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![VOLUME 04 | 2015 | 07
HOW DO WE CREATE
WEALTH IN THE
CURRENT CYCLE?
RETURNSARE
TEMPORARYFROMHERE
Howdowecreatewealth
fromthispointforwardin
thecurrentcycle?Before
answeringthisquestion,it’s
importanttounderstandthe
currentmarketconditions.
Webelievethisisbest
explained bythe testimony
ofAdolphMiller,former
FederalReservemember,
beforethe USSenate in 1931.
Hewastestifyingaboutthe
Fed’s1927interestratecuts
andaccelerationofopen
marketpurchases,which
fuelledthespeculationand
lowqualitycreditexpansion
thatculminated inthe1929
stockmarketpeakandthen
collapse:
“Itwasthegreatestand
boldestoperationever
undertakenbytheFederal
ReserveSystem,and,in my
judgment, resulted inone
ofthemostcostlyerrors
committed byitoranybanking
systeminthelast75 years…
Businesscould notuseand
wasnotaskingforincreased
moneyatthattime.”
Insimpleterms,Millerwas
sayingifconsumersor
businessarenotdemanding
moneyyetcentralbanksflood
themwithexcessivemoney,
thisleadstoamisallocation
ofcapital. Bothinvestors
andbusinessesallocate
theirwealthtoanyasset
givingthemabetterreturn
thanzero.Thismisallocation
resultsinexcessiverisk-taking
andthecreationofassetprice
bubbles.
Alltoooften,investment
discussionsmoveawayfrom
thesimpleprincipleatthe
heartofa goodinvestment
decision: howdo youcreate
realwealthoveracycle?
Aclient'sageorwhenthey
needtheirwealthisonly
relevanttothedegree
ofexcessiveriskyouare
preparedtotaketogenerate
thatrealwealth. Whethera
clientis20or82thesimple
goalisrealwealthcreation.
AREWEINABUBBLE…?
Setting aside the technical
debates about what defines
an asset bubble, we look at
the risk of a loss of wealth for
clients over the next part of
the cycle. We don’t attempt
to forecast the market; we
simply look at what the risks
are to clients’ wealth if they
are invested in the current
set of market conditions.
Historically, we have seen
that deep losses of clients’
wealth occur when the
market is expensive, as
illustrated in the graph below.
It shows that investing in
the market at the current
valuation level historically
has resulted in a loss of
more than half of the clients’
wealth within the next three
years. So, for example, you
can see that at single digit
price to earnings ratios (PEs)
the biggest loss a client
suffered historically was less
than 20%, while investing
in the market at PEs above
15, losses historically have
reached above 50%.
BY ROBIN EAGAR
HEAD OF STANLIB
MULTI-ASSET
FRANCHISE
S&P500 PE VS DEEPEST SUBSEQUENT 3-YEAR LOSS
6"(C"30"A"(
!
! <!Q,&!2#(.)+/ 0&%!WX!VF,/++&(!WXY 9!Q#>/2:0 ![ !#(!0/.1+4!)2!#+%!
! )*/#2!#?&(!]W9!)++!0)4!*,&!0).&!*,/27 R!
3(& !
*# ^?)+3&%!.)(;&*!#2!1&);!.)(7/20 !*# # !_
-#(!'+/&2*0< !
:! <!D&*3(2 0 !
9! !
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
0,0 2,5 5,0 7,5 10,0 12,5 15,0 17,5 20,0 22,5 25,0 27,5
S&P500 PE
Source: STANLIB Research/I-Net BFA
Current PE](https://image.slidesharecdn.com/4f50253a-5079-419c-8fdb-ed9267c65ea2-160910153940/85/15430-STANDPOINT-October-2015-F-PDF-7-320.jpg)
15430 STANDPOINT October 2015 F.PDF
- 1. VOLUME 04 |2015 | 01 VOLUME 04 | 2015 IS SOUTH AFRICA RUNNING OUT OF GROWTH OPTIONS? 05 How do we Create Wealth in the Current Cycle? How to Build Your Property Investment Moving on up… The Risk Spectrum Performance Fees and Treasury’s Draft Retirement Reform 11 17 21 07
- 2. VOLUME 04 |2015 | 02 STANLIBisanauthorisedfinancialservicesprovider. At STANLIB we never stop analysing the markets for new opportunities to grow our clients’ investments. It’s why we are proud to manage R560 billion in assets under management and administration. Speak to us to find out what our unwavering focus can do for your clients and invest with STANLIB today. www.stanlib.com Itcantakeupto10000 hourstobecomeanexpert. We have spent a collective 1200 years focused on the worldofinvestment.
- 3. VOLUME 04 |2015 | 03 05IS SOUTH AFRICA RUNNING OUT OF GROWTH OPTIONS? In Q2 2015, South African GDP declined by a shock -1.3%q/q annualised, compared with growth of +1.3%q/q in Q1 2015. 07HOW DO WE CREATE WEALTH IN THE CURRENT CYCLE? Returnsaretemporary fromhere.Howdowe createwealthfromthis pointforwardinthe currentcycle?Before answeringthisquestion, it’simportantto understandthecurrent marketconditions. 11HOW TO BUILD YOUR PROPERTY INVESTMENT Tomost,buyingahome is“investinginproperty”. However,whileitincurs runningcosts,youcannot deriveanincomefrom thehomeyoulivein. • SCAN TO SEE US ONLINE 14MTN — AFRICA'S LARGEST MOBILE OPERATOR MTNlistedonthe JohannesburgStock Exchangein1994.It currentlycommands over35% ofthemarket inSouthAfrica,withover 25millionsubscribers domestically. 18MOVINGONUP... THERISK SPECTRUM We know you need to beat inflation to reach your retirement goals and this requires you to move out of cash or money market funds and take on some investment risk. 22TAX-FREE SAVING INVESTMENT: YOUR LONG-TERM PARTNER Saving for retirement is a long-term goal and choosing the correct investment vehicle is a little bit like finding your long-term partner. GO DIGITAL WITH STANLIB’S eSTATEMENTS Stepbystep,STANLIBis changingthewaywedo thingstoplayourpartin preservingourworldfor futuregenerations.Our effortstobecomea paperlessenvironment involveofferingyouthe opportunitytoaccessyour investmentinformationat theclickofabutton24/7, 365daysayear. Ifyouwouldbehappyto receiveyourstatement andSTANDPOINTdigitally, pleasevisitSTANLIB Online toregister. Oursecureonlineservice, STANLIBOnline,provides accesstoyoureStatements andisavailabletoallexisting investors.Toregister, goto www.stanlib.comandlogonto STANLIBOnline.Then select Individual andfollowtheeasy stepstoregister.STANLIB Onlineoffersyoumanyother services,e.g.youcanviewyour welcomepacks,investment detailsandtaxcertificates.
- 4. VOLUME 04 |2015 | 04 BONGANI’S FOREWORD ATTHETIMEOF WRITINGTHIS FOREWORD,THE INTERNATIONAL MONETARYFUND(IMF) HADJUSTRELEASED THEIRWORLD ECONOMIC OUTLOOK ATTHEANNUAL IMF MEETINGSINLIMA, PERU. They provided a number of important updates; in particular, they revised down their growth forecast for Sub-Saharan Africa, especially Nigeria and South Africa, Africa’s two largest economies. The IMF’s growth forecast for Nigeria has been cut to 4.0% for 2015 and 4.3% for 2016. TheIMFalsoheavilyrevised downtheirestimateof SouthAfrica’sgrowthfrom 2.0%to1.4%for2015and from2.1%to1.3%for2016. Theseforecastsnowappear muchmorerealistic,butare stillslightlyaboveourown estimateof1.4%for2015and 1.1%for2016.Thedownward revisiontoSouthAfrica’s growthoutlookpartlyreflects theIMF’sconcernsaboutthe performanceofemerging markets. This means that external conditions are becoming more difficult for most emerging economies, including South Africa. The IMF explained that the world economy is at the intersection of at least three powerful forces. The first major force is China’s economic transformation —away from export and investment-led growth and manufacturing, in favour of a greater focus on consumption and services. The second force, related to China’s slowdown, is the fall in commodity prices. The third force is the impending increase in US interest rates, which can have global repercussions and add to current uncertainties. The next couple of months are going to be very interesting. I am sure that Kevin Lings, our Chief Economist, will keep you updated via the Weekly Focus as well as twitter: @lingskevin. Regards, Bongani Mageba Managing Director: STANLIB Retail NOTES FROM THE EDITOR Ittakesalargeteamtopull STANDPOINTtogetherevery quarterandIwouldliketo thankallthecontributors andmysub-editor,Olga Cukrowska,fortheirinputs. Wewelcomeyourinput. Ifyouhaveanyfeedbackor questions,pleasee-mailmeat Erica.stuart@stanlib.com. Regards, ERICASTUART Editor
- 5. VOLUME 04 |2015 | 05 OPTION ONE: INCREASE GOVERNMENT SPENDING TO BOOST GROWTH Increasing government spending to boost growth has been the South African government’s preferred method of stimulating the economy since the global financial crisis. The government has spent a considerable amount of money on growing the size of the public sector, paying higher wages and increasing employment. Consumption has been fuelled, but critical infrastructure bottlenecks have not been alleviated. The current slowdown in economic activity is starting to undermine tax revenue. The spending-more option is no longer easily available to the government as its debt levels are already high at around 44% of GDP, up from a low of 26% of GDP in 2009. The rating agencies have downgraded the country’s international credit rating, limiting the government’s ability to increase debt significantly. The government has made it clear that it will endeavour to control its salary bill and consumption spending to manage the fiscal deficit, reducing it to below 3% of GDP over upcoming years. It also means that there is less scope to boost public sector infrastructural development substantially—unless there is a sizeable shift of spending away from consumption into infrastructure. OPTION TWO: PRIVATE BUSINESS SECTOR EXPANSION, INCLUDING NEW BUSINESS VENTURES Privatebusinesssector expansion,includingnew businessventures,aresimply nothappeninginSouthAfrica. Instead,privatesectorfixed investmentisessentially stagnating—growingbyamere 0.1%q/qinQ22015.Business isnotevenspendingenough tomaintainthemachineryand equipmentitalreadyhas,let aloneexpandorinvestinnew technology. Underthesecircumstances, productioncapacitywill stagnateandultimately deteriorateasequipment ages.Italsoimpliesthatprivate employmentwillremain subdued. Itseemsclearthatthe privatebusinesssectorlacks confidence.Forexample, theSouthAfricanChamber ofCommerceandIndustry’s businessconfidenceindex reacheda16-yearlowinAugust 2015.Frequentpoweroutages, subduedcommodityprices, ongoinglabourunrestandan uncertainpolicyenvironment havecontributedtotheweak confidencelevel. IS SOUTH AFRICA RUNNING OUT OF GROWTH OPTIONS? BY KEVIN LINGS STANLIB CHIEF ECONOMIST The current slowdown in economic activity is starting to undermine tax revenue. The spending- more option is no longer easily available to the government as its debt levels are already high at around 44% of GDP, up from a low of 26% of GDP in 2009. 