at least three funds in a range of risk-profiled portfolios. The asset allocation of each fund is matched with a generic level of risk, whether aggressive (high equity content), moderate (medium equity content) or conservative (low equity content). Equity exposure is the key determinant of risk. But how much equity exposure is required and what is the right asset allocation for each portfolio? The most common way to establish this is an “optimization exercise” to examine historic correlations over the past 10 years and forecast returns over the next 10 years for each asset class. The optimizer indicates what asset mix is required to produce the highest possible return for any given level of risk. This exercise can be performed every year to ensure that if any of the variables change, the portfolio’s asset allocation can be adjusted. Below/above/right/left is a graphic representation of a recent optimization exercise carried out by a leading provider of risk-profiled portfolios, Stanlib Multi-Manager. Tactical or long-term allocations? Some providers offer tactical asset allocation (TAA). Others take a long-term strategic (LTS) approach. TAA tends to be more risky than LTS as it relies on the skills of one individual to correctly time the move between asset classes. TAA can also blur the lines between different risk profiles. The LTS approach on the other hand gives advisors and clients clarity on asset allocation at all times, which is extremely beneficial in the financial planning process. As explained, with the LTS approach, asset allocation is optimized annually. Investment philosophy Risk-profiled portfolios can be constructed using a single-manager or a multi-manager investment philosophy. In a single-manager approach, one asset manager takes responsibility for investing across all asset classes in the portfolio. The multi-manager approach relies on an independent team of dedicated experts selecting the best specialist managers in each asset class. In other words, managers are selected for their specialist abilities in a particular asset class and are included in the portfolio on this basis. Which approach is optimal? Do you use a combination of specialists or a generalist? Let’s look at a simple analogy. November 2004 Money Marketing Main Next
  • 30. The Athens Olympics In this year’s Olympics, the winner of the men’s decathlon was Romain Sebrle of the Czech Republic. Sebrle, a generalist focused on 10 disciplines, created a new Olympic record points-haul for the decathlon, defeating 32 opponents. It is however, interesting to compare his results in each individual event of the decathlon with those of the gold medal winner in each of the specialist disciplines. The results highlight the ability of a specialist to out perform a generalist, implying that focus leads to superior performance. In the high jump, Sebrle cleared 2.12m. The winner of the men’s Olympic gold in this specialist discipline was Stefan Holm from Sweden with a jump of 2.36m. Holm outperformed his decathlon counterpart by 11.3% or 24cm. In the javelin, Adreas Thorkildsen of Norway won gold with a throw of 86.5m, 22.7% further than Sebrle (who won that discipline in the decathlon). The gold medal winner (specialist) out-performed Sebrle (generalist) in each discipline. On average, Sebrle performed at 84.3% of the level achieved by his specialist counterpart, suggesting that specialization leads to superior results. In every discipline, the worst performance in the Olympic final was still good enough to beat the performance of the winning decathlete. You could have selected any combination of specialist finalists and still beaten the generalist. Investment implications Though small pockets of specialists exist, the local asset management industry is dominated by generalist providers. Generalists offer services in all disciplines (equity, bonds, property, income and cash), but may only have exceptional skills in one. For example, a strong bond team, a focused unit within the generalist, may be able to compete with specialist bond teams. In this context, portfolio construction involves selecting and combining specialist teams in each asset class. This should lead to superior performance relative to any single manager generalist managing risk-profiled portfolios across all asset classes. It is not easy to select and optimally blend specialist managers in a portfolio. Multi-managers specialize in analyzing asset management businesses. They have a thorough understanding of which asset managers have the best investments skills in each asset class. Accordingly, they construct risk-profiled portfolios using a combination of the best specialist managers in each asset class portfolio. By investing in a multi-manager risk-profiled portfolio, an investor not only benefits from asset class diversification but from specialist asset manager diversification and style diversification. By investing in a risk-profiled portfolio managed by generalist, an investor may inherit the manager’s weak disciplines. The generalist may be gifted in selecting equities, but have a weak bond team. Ideally, you may prefer