1 2 INQ22015,SOUTHAFRICANGDPDECLINEDBYASHOCK-1.3%Q/QANNUALISED, COMPAREDWITHGROWTHOF+1.3%Q/QINQ12015. The decline in Q2 2015 GDP was broad-based, including a fall in agriculture (-17.4%q/q due to drought), mining (-6.8%q/q), manufacturing (-6.3%q/q), electricity (-2.9%q/q) and retail trade and accommodation (-0.4%q/q). These sectors have been significantly hurt by regular bouts of electricity outages and falling confidence. Overall, during 2014 the South African economy grew by a mere 1.5%, down from 2.2% in both 2013 and 2012. For 2015 as a whole, we have revised the growth projection down to a weak 1.4%, sliding further to 1.1% in 2016. South Africa is going to struggle to lift its growth rate meaningfully back up to 2.0% or higher over the next 18 months, given the electricity, labour and low-confidence constraints. THERE ARE BROADLY FIVE OPTIONS FOR GROWING SOUTH AFRICA’S ECONOMY:
- 6. VOLUME 04 |2015 | 06 South African corporate deposits are sitting at a record high of R690 billion, while corporate balance sheets are, largely, in good shape with relatively low debt and impressive earnings growth. Yet, the private sector remains unwilling to use this cash or leverage their balance sheets for local expansion. This is despite the relatively low cost of capital due to low interest rates. To some extent, local companies are looking for investment opportunities in the rest of Africa and offshore, but they are still not committing a large portion of their balance sheet to these ventures. This situation is not unique to South Africa. Private sector fixed investment remains subdued in many parts of the world. OPTION THREE: INCREASE EXPORTS The argument that a weakening rand will boost the South African economy through a surge in our exports has not proved to be correct. Although the rand has lost 50% of its value since the beginning of 2011, the growth in exports, when measured in US dollars, has been somewhat lacklustre over the past three years. Thisdisappointingexport performancepartlyreflectsa slowdowninworldtrade.Prior totheglobalfinancialmarket crisis,worldtradewasgrowing comfortablyataround8%. Inthepastyear,worldtradehas slowedtoagrowthrateofless than1%.Inaddition,theimpact ofdomesticinfrastructural bottlenecksandacontraction inSouthAfrica’smanufacturing capacityhavealsohurtour exports. OPTION FOUR: BOOST HOUSEHOLD CONSUMPTION Whilethisisasub-optimal growthstrategy,SouthAfrica hasbecomeaconsumption- driveneconomy.Privateand publicsectorconsumption madeup79.6%ofGDPinthe firstquarterof2015.Although consumer confidence has fallen, South Africans have continued to shop and the retail sector is growing at between 2% and 2.5% a year. Thisoptioncouldbeunder threatifformalsector employmentkeepsdeclining. Overthepastyear,SouthAfrica lost43000formalsectorjobs.If massivejoblossesinthemining andotherindustriescontinue, andtoomanySouthAfricans areoutofwork,household consumptionwillstartdeclining andtheeconomywillgointoa recession. OPTION FIVE: A PUBLIC-PRIVATE PARTNERSHIP Thegovernmentcouldlookat waystopartnerwithbusiness inthedevelopmentofvital projects,particularlyeconomic infrastructure.Public-private partnershipshaveworked wellinmanyothercountries. Infact,wehaveourown exampleinSouthAfricaofa highlyeffectivepublic-private partnershipintheDepartment ofEnergy’sRenewable EnergyIndependentPower ProcurementProgramme,and developmentandmanagement ofsomeroadnetworks. Concernsaboutthepublic sector losingcontrol of keyutilitiesareoverstated. Thegovernmentcanretain ownershipandstrategic controlofinfrastructural developments,butinvolvethe privatesectorinthedesign, fundingandmanagement oftheprojects.Inthefew instancesSouthAfricahas embarkedonthisapproach theoutcomeshavebeen beneficialforallparties concerned, especiallythe end-user. Thisdevelopmentmodelcan beappliedacrossabroad rangeofsectors,including socialinfrastructure.Agood exampleisthedevelopment ofthehealthsystemby Netcare,inLesotho. This does not need a plethora of special incentives or tax concessions to succeed. Instead, as long as the projects are costed correctly, with sufficient understanding of maintenance costs and realistic projections of utilisation rates, the projects can become self-funding, with modest support from the state. It would ease the burden on the state’s budget. There is also no reason why these projects cannot attract foreign funding. It is unrealistic to expect that the public sector can fund the required infrastructural development of the country within a reasonable time. The public sector’s balance sheet is simply not strong enough. However, by government articulating a clear set of guidelines and objectives, many projects could be financed by the private sector, still allowing the government to retain ownership and oversight. Doing so would lift the country’s growth rate, boost business and consumer confidence, increase tax revenue receipts and encourage employment. THISSITUATIONISNOTUNIQUETOSOUTH AFRICA.PRIVATESECTORFIXEDINVESTMENT REMAINSSUBDUEDINMANYPARTSOFTHE WORLD. 3 4 5
- 7. VOLUME 04 |2015 | 07 HOW DO WE CREATE WEALTH IN THE CURRENT CYCLE? RETURNSARE TEMPORARYFROMHERE Howdowecreatewealth fromthispointforwardin thecurrentcycle?Before answeringthisquestion,it’s importanttounderstandthe currentmarketconditions. Webelievethisisbest explained bythe testimony ofAdolphMiller,former FederalReservemember, beforethe USSenate in 1931. Hewastestifyingaboutthe Fed’s1927interestratecuts andaccelerationofopen marketpurchases,which fuelledthespeculationand lowqualitycreditexpansion thatculminated inthe1929 stockmarketpeakandthen collapse: “Itwasthegreatestand boldestoperationever undertakenbytheFederal ReserveSystem,and,in my judgment, resulted inone ofthemostcostlyerrors committed byitoranybanking systeminthelast75 years… Businesscould notuseand wasnotaskingforincreased moneyatthattime.” Insimpleterms,Millerwas sayingifconsumersor businessarenotdemanding moneyyetcentralbanksflood themwithexcessivemoney, thisleadstoamisallocation ofcapital. Bothinvestors andbusinessesallocate theirwealthtoanyasset givingthemabetterreturn thanzero.Thismisallocation resultsinexcessiverisk-taking andthecreationofassetprice bubbles. Alltoooften,investment discussionsmoveawayfrom thesimpleprincipleatthe heartofa goodinvestment decision: howdo youcreate realwealthoveracycle? Aclient'sageorwhenthey needtheirwealthisonly relevanttothedegree ofexcessiveriskyouare preparedtotaketogenerate thatrealwealth. Whethera clientis20or82thesimple goalisrealwealthcreation. AREWEINABUBBLE…? Setting aside the technical debates about what defines an asset bubble, we look at the risk of a loss of wealth for clients over the next part of the cycle. We don’t attempt to forecast the market; we simply look at what the risks are to clients’ wealth if they are invested in the current set of market conditions. Historically, we have seen that deep losses of clients’ wealth occur when the market is expensive, as illustrated in the graph below. It shows that investing in the market at the current valuation level historically has resulted in a loss of more than half of the clients’ wealth within the next three years. So, for example, you can see that at single digit price to earnings ratios (PEs) the biggest loss a client suffered historically was less than 20%, while investing in the market at PEs above 15, losses historically have reached above 50%. BY ROBIN EAGAR HEAD OF STANLIB MULTI-ASSET FRANCHISE S&P500 PE VS DEEPEST SUBSEQUENT 3-YEAR LOSS 6"(C"30"A"( ! ! <!Q,&!2#(.)+/ 0&%!WX!VF,/++&(!WXY 9!Q#>/2:0 ![ !#(!0/.1+4!)2!#+%! ! )*/#2!#?&(!]W9!)++!0)4!*,&!0).&!*,/27 R! 3(& ! *# ^?)+3&%!.)(;&*!#2!1&);!.)(7/20 !*# # !_ -#(!'+/&2*0< ! :! <!D&*3(2 0 ! 9! ! -60% -50% -40% -30% -20% -10% 0% 10% 20% 0,0 2,5 5,0 7,5 10,0 12,5 15,0 17,5 20,0 22,5 25,0 27,5 S&P500 PE Source: STANLIB Research/I-Net BFA Current PE