to select them only to manage a portion of your equity portfolio. Asset manager diversification within a risk-profiled portfolio will also contribute to enhanced levels of diversification and lead to lower levels or risk relative to a single-manager risk-profiled portfolio. Conclusion Hiring specialist mangers in each asset class should produce superior results than employing a generalist. The Olympic analogy appears to confirm this. Admittedly, it is possible that all the best investment professionals might gravitate to one asset manager. But manager assessment and ranking systems developed by multi-managers indicate this is far from the case. The asset management industry is intensively competitive. People move around. Some asset managers have great equity teams, but only have average bond teams. Others are better at bonds and just average at picking equities. Optimising the risk-profiled equation involves the selection of specialist November 2004 Money Marketing Main Previous Next
  • 31. managers who have demonstrated skills over and above other managers in that asset class. Don’t ask Stefan Holm to compete in the shot put, javelin and the 100m because he will surely fail – just pick him for the high jump. We conclude that picking a risk-profiled product from any one generalist provider may be suboptional because you naturally inherit their weak skills. Building superior risk-profiled portfolios means not only offering investors asset class diversification, but also offering investors exposure to the best specialist investment skills in each asset class – thereby avoiding exposure to average managers. November 2004 Money Marketing Main Previous
  • 32. GOLF FOR HOSPICE SOWETO In an attempt to raise much needed funds for a new Hospice in Soweto, the Hospice Association and ADT Security are holding a golf day at the Houghton golf course on November 9. The new hospice will cater for hundreds of terminally ill people in Soweto who have, until now, had to seek help elsewhere. According to ADT’s Richard McGhee, the company has agreed to co-sponsor the event with a donation of R30 000. He said: “We have a moral and ethical responsibility to give back to the community and what better cause is there to assist than the sterling work already carried out by the Hospice Association? “ There is a desperate need for their work in Soweto and we are happy to support their efforts to help and assist the people of Soweto.” Corporate companies such as South African Breweries, the Ford Motor Company, Stanlib and Netcare will also be participating in the event. Ten four balls are still available and leading corporates who would like to participate in this worthwhile event can contact Danny Blumberg at the Hospice offices at 011-483-9170. Main 05 November 2004 Midrand Reporter
  • 33. STANLIB COMMITTED TO GAUTENG Stanlib was created in 2002 and represents the fusion of the Asset Management and Wealth Management businesses of the Standard Bank and Liberty Groups. In 2003, Safika Holdings purchased a 25.2% stake in Stanlib, which, at the time, was the most significant empowerment transaction in the financial services sector. Saki Macozoma became Chairman of Stanlib while Bruce Hemphill was appointed CEO. Today, Stanlib is South Africa’s largest unit trust manager and the country’s third largest asset manager. With over R150bn of assets under management, the company follows close on the heels of Old Mutual and Sanlam. Out of the ten leading asset managers in South Africa, Stanlib is one of only two based in Johannesburg. “A few years ago it became very fashionable for asset management companies to move to Cape Town,” commented Hemphill. “The argument ran that the quality of life was better there. However, this is the commercial and industrial hub of this country and increasingly the stepping-stone into Africa. “Asset management is a global industry and with the electronic communications we have today, money can be managed almost anywhere in the world. We also need to service our clients and particularly where our parastatal or government type clients are concerned, we need to be in Gauteng.” Hemphill quotes a couple of recent initiatives to prove his point. “We have been putting together a unique cash management service for provincial, municipal treasuries and medical aid schemes and it’s invaluable to be close to the respective authorities for consultation and advice. So many of these discussions are evolutionary and physical proximity makes a huge difference.” Another example he points to is Stanlib’s African initiatives. “We have businesses throughout SADC as well as in Kenya, Uganda and Nigeria. We work in tandem with Standard Bank’s Africa Division from Johannesburg, although the Western Cape link with Namibia is clearly crucially important. A direct spin-off is that many of the companies we manage money for in Africa have their head offices in Gauteng.” Stanlib is also playing an important role in the development of the Financial Sector Charter. It has representatives on the key industry working groups covering both access to financial services and targeted investments and