- 8. VOLUME 04 |2015 | 08 To be absolutely clear regarding our view, we believe we are now in an equity bubble and a highly advanced one. The equity market is above 1972, 1987 and 2007 market levels and has only been higher in the final periods leading up to the 2000 Tech Bubble. This can be measured on a variety of metrics, each with their pros and cons. The normalised PE (Shiller PE), Tobin’s Q or simply an old Warren Buffet favourite of market capitalisation over GDP, all say the same thing: we have only been at these levels less than 10% of the time (as seen in the graph below). In addition to buying the market at extremely elevated levels, an investor today would be buying a over-valued market on peak margins too—an extremely toxic mix when thinking about real wealth creation for clients. We prefer to invest based on sound principles that align to our clients’ real wealth creation as opposed to hope. Returns from here are, in our opinion, temporary. CURRENT PSYCHOLOGY OF THE MARKET A zero interest rate policy drives strong emotional behaviour. Investors are willing to take a risk, no matter how extreme, to avoid the discomfort of holding cash. This normal emotional behaviour has historically resulted in poor investment decisions and makes it difficult to generate real wealth for clients over the second part of the cycle. We are constantly engaging with investors who are trying to justify the market levels based on the fact that markets have been higher before and that low interest rates justify higher valuation levels. All low rates do is bring forward the returns you would experience over the cycle. Low rates do not mean perpetual higher returns, they mean we have already experienced them as they have been brought forward and from here we can expect, at best, lower returns for the next part of the cycle. The current valuations assume interest rates would be very low for at least a decade. Low rates in practice mean excessive risk taking and a misallocation of capital. This is evident in the number of margin accounts in China and the US markets today and the excessive issuance of high-yield debt by corporate America. In our view, equity market returns from here on are temporary. Based on current market conditions we have no evidence on which to accept market risk at this point and, therefore, will not take market risk. IT’S NOT JUST EQUITIES; YOU HAVE TO THINK ABOUT BONDS AS WELL We are of the view that, more than ever before, investors need to be aware of the level of all asset classes at this point in the cycle. One of the benefits of investing in a multi-asset portfolio is that when one asset class, equity in this case, suffers a loss an alternative asset class, for example bonds, provides protection to your overall investment. This is one of the benefits of asset class diversification. As with all asset classes, the starting valuation is important. This is evident in the graph on the next page, which shows how a theoretical 60/40 (equities/ bonds) balanced portfolio would have protected clients’ wealth in 2008 when the equity market declined 42%. MARKET CAPITALISATION OVER GDP 0% 20% 40% 60% 80% 100% 120% 140% 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 S&P Market Cap / Nominal US GDP Source: Bloomberg Tech Bubble Current levels have only been reached over brief periods of history: Mkt Cap / GDP 6% Financial crisis
- 9. VOLUME 04 |2015 | 09 At the time, bonds protected clients’ wealth by delivering a 17% return for investors over the same period. Bonds thereby mitigated clients’ loss of wealth by more than half of what it could have been. Interestingly, this was even more evident in the 2002/3 market correction. However, to generate the capital returns in bonds evident in the previous cycles, two important components are necessary: the starting yield needs to be high and inflation needs to be high. This means that by the end of the cycle inflation and yields have declined, generating large capital returns for bond holders. These ingredients are not in place at the moment as both starting yields and inflation are low. SA MARKET RETURNS DURING MARKET CRASHES -60% -50% -40% -30% -20% -10% 0% 10% 20% 1969-1971 1974-1976 1980-1982 1987-1988 1990-1991 1992-1992 1998-1998 2002-2003 2008-2009 60/40 Portfolio Return Equity Returns Bond Returns Source: I-Net BFA Wethinkitisevenmore important,giventhehigh equitymarketlevelsandthe limitedimpactofthebond protection,toreduceour equityallocationtoprotect capitalforourclientsbasedon experiencesofpreviouscycles. Thewaywethinkaboutclients’ realwealthcreationcanbe illustratedbysimpleexample indicatedbelow.If aclient investedR10milliontodayinan equityfund(redline)andthe marketgavereturnsof10%per annumforthenexttwoyears andthensufferedadrawdown inyearthree,evenwiththe traditionalstrongreboundin themarketpostthecorrection, theclientwouldbeworseoff overthefull five-yearperiod. Thissimplisticallyillustrates ourviewthattogenerate realwealthoverthenextleg ofthecycle,clients'require assetallocationpositionsthat protecttheirwealthduringa marketfall. Itisnotimportantifclients donotparticipateinthefull equityreturns,asreturns aretemporaryfromhere on,untilacorrectiontakes place.Intheeventthatyou believethatourviewiswrong, wewouldputforwardthat returnsfromhereonare asymmetricalinnature,with limitedupsideandsignificant riskofamateriallossofclients’ wealth. GENERATING REAL WEALTH OVER CLIENTS CYCLES 9 329 170 11 356 365 10 000 000 5 000 000 6 000 000 7 000 000 8 000 000 9 000 000 10 000 000 11 000 000 12 000 000 Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Equity Only (Real Returns) Balanced Fund (Real Returns) Inflation at 6% (Real Return) Source: STANLIB Research
- 10. VOLUME 04 |2015 | 10 RISK PROFILE OF OUR BALANCED FUNDS 61% 9% 9% 5% 13% 33% 18% 0% 0% 13% 9% 26% 0% 10% 20% 30% 40% 50% 60% 70% SA Equity International Equities Commodities SA Property SA Bonds International Bonds & Cash SA Income Source: STANLIB Performance Fund & Cash Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Current Protected Equity Structure WHYSTANLIB? We have lowered the risk profile of our Balanced Funds by reducing our equity exposure in favour of high-yielding income earning products, effectively moving down the risk curve on an absolute and relative basis. When we look back at history we don’t expect clients will regret the path we have chosen by the time we complete the cycle. There are enough managers willing to provide you with market risk from here—we are not one of them. We are positioned to create long-term wealth for our clients—not to try to squeeze out the next bit of marginal returns to move up a ranking table. STANLIB balanced funds are positioned differently to peers and our focus remains on doing what is right for our clients. STANLIBBALANCEDFUNDSARE POSITIONEDDIFFERENTLYTOPEERS ANDOURFOCUSREMAINSONDOING WHATISRIGHTFOROURCLIENTS.
- 11. VOLUME 04 |2015 | 11 TOMOST,BUYINGA HOMEIS“INVESTINGIN PROPERTY”.HOWEVER, WHILEITINCURS RUNNINGCOSTS,YOU CANNOTDERIVEAN INCOMEFROMTHE HOMEYOULIVEIN. Soeventhoughitisanasset,it isnotaliquid one—youcannot tapintoitwhenyouneedcash. Youwould havetosellyour houseto realise itsvalue,but thenwhere would youlive? Investorshave twomain routesto followwheninvesting inproperty:investingin public propertycompanieslisted ontheJohannesburgStock Exchange(JSE),orinvestingin unlistedordirectproperties. Within the listed property options,there isactiveor passive investing,orablend ofboth. AtSTANLIB,there arefour differentwaystoaccess purepropertyinvesting. Threelistedoptions includingsingleactiveasset management,singlepassive assetmanagementand multi-manageractiveasset management.Thereisalso theunlisted optionofinvesting indirectproperties. Inthis article,we outlinethekey featuresandbenefitsof each. WHYPROPERTY? Apropertyinvestment appealstomanypeople becauseitseemsmore tangiblethan,say,ashare. Itisnotmerelyapiece of paper thatentitlesyouto somedividends,itisbrickand mortar.Manyinvestorsfind thatreassuring. However, other than sentiment, there are technically valid reasons to invest in property. As an asset class, property behaves differently to both bonds and equities. This lack of correlation means that when the one asset class falls in value, the other may rise, cancelling out at least some of the former’s fall. This is the overriding principle behind diversification. Investing in multiple asset classes at any one time smooths out the returns in your portfolio, without necessarily reducing the long-term return. Secondly,property investments,listedorunlisted, havebond-likecharacteristics becausetheypayyouaregular andstable income—andunlike a bond,youcanrelyongrowth ofyourincome.Thegrowing incomestreamofferedby propertymakesitanattractive assetclass. Where the underlying properties themselves are revalued annually in the unlisted space, a portfolio of properties is revalued by the market daily, minute-to- minute, in the listed space. While some investors focus on yield and others focus on capital, it is the hybrid nature of property as an asset class in its own right that makes it attractive. ACTIVEINVESTING –CAPITAL GROWTH ANDINCOMEGROWTH A single active manager, like STANLIB’s Keillen Ndlovu, Head of Listed Property Franchise, looks at the South African Property Index (SAPI) with the view to outperform it. While a passive manager has to mirror the index, an active manager has to outperform the index. Keillen’s philosophy is to generate a source of income and show capital growth over time. He does this by investing in shares of listed property companies. These shares are tradable on the JSE and, therefore, provide great liquidity. The underlying companies are purely property companies—so they own and manage a variety of properties, like offices, shopping malls and even residential. TheListedProperty Franchise'sinvestorpromise isthattheycanachieveoneto twopercentoutperformance onaverageperannum— usuallyachievingcloserto2% annualisedoutperformance, leavingtheinvestorwithalittle moreafterfees.Thisisthe firstadvantageofinvesting inpropertyviaanactively managedfund. “There’saperceptionthat activefundmanagersunder- performtheindex,butwe’ve consistentlyoutperformed itthroughallperiodssince inceptionin2002.There’s aplaceforpropertyina portfoliowiththebenefitof amorepredictableincome streamandlessvolatilitythan otherassetclasses,”says Keillen. Thesecondadvantageis thatanactivemanageris hands-onandconductsdeep researchintothecompanies beforeinvesting.Thisincludes highengagementthrough HOW TO BUILD YOUR PROPERTY INVESTMENT BY KEILLEN NDLOVU, HEAD OF LISTED PROPERTY FRANCHISE BY MALCOLM HOLMES, HEAD OF PORTFOLIO MANAGEMENT: STANLIB MULTI-MANAGER BY LEN JORDAAN, HEAD OF EXCHANGE TRADED FUNDS BY ALEX PHAKATHI, FUND MANAGER: LIBERTY PROPERTY PORTFOLIO
- 12. VOLUME 04 |2015 | 12 activities like site visits, results presentations and direct meetings with the companies. Based on his research, the active fund manager will sell shares when over-valued, or buy more when undervalued. Duetotheactivemanager’s goalofmaximisingincome foraninvestor,theytendto haveanoverweightposition incompaniesdeliveringhigh incomegrowth,generally shyingawayfrom companies thatdo notpaydividendsor distributions. STANLIB’sListed Property Franchiseseeksouthigher, sustainableandquality income.Intheretailspace, forexample,theylook for dominantshoppingcentres thathavelongleasesand qualitytenants. Intheoffice space,theyoptforprimeor premiumgrade(PGrade) propertieswithstrong, proactivemanagementand strongrentalincome growth. Theymakewell-informed decisionsand takelong-term positions,sittingonthem and adjustingthemovertime.This isn’ta tradingportfolio where theywould betradingin-and- outon aweeklybasis. Availableonmostplatforms, activepropertyinvesting throughSTANLIBismore accessiblethansome maythink. Theminimum investmentisR 500viaa monthlydebitorderor R5000,asaonce off-lump sum. PASSIVEINVESTING —MOSTAFFORDABLE ACCESSTOPROPERTY INVESTING Apassivepropertyportfolio alsoinvestsinproperty shares.However,thereisno shareselectionprocess.The passivemanagerinvestsinall thesharesrepresentedinthe listedpropertyindex,inthe sameproportionsastheyare representedintheindex. Thekeyadvantageofpassive investinginpropertyisthat itismostaffordable.The totalexpenseratioforretail investorsonSTANLIB’spassive fundsis48basispoints,less thanhalfapercent. STANLIBofferstwopassive propertyfunds: Oneisanexchangetraded fund(ETF)thattradesonthe JSElikeashare.Theotherisa normalunittrust,orcollective investmentscheme. These twofundstracktwodifferent propertyindices,giving investorswiderchoice. TheETFhasbeengoingthe longestandtrackstheSAPI, anindexofprimarylisted propertysharesontheJSE.This excludescompaniesthathave aprimarylistingoffshoreand secondarylistingonourstock exchange. Thesecond,theunittrust, offersinvestorsexposuretothe cappedpropertyindex(PCAP), anindexofpropertycompanies listedontheJSE,regardlessof whethertheirlistingisprimary orsecondary. Whenbuyinginto thePCAP,you’reinvestinginthe 20biggestpropertycompanies listedontheJSE,rankedby marketcapitalandliquidity. ThePCAPalsocapsthe maximumexposureofanyone companyat15%,meaningyou won’tgetoverweightexposure toanyparticularproperty company.Abigproperty companycouldrepresent21% oftheSAPIbutwillonlybe15% ofthePCAP,forexample. WhileETFsareasimplewayto engageinpropertyinvesting, especiallyforsomeonewho doesn’tknowanythingabout property,thisoptionhasn’thad muchtractiontodate. “Themajorityofthemarket stilllikestoinvestbycollective investmentschemes,because thistypeofvehicleiswell establishedandunderstood. Byvirtueofthefactthatthe PCAPindexhasexposureto offshorelistedcompanies, (approximately35%),thefund thattracksitprovidesslightly morerand-hedgeexposure thantheSAPI. “Propertybehavesdifferently fromequityandbonds,souse ittodiversifyyourexposure. Ifyou’relookingforaffordable access,apassivefundisthe waytogo.Ifyou’relooking tomaximiseyourincome, thenit’sworthgoingforan activemanagerwhereyou canpickthestocksthatgive highyield.Weseepassives ascomplimentarytoour activemanagerandasacore holding,”saysLenJordaan, HeadofExchangeTraded FundsatSTANLIB. MULTI-MANAGED PROPERTY INVESTMENTS - DIVERSIFICATION Whenyouhavefourasset managersinthemix,you’re notentirelyreliantonone gettingit100%rightallthetime. Diversificationisthekeybenefit tohavingmultiplemanagersin yourpropertyportfolio. Amulti-managerselectsan optimalblendofseveralskilled activeassetmanagers,each withtheirowninvestment styleandphilosophy. Extremehighsandlowsare mitigatedthroughtheskill ofamulti-managerwho hand-picksthebestasset managers. Thecombination ofreallygoodassetmanagers isdesignedtogiveinvestors outperformanceoftheindex overtime.STANLIBMulti- Managertakesitonestep furtherbyalsoincludingan allocationtoapassivePCAP mandate,whichhelpsto provideconsistencyofreturns andcontrol costs. Thereismoretopickingactive managersthanfocusingon pastperformance.Lookingat theirinvestmentprocesses, themulti-managerasks, "Do theyhavetheinvestmentskill andprocessestooutperform thebenchmarkand dothey adddiversitytotheportfolio relativetotheotherskillful managersintheportfolio?" MalcolmHolmes,Headof PortfolioManagementat STANLIBMulti-Manager, wrapsitupbysaying, “Weaim toproduceabove-average returnsforourinvestorsat belowaveragerisk.Toachieve this,weselectwhatwebelieve arereallygoodmanagersand letthemdowhattheydowell. Theblendofmanagershelps toreduceportfoliorisk.” DIRECTPROPERTY INVESTMENT – SUSTAINABLE PREDICTABLE RETURNS,LOWER- VOLATILITY Thecorebenefitofinvestingin unlistedordirectpropertyliesin thepredictablereturnsitoffers. Investorsarealsonotexposed tothevagariesofthemarketor samevolatilityastheyarewith listedproperty.Youcandrive pastSandtonCity,forexample, andpointtoyourbrick-and- mortarinvestment. TheLibertyPropertyPortfolio, managedbytheSTANLIB DirectPropertyFranchise, isaR30billionportfolio comprising30properties, includinglandmarkshopping centres,13hotelsandseveral officebuildings. Investors derivereturnontheir investmentinthisfundfrom rentals.Onceoperational costshavebeendeducted,the netpropertyincomeisadded totheannualcapitalgrowth, (differenceinthevaluationof thepropertyatthestartand endofayear),andthisisthe investors’return. TheLibertyPropertyPortfolio promisesinvestorsareturn ofCPI+5%overanyfive-year rollingperiod.Theyhave consistentlyachievedthisfor overfiveyears.
- 13. VOLUME 04 |2015 | 13 Tobenefitfrom the promised return,investorsneed tobe invested forthe long-term(a minimum offiveyears). What makestheincomepredictable isthatatleast85% ofthe rental incomeinthe portfolio iscontractual,within-built contractualrentalescalations of7.5%to 9% eachyear, makingthisaninflationhedge. “Inoverthepasttenyears retailproperty,big shopping centresinparticular,have donebetterthantheother typesofproperty.Inour particularportfolio wehave someof themosticonic propertyassetsinthe country.Ourportfoliois about67% investedinretail andthoseretailproperties include twosuper-regional shoppingcentres(over 100m2):Eastgateand SandtonCity.Super-regional shoppingcentresare more resilientinleanyears comparedtoone-wing shopping centres,because theyhavea verygoodtenant mix.Weconstantlyensure thatourportfolio isahead of themarketintermsoftenant mix.Wewerethefirsttobring ZaraandPrada to Africa, forexample.InMay2015we launchedDiamondWalkat SandtonCitythathouses 11international brands includingLouis Vuitton, JimmyChooand Todds”, says,AlexPhakathi,Fund Manager: Liberty Property Portfolio. Retailinvestorsgainentryto thedirectpropertyportfolio via acquiringa policyor productthroughLiberty. Sizeable corporate investors caninvestinthisfund. WHYPROPERTY HAS DONESOWELLOVER THEPAST20YEARS Thetrendinproperty investmenthaschangedquite dramatically in South Africa overthepasttwentyyears. “Interestingly, in South Africa, property investing has actually taken off dramatically. It used to be dominated by retail investors. In the early days, if an institutional investor wanted to get into property, he might have bought one or two shares. However, we’ve seen a huge pick-up in the property weightings of pension fund investments over the past ten years. I’d say that if a pension fund had 2% invested in property ten years ago, that would have been considered an overweight. "Today,Iestimatethat theaveragepensionfund probablyhas5%investedin property.It’sthisincreased allocation towardsproperty andincreaseddemandfrom institutionalinvestorsthat hasboostedtheproperty investmentmarketand pushedpricesup.Thisiswhy propertyhasactuallydone verywellovertherecent decades,”saysMalcolm Holmes. Anotherinfluentialfactoron thelocalpropertymarkethas beenincreasedinvestment fromthirdpartyinvestorslike foreigners.Malcolmsays, “TheylikeSouthAfrican propertybecauseitprovides aniceneatreturnstream, brokendownbetweencapital andincome. The income is quite stable and has grown steadily at around 7.5% per annum over the last five years. Over the next year, an investment in property will produce an income yield of around 7%, which is attractive relative to the dividend yield on equity of about 3%. Whatyouarenowfinding isthatmanySouthAfrican companiesarebeingnoticed becausetheyhavemadetheir wayintoindicesglobally. This hascreatedforced-buying whichhaspushedupprices andthemarketcapitalisation ofpropertyinSA.Byway ofexample,thecombined weightoflistedpropertyin theFTSE/JSEAllShareIndex hasgrownfromaround1% ten yearsagotoaround6% today,” saysMalcolm. INCONCLUSION Whetherit’ssingleactiveasset management,singlepassive assetmanagement, multi- managerordirectproperty investmentthatappealsmost toyouasaninvestor, you need toweighuptheprosandcons ofeachandbecomfortable withwhichevermandateyou select. Alternatively,youcanleave thisdecisionuptotheexperts bychoosingoneofourmany multi-assetfundsthatcontain propertyexposure. IN THE PAST TEN YEARS RETAIL PROPERTY, BIG SHOPPING CENTRES IN PARTICULAR, HAVE DONE BETTER THAN THE OTHER TYPES OF PROPERTY. IN OUR PARTICULAR PORTFOLIO WE HAVE SOME OF THE MOST ICONIC PROPERTY ASSETS IN THE COUNTRY