empowerment funding. Hemphill observes, “The final outcomes that emerge on access and empowerment financing will, of course, have nationwide application but by virtue of our presence in Gauteng it would be reasonable to expect Stanlib to participate to a greater extent in Gauteng based initiatives. Obviously, this applies directly to issues such as Learnerships, where Stanlib is already sponsoring five Gauteng matriculants from September 2004.” With well over 500 employees, Stanlib also makes a significant contribution to Gauteng’s economy. In the main, Stanlib’s Socially Responsible Investment budget (0.5% of post tax profits) is channeled into the Liberty and Standard Bank Foundations. Social upliftment projects are their field of expertise and they naturally undertake both national and Gauteng based projects. For instance, Gauteng has been a torchbearer in rolling out the Liberty Learning Channel to our schools, the Braamfontein Regeneration Project, and funding for the Donald Gordon Building at the University of the Witwatersrand to house the School of Public and Development Management. The purpose of the School is to train public sector leadership and equip them to run the public service and public enterprises effectively. There is a project, however, in which the company takes great pride. Hemphill explains, “A couple of years ago it came to our notice that Leshata School in Orange Farm was recording superb matric results, delivered with very few resources. We initially teamed up with Microsoft SA to give them computers and software. Now we are sponsoring five of their best pupils with bursaries. It would be extraordinarily fulfilling for me if Stanlib eventually ends up employing them.” Hemphill is very optimistic about both Stanlib and Gauteng. “We have a huge pool of talent here in Gauteng. As that talent is trained and harnessed in our industry and others, it becomes, hopefully, our future customer base. It’s difficult to think of many places in the world where that dynamic is as powerful as it is here”. Main 01 November 2004 PMR
  • 34. PROBLEMATIC MARKETS HAVE INVESTORS FOXED STANLIB His advice is to “think strategically, not tactically; look for balance and don’t look to make any big bets in any one direction”. Investors are at the crossroads and looking desperately for direction, according to Stanlib, the biggest unit trust company in the country and the custodian of R150 billion in private and institutional wealth. Paul Hansen, Stanlib’s Director of Retail Investing, points out that the six-monthly figures to June 30 have “given pause” to many investment advisers who find it increasingly difficult to give clear-cut guidance to clients. Hansen’s job makes him the investment adviser’s investment adviser. His recommendation to intermediaries is that this is no time to try and outsmart the market as the biggest imponderable of all the rand now has a 30-month record of proving most experts wrong. His advice is to “think strategically, not tactically; look for balance and don’t look to make any big bets in any one direction”. Stanlib is giving a ‘big picture context’ to current developments to encourage a long-term strategic approach. “Market timing is difficult at the best of times,” says Hansen. “The current scenario makes it even more problematic.” Yardstick One of the difficulties is the contradiction in some numbers. A one-year reading of the equity market shows 24.9% growth, but this turns marginally negative when the yardstick is the six months to mid-year. The other difficulty is the “huge impact” of the rand. Over the last six months, the unit is considered to be the prime suspect behind the 16% retreat by resource stocks, the 5% decline by the JSE Top 40 and the 4% fall in the All-Share Index. Best-performing The best-performing sectors are those where rand-hedge stocks are under represented or don’t feature at all. In the six months to June 30, for instance:  Small-cap unit trusts are up 7%  The financial index is up 5%  The industrial index is up 5%  Standard Bank’s share-price hit an all-time high on July 15 th  Local fashion chain Edgars hit a new multi-year high about the same time  Income funds and listed property funds enjoy continuing investment attention largely because they are out of the rand’s reach and in fact benefit from rand strength because this help keep inflation down. Strategic Investment Planning Hansen argues that short timeframes kill perspective and that “the numbers usually favour those who take a long view”. He supports the argument by reference to the rand. In December 2001 it was worth 6 US cents. By early July 2004 it was worth 16.4 US cents, reflecting appreciation of 127% on a 30-month view. Yet in the 19 years from 1982 the unit lost 94% of its value. Between 1982 and mid-2004 it lost 84% of its value. Says Hansen: “We’ve reached a stage where almost every piece of investment advice contains the caveat ‘depending on what the rand does next’. “This tells me that this is a time for strategic investment planning, not tactical allocations.” Main 01 November 2004 PMR

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