- 14. VOLUME 04 |2015 | 14 MTNLISTEDONTHE JOHANNESBURGSTOCK EXCHANGEIN1994. ITCURRENTLY COMMANDSOVER35%OF THEMARKETINSOUTH AFRICA,WITHOVER25 MILLIONSUBSCRIBERS DOMESTICALLY. However,theMTNsuccess storyexpandsfarbeyondSA borders.Ithasestablisheda firmfootprintin22countries acrossAfricaandtheMiddle East,withover230million subscribers.Moreover,itisthe numberoneoperatorin15of its22markets. WHAT’S BEHIND THE RECENT SHARE PRICE DECREASE? The MTN share price has been steadily decreasing in the last few months. Despite this, STANLIB has put this stock on our buy list. While this might seem counter- intuitive at first blush, we have very good reasons for having done so. When looking at any share price movements, it is important to investigate the reasons for them. Is the price depreciating because the business is in trouble, or is it a matter of sentiment or short- term shocks? As investing is a long-term game, it is important not to get caught up in short-term factors. In the case of MTN, we believe the current subdued price is due to short-to-medium term shocks and investor sentiment, rather than any fundamental shortcomings in MTN’s long-term growth strategy. Here are a few reasons for this view: THE HEADWINDS FROM NIGERIA MTN’s top two markets by revenue, Nigeria and South Africa, account for more than 60% of its current profits. Nigeria and South Africa are both resources-driven economies. Resource prices have been under pressure lately—for a myriad of reasons. When commodity prices decrease, the Gross Domestic Products (GDPs) of these two countries suffer, as a large part of the national income is derived from the sale of resources. Nigeria’s main export is oil. As we all know, oil prices have fallen rapidly over the past 12 months. Low oil prices mean low values for the country’s main export, translating into lower government income, lower GDP growth, and ultimately, an end-consumer under increased pressure. MTN derives over 40% of its revenues from Nigeria. A subdued macro-economic climate in that country translates to a slow-down in revenue for MTN. Inpart,thisisthereason for therecentslideinMTN’sshare MTN — AFRICA'S LARGEST MOBILE OPERATOR SHAREPRICEOFMTNANDVODACOMVSALLSHAREINDEX 60 70 80 90 100 110 120 2014 O N D F M A M J J A 2015 12 month price performance rebased to 100 Source:I-Net Vodacom AllShare MTN MTNSUBSCRIBERSPERCOUNTRY Cameroon 10 363 000 Nigeria 62 813 000 Benin 3 913 000 Guinea-Bissau 705 000 Guinea-Conarky 3 485 000 Liberia 1 300 000 Cote D’ivoire 8 488 000 Ghana 14 886 000 Congo Brazzaville 2 128 000 South Africa 28 504 000 Source: MTN Cyprus 354 000 Swaziland 889 000 Botswana 1 784 000 Zambia 4 901 000 Rwanda 3 588 000 Uganda 11 146 000 South Sudan 982 000 North Sudan 8 757 000 Yemen 5 239 000 Afghanistan 6 487 000 Iran 44 146 000 Syria 5 765 000
- 15. VOLUME 04 |2015 | 15 BY FRED TEELING-SMITH, INDUSTRIALS ANALYST BY OLGA CUKROWSKA, TECHNICAL MARKETING MANAGER, STANLIB price.Marketspeculators lookattheoilpricereducing andinferthatMTN’sNigerian operationsare goingtosuffer. They,therefore,selloffMTN basedonthisshort-term viewand drivetheshareprice lower. This trend is easy to discern from the graph above that plots the oil price versus the MTN share price in dollars. Even though the MTN share price fundamentals have no direct dependency on the oil price, the market forces have made these two counters move in tandem. Due to its large exposure to Nigeria, they are using the oil price as a proxy for MTN’s success. The shortcoming of a proxy is that it is, by its nature, an approximation. So the market using the oil price as a proxy for MTN’s revenue, due to its approximate nature, has in our opinion, led to an undervaluation of an otherwise solid stock. There is another supply and demand mechanism at play here. A lower US-dollar value of oil exports means a lower demand for the Nigerian currency, the Naira. As with all supply and demand equations, a lower demand leads to a lower price. In the case of currencies like this, it translates into a weakening in the Naira against other currencies. A weakening currency is normally good for a country’s economy because it makes their exports cheaper for other countries to buy. In Nigeria, its central bank has allowed the official exchange rate to weaken to around 200 Naira to one USD. However, there is a parallel unofficial market for the USD in Nigeria, where it is trading between 230 and 250 Naira. This parallel market is more nimble than the official exchange rate and is, therefore, a good indicator of the direction the currency may take. Thus, there is the risk of further official devaluation in due course. As mentioned, the devaluation will be good for the economy but not good for MTN’s rand earnings. MTN repatriate all Nigeria’s earnings back to SA, so a REVENUEANDEBITDABYREGION(12MONTHSTO30JUNE2015) Revenue contribution EBITDA contribution Source:MTN SouthAfrica Uganda RestofSEA Nigeria Ghana Cameroon IvoryCoast RestofWECA Iran Syria RestofMENA Sudan Afghanistan AllShare 24% 3% 4% 33% 5% 4% 4% 6% 8% 2% 4%2% 2% 19% 3% 3% 45% 4% 3% 3% 5% 8% 1% 3%1% 1% MTNSHAREPRICE(USD)VSOILPRICE 12 14 16 18 20 22 40 50 60 70 80 90 100 2014 O N D F M A M J J A 2015 Source:I-Net Oilprice MTN USD USD MTNshareprice($) Oilpriceperbarrel($) MTN derives over 40% of its revenues from Nigeria. A subdued macro-economic climate in that country translates to a slow-down in revenue for MTN.
- 16. VOLUME 04 |2015 | 16 weakening Naira currency means lower rand earnings. Fortunately, a weakening rand has provided an element of protection for MTN’s earnings base. On the up-side, Nigeria has a new government that has vowed to eradicate corruption. It also has good long-term prospects, despite the short-term oil price shocks to its growth. We, therefore, expect this economy will recover with time, and with it, MTN’s fortunes. WELL POSITIONED TO TAKE ADVANTAGE OF OPPORTUNITIES IN AFRICA Even though Nigeria is its largest market, MTN is a well- diversified business across various geographies, as evidenced by the graphic on the previous page. Apart from SA, where real penetration is close to 100%, real mobile penetration is still below 50% across the rest of Africa—representing good growth potential. We therefore expect MTN to be able to grow its subscriber base to over 350 million over the next ten years, with penetration rates climbing. Increasing penetration with growing economies will mean more people in Africa with more money to spend on communications— and with no fixed-line infrastructure to speak of, mobile is the only choice. Also, data usage across Africa is in its infancy. Without fixed- line alternatives, the majority of data consumption will have to take place via the mobile networks. If the development of data usage in Africa follows global trends, then this will prove to be a substantial growth area on the continent. And then there is Mobile Money. Africa is home to a large unbanked market. Even though urbanisation is taking place at an unprecedented pace, there are still large populations without easy access to banks or ATM’s. Mobile Money is, therefore, a convenient solution to this challenge, and is being actively launched across MTN’s operations. Being the largest operator in 15 of its 22 markets, MTN is uniquely positioned to capture these new revenue streams ahead of its competitors. STREAMLINING OF OPERATIONS MTN is also partnering with various companies across the continent to streamline their infrastructure. They are selling their towers in segments to dedicated tower operators. MTN benefits from a cash injection from these transactions and by having fewer maintenance costs. The tower operators benefit from expanding their networks and recouping their costs by being able to piggyback other service providers onto the existing towers. It is a rare example of a win-win situation. STRONG CASH GENERATION AND ATTRACTIVE DIVIDEND YIELD Although MTN operates in a capital-intensive industry, (building a network from scratch and subsequent maintenance and network upgrades is expensive—although partly offset by the above mentioned streamlining), cash flow generation remains high. This means that in future, the share price will be supported by a dividend yield of over 7% and expected growth in dividends of 5% to 15% per annum. Free cash flow after capital expenditure as a percentage of operating income is over 100%. Despite the short-term pressure on Headline Earnings Per Share (HEPS), MTN can use its ungeared balance sheet to support dividend growth, (if repatriation of cash from some of its key operations is impacted in the short-term). Finally, let’s not forget about Iran. MTN has been unable to extract any cash from Iran for several years due to sanctions. With the expectation of sanctions being lifted, Iran will become an important contributor to MTN’s cash available for dividends. Leading mobile operators in any country have an ability to generate higher profit margins due to the economies of scale—and, as mentioned, MTN dominates in 15 of its 22 regions.Therefore, overall group margins should be supported by increasing margins in the smaller markets. CONCLUSION Following the trend or buying things en vogue will work wonders for your fashion wardrobe but it is a poor investment strategy. Stocks that are popular are often expensive. Yet, when investing, you want to buy low and sell high. Thefactthattheshare pricehascomedown from itsrecenthighofR260, (September2014),to its currentlevelsofaroundR165, meansthisqualitystock isnow availableatalowerprice—and we,therefore,viewthisasan idealopportunitytobuyit. Itis, aswesay,avalue-play. IFTHEDEVELOPMENTOFDATAUSAGE INAFRICAFOLLOWSGLOBALTRENDS, THENTHISWILLPROVETOBEA SUBSTANTIALGROWTHAREAONTHE CONTINENT.
- 17. VOLUME 04 |2015 | 17 WEKNOWYOUNEED TO BEATINFLATION TO REACHYOUR RETIREMENTGOALS ANDTHISREQUIRESYOU TOMOVEOUTOFCASH ORMONEYMARKET FUNDSANDTAKEON SOMEINVESTMENTRISK. HOW MUCH RISK SHOULD YOU TAKE ON? That is a question best answered by you and your financial adviser. However, we devised an example to illustrate how moving slightly up the risk-return spectrum can have an impact on your final nest egg: We looked at how R100 000 would have performed at the average rate of cash return over the past 20 years, which was approximately 10% nominal, (ignoring tax and fees), versus how the same lump sum investment would have performed if it were invested in a portfolio that provided just one extra percent of return per annum, i.e. 11%. Over 20 years, the 1% of extra return per annum leads to a final value that is 20% higher. That is the power of compound interest—a small increase in return leads to a large difference in investment value over time. BY OLGA CUKROWSKA, TECHNICAL MARKETING MANAGER, STANLIB MOVING ON UP... THE RISK SPECTRUM AT AVERAGE CASH RETURN: of 10% pa AT AVERAGE RETURN: of 11% pa VS R100000 R100 000 20YEARS 20 YEARS =±R673000 = ±R806 000 LUMPSUM LUMPSUM R133000EXTRA GROWTH OVER20YEARSDUETOONLY1%EXTRARETURN
- 18. VOLUME 04 |2015 | 18 Ifyoudon’tneedtheextra20% attheendofyourinvestment period,thinkaboutthis differently—inahigheryielding portfolio,youcouldhavegotto thesameendresultwitha20% lowerinitialinvestment. Either way,inthelongrun,aslightly riskierinvestmentworksinyour favour. INVEST ACCORDING TO YOUR TIME HORIZON, NOT ACCORDING TO YOUR RISK AVERSION Nobody likes making a loss. In this way, we are all risk averse by nature. Therefore, allowing your risk aversion to determine your asset exposure is not always the best tactic. Instead,yourassetmixorrisk profileshould beafunction ofhow longyouhaveuntil retirement. Thetwoextremes ofthisspectrum are: • A 20-yearold hasover 40yearsuntilretirement and,therefore,can take onsubstantialrisk to benefitfrom thehigher returnsthiswillyieldinthe longrun,but • A personwho isaboutto turn65 and retireshould beinalowerrisk portfolio, onewhichshieldsthem from large assetvalue variations,tominimise the downside risk whenit comesto cashinginthe investmentatthe point ofretirement.Justhow lowthe risk profileshould bewilldepend onthe choice ofannuitytypeat retirement Betweenthesetwoextremes isa continuum of risk-return profiles.Again,whereyou fitonthiscontinuumis somethingyou should discusswithyouradviser, aseveryone’spersonal circumstancesaredifferent. CHOOSING THE UNDERLYING FUNDS So,youhavemadea decision astotheretirementproduct youneed,andyouhave workedoutthebudgetforhow muchyoucanputawayeach month.Now,theunderlying fundsneedtobechosen— withthehelpofyouradviser, youneedtocreatea portfolio offundsthatisalignedtoyour investmentgoalandtobeat inflation. Severalfactorswillcomeinto considerationhere: yourtime horizontoretirement;how yourotherexistingretirement savingshave been invested; yourstateofhealth;howmany dependantsyouhave, etc. If youarealreadyinretirement, thenyourage,healthandthe amountofmonthlydrawdown shouldbetakenintoaccount when choosingunderlying funds. Thechoiceofunderlyingunit trustsandothersolutionswill, therefore,beaverypersonal oneandyoushouldseek professionaladvicefromyour accreditedfinancialadviser beforemakingyourchoices. However,themostimportant considerationshouldbeyour time horizontoretirement, whichwillinformhowmuch riskyoucantakeoninyour choiceofunittrusts. YOURASSETMIXORRISK PROFILESHOULDBE AFUNCTIONOFHOW LONGYOUHAVEUNTIL RETIREMENT.
- 19. VOLUME 04 |2015 | 19 TAX-FREE SAVING INVESTMENT: YOUR LONG-TERM PARTNER IFYOU’RE18OROLDER, WITHAVALIDSOUTH AFRICANIDENTITY NUMBERANDCAN CONTRIBUTEAMINIMUM OFR500PERMONTH, YOUQUALIFYTOINVEST INATAX-FREESAVINGS VEHICLE. Why would you be interested in this investment? Firstly, it allows you to invest tax- free over the long–term. Secondly, it can be valuable post-retirement. The National Treasury introduced Tax-Free Savings Accounts from 1 March 2015, allowing individual investors to invest up to R30 000 a year tax-free while the maximum capital investment is R500 000 over your lifetime, there are no limits on the size to which this account can grow. All growth in this account— interest, dividends and capital growth—is 100% tax- free. You don't pay capital gains tax, no matter how often you switch between funds. While Treasury would like to see lower income earners use these accounts to boost their savings, tax-free savings accounts are also well suited to higher income earners. This includes anyone who can afford to put away R30 000 a year, over many years, to build up to the R500 000 maximum lifetime contribution limit. TRADITIONAL RETIREMENT SAVING Investorshavealways beenabletoaccumulate retirementassetsthrough aretirementfund,topped upbyaretirementannuity. Contributionstoboththese savingsvehiclesaretax- deductibletothelimitof15% ofyournon-pensionable income.Anycontributions abovethisamountarenot tax-deductible.Aslongasthe moneystaysinthepension fundorretirementannuity, yourincomeandgrowth remainstax-free. Onceretired,youneedto manageyourannuitypayouts relativetoinflation,ensuring theystillmeetyourneeds throughretirement. BY ANTHONY KATAKUZINOS, CHIEF OPERATING OFFICER, STANLIB RETAIL BY LEVASHNI NAICKER, TECHNICAL MARKETING MANAGER PLANNINGFORYOURPOST-RETIREMENTGOALS Can be more effective by combining a retirement annuity with a tax-free savings account: PENSIONWITHDRAWALFROMALINKED-LIFEANNUITYONLY PENSIONWITHDRAWALFROMALINKED-LIFEANNUITYANDATAX-FREESAVINGSACCOUNT InvestorAwithdrawsapensionfromalivingannuityofR20000p.m. andisthentaxedannuallyonR240000 AnnualtaxonR240000 = R47848 Tocalculatethenetmonthlyincomefromthelinked-lifeannuity: Annualtaxbeforerebate: R47848 Less:Primaryrebate: R13257 Less:Secondaryrebate: R7407 Annualtaxafterrebate: R27184 (R27184/12months =R2265.33monthlytaxamount) Netpaymentfromlinkedlifeannuitypermonthis(R20000-R2265)=R17735 InvestorBwithdrawsalivingannuityofR15000permonth andR5000p.m.fromatax-freesavingsaccount HeorsheisthentaxedannuallyonR180000 AnnualtaxonR180000 = R32400 Tocalculatethenetmonthlyincomefromthelinked-lifeannuity: Annualtaxbeforerebate: R32400 Less:Primaryrebate: R13257 Less:Secondaryrebate: R7407 Annualtaxafterrebate: R11736 (R11736/12months=R978monthlytaxamount) Netpaymentfromlinked-lifeannuitypermonthis(15000-R978)=R14022 Netpaymentfromlinked-lifeannuityandtax-freeinvestmentis(R14022+R5000)=R19022 InvestorA InvestorB Assumptions: Thiscalculationisbasedona pensionofR20000p.m.or R15000p.m.fromalivingannuityat theapplicabletaxrate,fora pensionerovertheageof65, butundertheageof75,at2016tax tablesrates.Thiscalculationdoes nottakeintoaccountanyallowable deductions.Thewithdrawalfrom thetax-freesavingsaccountis basedontheassumptionthatthe pensionerhasaccumulatedenough fundsinthetax-freesavings accounttosupportamonthly withdrawalofR5000.Allfigures roundeduptonearestrand. THEREFORE,THE TOTALTAX SAVINGSPERMONTH, IFANINVESTOR SUPPLEMENTSTHEIR RETIREMENTANNUITY WITHATAX-FREE SAVINGSVEHICLE IS(R19022-R17735) R1287PERMONTH ORR15340PER ANNUM. SAVING FOR RETIREMENT IS A LONG-TERM GOAL AND CHOOSING THE CORRECT INVESTMENT VEHICLE IS A LITTLE BIT LIKE FINDING YOUR LONG-TERM PARTNER.
- 20. VOLUME 04 |2015 | 20 When you retire, your retirement annuity is converted as follows: • Up to one third of your lump sum is taxed at a specific scale • The remaining portion must be used to purchase an annuity On the other hand, from your tax-free savings account, you can draw a monthly cash flow plan, giving you tax-free income in retirement. CONCLUSION The cards are on the table as to why you should consider entering into a long-term relationship with a tax-free savings account. You may have the account for 20 years or more pre- retirement (building up your pool of assets), and another 20 or so years post- retirement (where you can withdraw a tax-free income). When you enter into any long-term relationship, it is important to choose your partner carefully. It’s equally important to choose your tax-free savings account with care. It is important to note: Your contributions in a tax-free savings account are limited to R30 000 p.a. SARS will tax any amounts exceeding the R30 000 p.a. limit at rate of 40%. WHEN YOU ENTER INTO ANY LONG-TERM RELATIONSHIP, IT IS IMPORTANT TO CHOOSE YOUR PARTNER CAREFULLY. IT’S EQUALLY IMPORTANT TO CHOOSE YOUR TAX-FREE SAVINGS ACCOUNT WITH CARE. • Investments in a retirement annuity cannot be accessed prior to age 55, whereas tax-free savings account funds can be accessed at any time. However, withdrawing from your tax-free savings account impacts negatively on your lifetime investment limit of R500 000 • Pre-tax money is used to invest in a retirement annuity, while after-tax money is deposited into a tax-free savings account • Withbotharetirement annuityandtax-free savingsaccount,your growthistax-free. Thepre-retirementbenefit witha retirementannuity isthata percentageof your contributionsare tax-deductible. Inpost- retirement, thebenefitwith a savingsaccountisthatall withdrawalsandincome aretax-free • A retirement product is protected from being attached as security for debt. Although a tax- free savings account can’t be used as security for debt, creditors can still attach it • A great advantage of a retirement annuity is that it falls outside your estate upon death, while a tax-free savings account falls within your estate DIFFERENCES BETWEEN A RETIREMENT ANNUITY AND A TAX-FREE SAVINGS ACCOUNT:
- 21. VOLUME 04 |2015 | 21 BY FARAI MURONDO, STRATEGY DEVELOPMENT MANAGER PERFORMANCE FEES AND TREASURY’S DRAFT RETIREMENT REFORMS BY GILLIAN JONES, HEAD OF THOUGHT LEADERSHIP AND PERFORMANCE COMMUNICATION, STANLIB THESOUTHAFRICAN TREASURY’SDRAFT PROPOSALSTO OVERHAULTHE RETIREMENTINDUSTRY AIMTOIMPROVEMARKET CONDUCTANDLOWER COSTSFORINVESTORS, ENCOURAGINGSOUTH AFRICANSACROSSALL INCOMELEVELSTO FOCUSONINVESTING MOREFORRETIREMENT. Following its paper, Charges in South African Retirement Funds, published in July 2013, the Treasury’s draft regulations were first outlined in the 2014 Budget update on retirement reforms document. The draft regulations state that all retirement funds must provide members with a low-cost default investment choice suitable for their needs. No performance fees may be charged on any assets held in these default portfolios. Evidencesuggeststhe majorityofretirementfund memberswillroutinelyselect thedefaultinvestmentoption. Thesedefaultoptionsare expectedtocapturethe majorityofretirementassets infuture. OBJECTIVESOFTHE RETIREMENTINDUSTRY REFORMLEGISLATION Government’s view is that all employed South Africans should contribute to a retirement fund. Products offered to these retirement funds must protect member interests through product simplification and fee transparency. Therefore, regulations are based on the premise that parts of the South African retirement system are characterised by complex and unclear products with high charges. Higher costs, all else being equal, can erode retirement savings for many fund members that can acutely impact lower-income members in particular. Byreducingthecostof savingforretirement,the governmenthopestoimprove thelevelofsavingsamong SouthAfricans.Anymoney spentonmanaginga fundis moneynotspentonsavings andcan impactoverall investmentovertime. STANLIB supports the Treasury’s intent of encouraging better retirement outcomes by instituting frameworks to manage retirement fund service providers like asset managers and by clarifying obligations of trustees. Intermsofthedraft regulations,default investmentportfoliosmust be simple—performancefees, loyaltybonusesorsimilar charge structuresare not permitted. Accordingtothedraft amendmentstothe regulations issuedinterms ofSection36ofthePension FundsAct1956(Act24of 1956): • Allfeesandcharges, andtheirimpacton memberbenefitsmust bedisclosedaccurately andregularly • Performancefeesare notpermittedindefault investmentportfolios. Noserviceprovidermay receivefeesorcharges forassetsheldinrespect ofthedefaultinvestment portfoliothatdepend onthereturnearnedon thoseassets Our unit trust portfolios align with Treasury’s good practice because they charge no performance fees. Our Multi-Manager funds are the exception, where underlying managers may charge performance fees—however, the fund itself and STANLIB Multi- Manager do not. Treasury’sretirement reformdocumentisstill indraftformat.Theasset managementindustry hasbeenaskedtoprovide commentontheproposalsto theFinancial ServicesBoard. Thefinallegislationislikely tobeimplementedbythe beginningof2017. Thenewdraftregulationsare acontinuationofthetrend ofincreasingregulationand involvementoftheregulatorin thesavingsandinvestments industry.
- 22. VOLUME 04 |2015 | 22 WHYAREPERFORMANCE FEESPROBLEMATIC? Performancefeeshavelong beenconsideredcontroversial inthe assetmanagement industryformanyreasons. • Performancefees are calculated usingthe returnsgeneratedbythe fund.Investorsneedto considerwhetherthe portfoliomanagertook excessiveinvestmentrisk to generate the returns. STANLIBbelievesthata risk-adjustedreturnmust underpinperformance fees • Performancefeesmust bestructured using appropriatebenchmarks thatreflectthe objectives oftheportfolio and theassetclassesbeing managed.Forexample, usingabenchmarklike theConsumerPrice Index(CPI)asabasis for performance fees foranequityfund is inappropriate—reaching thistargetiseasy, meaningfundmanagers willbecompensatedfor simplyfulfillingtheir basic investmentmandate • Performancefeesmay beunsuitableforretail investors,whomight notbeappropriately informed regarding potentiallycomplexfee structures. Additionally, retailinvestorsareoften notinthebestpositionto judge feesorto negotiate thecorrectfeesfortheir circumstances • Due tothenature ofretail investmentsandclient turnover,itisdifficult toascertaintheexact returnsenjoyedbyeach investororchargefeeson thatbasis.Newinvestors mayenduppaying forpastperformance enjoyedbeforethey joinedthefund • Theperformancefee calculationandits underlyingmethodology canbeincredibly complexforinvestors. STANLIB’s suggestion is that investors focus on the following three elements: Fairness to all parties; ensuring portfolio manager incentives are aligned to investor outcomes; and whether the performance fee is calculated with available public information. Itisimportanttonotethat SouthAfrica currentlyhas noindustrystandardfor structuringperformancefees. Eachassetmanagerhasfull discretion in designingtheir performancefeemodel. PERFORMANCEFEES ANDALTERNATIVE INVESTMENTVEHICLES STANLIBsupportsandagrees withTreasury’sintended reforms,welcomingthe move to ensure performance feesaremoreappropriately structured.However, prescriptiveregulationsand anoutrightban,ratherthana structuredframeworkforthe useofsuchfees,mayhave unintendedconsequencesfor theinvestmentindustryand investor portfolios. Amorenuanced,principle- basedregulationof performancefeeswould empowertrusteesto negotiatehowfeesare structured.Itisanimportant leverforaligningfundmanager andmemberinterests. Another unintended consequence is that banning performance fees on any assets held in these default portfolios effectively excludes the entire spectrum of alternative investments from default funds, including direct property, infrastructure, renewable energy and private equity vehicles. The use of pension fund assets in these investments plays an important supportive role to achieving South Africa’s infrastructure and development goals. Theperformancefee structureisanintegralpartof themanagementoflonger- terminvestmentvehicles, necessitatedbytheilliquidity natureoftheunderlyingassets. Performancefees,alsoknown ascarriedinterest,areused toaligntheinterestsoffund managerswiththatofthe fundoverthelifetimeofthese investments,andmotivate fundmanagerstoactinthe bestinterestofinvestors. Investorspaybasefeesto coverthemanager’sminimum runningcosts.Managersthen participatealongsideinvestors whenreturnsarerealised afterasignificantlock-in period.Investorsalsooften derivecomfortfromthefact thatmanagersco-investorin thefundandhaveavested interestinitssuccess. Structuringalternative investmentvehiclesinthis waymayaligntheinterestsof managersandinvestorsandis acceptedglobalbestpractice. Whilethedraftregulations couldbeconsidered unnecessarilyprescriptive, thisoversightcouldhavethe unintendedconsequenceof theexclusionofalternatives. Ultimately,webelievethis wouldbetothedetriment ofmembers.Alternatives areanimportantsourceof uncorrelatedreturnsand offerlong-terminvestment horizonswhileproviding investorstheopportunityto benefitfromtheilliquidity premium—ahigherreturndue totheilliquidnatureofthese investments. Also,pensionfund investmentsaremadeby professionalinvestorslike assetconsultantswhoare informedandempowered tonegotiatethebestfeesfor thefund.Aprescriptiveban ofperformancefees across theboard,inthiscase, seems excessive. InSTANLIB’sview, Treasuryshouldapproach theperformancefee issuesimilarlytohow itsapproachedpassive investments.Thedraft regulationsmandatepension fundtrusteestoconsider passiveinvestments—but doesnotspecifically prescribe themtoincludethem.Such principle-basedregulation shouldbeextendedto performancefees,ratherthan bannedoutright.
- 23. VOLUME 04 |2015 | 23 THE AFRICAN BANK TANGO BY OLGA CUKROWSKA, TECHNICAL MARKETING MANAGER, STANLIB THEAFRICANBANK CURATORSHIPPROCESS HASPLAYEDOUTA LITTLELIKE—TAKING TWOSTEPSFORWARD, ANDTHENONESTEP BACK. Attheonsetofthecuratorship on10August2014,the curator hadhoped to havetheGood Bank,ahealthynewcompany, listedonthe stock exchange inthefirsthalfof2015.The timetable,asatthetimeof going to print,nowplacesthe listingat1February2016,with apossibilityofanotherdelay, (which wewilltouchonlaterin thisarticle). Thedelayscanneitherbe ascribedtothecuratornor theprocessheisfollowing. Rather,theyhavebeendueto unforeseenobstacles,ranging fromlegislationchallengesto courtorders. THEAMENDMENT CHA-CHA One of the major delays was an amendment to the Banks Act of 1990. The amendment was needed to make the African Bank transition into the new Good Bank legally possible. We remind our readers that the African Bank bail-out was a first such occurrence in South African history. Our laws were not geared for it and, therefore, had to be amended. The first draft was published on 23 November 2014 but met with criticism. Many industry stakeholders felt that it had too many loopholes, which could be unintentionally open to abuse in the future. Extensive public consultation took place until all participants were satisfied. TheBanksAmendmentBill of2015waseventuallysigned bythePresidentintolaw on25June2015.Thiswasa six-monthstepbackinthe curatorshipprocesswhich couldneitherhavebeen foreseennorhelped.Clearly,a newbanklistinginfirsthalfof 2015wasoutofthequestion. THEFINANCIALS FOXTROT Anotherculpritresponsiblefor afewsmallerback-stepsinthe curatorshipdancehasbeen thefinalisationofthevarious auditedfinancialstatements. Youwillrecallfromourprevious articlesthatAfricanBank InvestmentsLimited,orABIL, hadthreemajorsubsidiary companies:AfricanBank Limited;theailingfurniture retailerEllerines;andStandard GeneralInsuranceCompany Limited,orStangenforshort. Allthreesubsidiariesneed tohavetheirfinancial statementsfinalisedand auditedbeforeconsolidated ABILfinancialscanbe finalised.Therehavebeen severaldelaysinthisprocess. THESTANGENSAMBA After the step-backs caused by the legislative delays, the curator communicated his intent to have the Information Memorandum (IM) published in July 2015, with the new bank listing scheduled for October 2015. TheIMisadocumentthat detailstheGoodBank RestructuringProposal. Fortheholdingcompany ABILtoberesolved,allthree subsidiariesneedtobe handled.Asweknow,African Bankassetsandliabilitieswill betransferredtothenew GoodBankinduecourse. TheCuratorhadhopedtosell theothertwosubsidiariesto thirdparties.Nobuyerscould befoundforEllerines,whichis nowinbusinessrescue. On 15 July 2015, the curator communicated that the release of the IM would be delayed, mostly due to on-going negotiations around the sale of Stangen. This was the first instance when the Stangen subsidiary caused a setback. THENAFEW STEPS FORWARD TheAfricanBankLimited financialstatementswere finalisedby11June2015, andtheStangenfinancial statementswerereleasedon 16July2015. On27August2015,thecurator communicatedtwoimportant piecesofgoodnews: Firstly,theSouthAfrican ReserveBankhasauthorised thecreationoftheGood All three subsidiaries need to have their financial statements finalised and audited before consolidated ABIL financials can be finalised. There have been several delays in this process.
- 24. VOLUME 04 |2015 | 24 BankundertheGoodBank RestructuringProposal. Secondly,theFinancial ServicesBoardhasgranted theGoodBankalicencetobe aFinancialServicedProvider. Effectively,thismeansthat theauthoritieshaverubber- stampedthecreationof theGoodBank,onceallthe otherpartsoftheprocessare completed. On9September2015,the InformationMemorandum wasfinallyreleasedfor considerationandcomments. Itcontainsthedetailsofhow thetransferofAfricanBank businessintothenewGood Bankwouldtakeplace.The curatoraffordedinterested partiesa30-dayperiod withinwhichtosubmitwritten comments. Thisreleasealsosetoutanew timetableforthecompletion ofthecuratorship.Herearethe datesthatwerepublished: 26October2015: IssuanceofOfferInformation Memorandum 26October2015: SubmissionofCuratorReport totheMinisterofFinance 18–20thNovember2015: CreditorVoteprocess 24November2015: UpdatereportbyCuratorto MinisterofFinance 08December2015: ConsentfromMinisterof Finance 01February2016: ExpectedlaunchofGoodBank ASECOND STANGEN-RELATED DELAY Alsoon9September2015,a proposalwaspublishedthat 100%ofStangenshareswould besoldbyABILtoAfricanBank. SubsequentlyStangenwould transfertothenewGood Bank,oncethisentitywas established. Thistransactionmakessense. Stangenisaprofit-making business.Itisalong-term insurancecompanywhose mainbusinessisunderwriting ofcreditlifebusinessesto AfricanBankclients. Unfortunately,certainshare- holdersinStangenwerenot happywiththeproposedsale. Theyapproachedthecourts andon28September2015,the HighCourtinPretoriaissued aninterimcourtorder,that postponedtheplanstohave thetransactionapproved. Thecomplaintisbasedon thevaluationoftheStangen business,andtheshareholders believetheyshouldbegetting ahighervaluefortheirshares thanwhathasbeenproposed. Shouldacourtbattleensue, itcouldtakeyearstorunits course. Fortunately,thecuratoris wellawareofthisandhas alreadyindicatedthatshould acompromisenotbereached speedily,hewillcontinue withtherestructuringplanof AfricanBankwithoutStangen. Allinall,thecuratorshouldbe commendedforhison-going commitmenttorunninga transparentprocess.Hismight beoneoftheleastenviable jobsinSouthAfricaatthis time.Hehasbeenpedantic aboutcommunicatingwith thepublicthroughregular announcementspublished throughShareExchangeNews Service(SENS).Therehave beennofewerthan16releases inthethirdquarterof2015. Thecuratoralsoholdsregular meetingswithstakeholders andrecentlywentonan internationalroadshowto engageinvestorsandcreditors inJohannesburg,CapeTown, LondonandSwitzerland. ALL IN ALL, THE CURATOR SHOULD BE COMMENDED FOR HIS ON-GOING COMMITMENT TO RUNNING A TRANSPARENT PROCESS.
- 25. VOLUME 04 |2015 | 25 WHAT YOU MAY HAVE MISSED 1. Onourwebsiteasane-book 2. Themagazineisalsoavailable asatabletapplicationonthe AppleandAndroidAppstores search"standpoint" search"standpoint" 3. Themagazineisnowalso availableonAppleand Androidsmartphones search"standpoint" search"standpoint" STANLIB’sServiceCharges(annualandplatformcharges dependingontheinvestment)remainunchanged.Please refertotheproductorfundspecificformformoredetails ontheupfrontintermediarychargeandtotalservicecharge (thisincludesSTANLIB’sportionandyourfinancialadviser’s portion). STANLIBchargesnoupfrontchargeonnewinvestments(lump sumordebitorder)forUnitTrustsandLinkedInvestments regardlessoftheinvestmentamount.Thisappliestoonce-off debits,directdepositsandrecurringdebitorders. Theabovedoesnotaffectyourfinancialadviser’supfront chargeasagreedwithhim/her. STANDPOINT IS AVAILABLE VIA VARIOUS DIGITAL PLATFORMS: OR SCAN BELOW •
- 26. VOLUME 04 |2015 | 26 INTOUCH Thereareseveralwaysto contactusatSTANLIB. OurheadofficeisinMelrose Arch,Johannesburg,where wehaveawalk-ininvestment centre,oryoucancallusor useouronlineservices: JOHANNESBURG (HEADOFFICE) Physical address: 17 Melrose Boulevard, Melrose Arch, 2196 Postal address: PO Box 202, Melrose Arch, 2076 Switchboard: +27 (0)11 448 6000 Call Centre: 0860 123 003 (SA only) Financial Adviser: 0860 104 418 (SA only) For enquiries: contact@stanlib.com For instructions: instructions@stanlib.com GPS coordinates: S 26.1347°, E 28.0686° HOWTOACCESS YOURINVESTMENT VIATHEWEB,MOBILE PHONEORVIAA STANDARDBANKATM Wehavevariouswaysin whichyoucanaccessyour investment,viewbalancesor transact. KEEPINGYOU CONNECTED24/7 RegisternowforSTANLIB Online,asself-serviceportal thatgivesyoueasyaccessto yourinvestments24/7,a simplifiedregistration processjustaclickaway. Gotowww.stanlib.com STANLIBMOBILE: M.STANLIB.COM Ifyouhaveaweb-enabled cellphone,youcanaccess yourinvestmentviaSTANLIB Mobile. • View your investment balances • View your asset and fund allocation • Download or e-mail your statement ToaccessSTANLIBOnline andSTANLIBMobile,you needtobearegistered STANLIBOnlineuser. HOWTOREGISTERFOR STANLIBONLINEAND STANLIBMOBILE 1. Gotowww.stanlib.com 2. ClickontheSTANLIB Onlineloginatthetopofthe homepage 3. ClickonRegisterNow 4. Completetherequested detailsandsubmit 5. Ane-mailwillbesentto thee-mailaddressyou’ve provided,confirmingyour registrationandloginnumber 6. After48hoursa seconde-mailwillbe sent,authenticatingyour registration STANDARDBANKATM IfyouareaStandardBank client,youcanlinkyour STANLIBunittrusttoyour StandardBankATMcard. EverytimeyouusetheATM, youcanviewyourstatement, buyadditionalunitsinyour unittrustandswitchbetween unittrustfundsinyour account. HOWTOLINKYOURATM CARDTOYOURSTANLIB INVESTMENT 1. CompletetheUnitTrust ATMLinkingForm (availableonourwebsite www.stanlib.com). Print,signand e-mailtheformto instructions@stanlib.com, orfaxitto0867277501. 2. Pleasecontactourcall centreon0860123003for assistance. CONTACT US If you would like to email the editor, you can contact her on: erica.stuart@stanlib.com IF YOU WISH TO MAKE ANY CHANGES TO YOUR INVESTMENT OR HAVE ANY QUERIES, PLEASE CONTACT YOUR FINANCIAL ADVISER OR ALTERNATIVELY OUR DEDICATED CLIENT SERVICE TEAM ON 0860 123 003 On STANLIB Online you can: • View your history of transactions •View your investment balance and statements •Access your tax certificate •View investment graphs and fund fact sheets •Switch unit trusts (for Unit Trust clients)
- 27. VOLUME 04 |2015 | 27 STANLIBisanauthorisedfinancialservicesprovider. invest@stanlib.com STANLIB is proud to have been named as the BestAssetManagerbasedinFrontierMarkets by Global Finance. Opportunity lieswhereyou havethefocus tofindit. The award is recognition of the fact that we never stop looking for new opportunities to grow our clients’ investments. We operate on the ground in 10 African countries – immersing ourselves in both traditional and alternative investment classes, every day. To find out how we can open new frontiers for your investments, contact us today. UK / Europe Michael Barnes +27 11 448 5384 Africa Branden Alexander +27 11 448 5164 South Africa Brendan Howie +27 11 448 6585 Global Finance Ad 4Sep Opt2.indd 1 2015/09/07 3:26 PM
- 28. STANLIB ASSET MANAGEMENTREG. NO. 1969/002753/06 | AN AUTHORISED FINANCIAL SERVICES PROVIDER IN TERMS OF THE FINANCIAL ADVISORY AND INTERMEDIARY SERVICES ACT 37 OF 2002 (LICENCE NO. 26/10/719)