Largest unit trust funds in South Africa

Below are the 10 largest unit trust funds in South Africa, by total assets:

1. Allan Gray Balanced Fund - R61.6 billion
2. ABSA Money Market Fund - R57.8 billion
3. Standard Bank Money Market Fund - R35.7 billion
4. Allan Gray Equity Fund - R32.4 billion
5. Investec Opportunity Fund - R29.6 billion
6. Allan Gray Stable Fund - R29.0 billion
7. Coronation Balanced Plus Fund - R28.3 billion
8. Standard Bank Corporate Money Market Fund - R27.5 billion
9. Investec Money Market Fund - R21.6 billion
10. Stanlib Income Fund - R20.7 billion

These figures are as of 1 February.

It is clear the largest funds are dominated by money market and income funds, as well as Allan Gray funds.

Best performing sectors and funds over 5 years

Over the last five years, the best performing sectors are:
Property funds
Industrial funds

the best performing funds include:
Marriot Dividend Growth Fund
36ONE MET Equity Fund
Coronation Top 20 Fund
36ONE Met Flexible Fund
Foord Equity Fund
Momentum Small Mid-Cap Fund

the worst performing sector: Resources

Will the resources sector make a comeback? At the moment with the subdued global economic outlook, it is not going to happen any time soon.

Discovery Funeral Plan

Discovery Funeral Plan

 

Would you be able to give your loved ones the funeral they deserve?

 

Even though death may not cross your mind everyday it is important to consider if your family will be able to cope financially with a death.

 

Discovery Life is one of South Africa's fastest growing life insurers and you and your family will have peace of mind with their funeral cover. For as little as R55 per month you can receive this comprehensive funeral plan from Discovery Life, providing cover for your family.

 

You can select funeral cover from R10 000 all the way up to R60 000, depending on your individual needs. You can select funeral cover for you, your spouse, children, parents as well as extended family members.

 

In the event of an accidental death of you or your spouse, Discovery will automatically pay double the cover amount. This benefit is included free of charge and will apply for your whole life.

 

To find out more on Discovery Funeral Cover, contact Kevin Yeh or Aviwe on 011 658 133 or you can e-mail them on life@daberistic.com.

How to select the right investment manager

 

It is challenging for investors and their advisers to differentiate between investment managers in an ever-changing landscape. When assessing who is best placed to manage your investments it pays off to gather as much information as possible upfront and to ensure that the evidence is relevant to future outcomes, not past returns. Ultimately, selecting the right investment manager is more of a consistency contest than a talent or intellectual evaluation. A good acid test is to ask: will the asset manager likely be doing the same thing in 10 years’ time? By answering this, you need to look at the incentives, the business structure, the team stability, experience, breadth and evidence of past investment conviction and temperament. These types of questions avoid the natural inclination of anchoring on past performance when it is the future that matters.

An extension of this thinking is to avoid focusing on funds: rather see a fund as an underlying business, team and process.

So, what evidence is at your disposal and what should you be looking for?

There are generally two types of information. First is the external message: you can source the information that the investment manager presents to the outside world. This is fairly straight forward and is usually available on their website and via newsletters. Second, and more complicated, is to source evidence that evaluates whether or not the manager actually does what it says. There are a few ways you can assess this, for example, you can evaluate their investment holding period and portfolio turnover by assessing the frequency with which their portfolios or top 10 holdings rotate. Are they long-term investors or do they respond to short-term events? You can also see if the top 10 holdings align with those in the index, which may give you further insight into their investment style. In addition, you can look at team changes: stable teams often result in more investment consistency. Websites reflect core people – you can track them and gauge their experience: how long have they been managing this mandate and do they have the requisite experience?

Key criteria

These are a few high level ideas. But complete research involves examining the business and the team and, if done properly, will take time and involve several rounds of information gathering. While it is not recommended to adopt a ‘tick-box’ approach, there are some key criteria which, if fulfilled, can bring you comfort that an investment manager will most likely deliver on its obligations:

1. A business and shareholder that understands asset management. Look into the intent behind the shareholders. Are they likely to overload their investment team with too many offerings? Will they grow assets beyond what is digestible for active management to thrive? How do they measure themselves? And do they support their portfolio managers during periods of underperformance?

2. One or two individuals who drive the investment process and who love investing (and who are, therefore, often averse to marketing).

3. A team that has significant experience with the specific asset class and has sufficient depth in resources. There is, at times, an odd anomaly with South African asset managers who seem to have far more people allocated to SA investments than global, yet there is materially more work to do in global. Always ask: is the ratio of people to investment ideas appropriate, given the mandate? More often than not, an analyst cannot adequately research more than 15 investment ideas.

4. A low staff turnover environment of senior investment people. Can you trust the track record if the team changes frequently? Also look at the calibre of people who are joining; peer endorsement is a good sign.

5. A clear investment process that is deeply engrained into all corners of the team. It needs to outlive any individual and make intuitive sense.

6. They do what they say they do. It is important to look inside portfolios to see whether past actions are consistent with what is written on the tin. Different people in the same business should be giving the same message.

7. Appropriate incentives: do they align with the client’s promise? Are fees appropriate? Are they invested alongside the client? It is usually a red flag when an investment business sees financial rewards as the key determinant of behaviour and culture.

In the end, the selection of an appropriate investment manager is always going to be a judgment. There is no perfect answer. But we think that if you look for consistency (and the drivers of consistency) above all else, you will likely select a manager who delivers on their obligations.

If you lack the time and/or appetite to perform your own due diligence and make your own assessment, you may want to make use of the services of an independent financial adviser. Independent advisers do regular research and can assist you in putting together a portfolio based on your needs and your risk appetite.

Source：Allan Gray GrayIssue

Pravin’s big retirement changes on track

You won’t lose your rights to your savings

You need to gear up your retirement planning to meet T-Day and P-Day, when government will implement major changes to the R3-trillion retirement savings industry.

T-Day and P-Day are days when retirement fund reforms are scheduled to be implemented in or after 2015, with legislation based on government’s latest proposals for retirement reform being put before Parliament this year. The proposals are outlined in a discussion paper titled “2013 Retirement reform proposals for further consultations”.

This latest discussion document, released this week with the Budget, consolidates reaction to four discussion documents published last year on various aspects of retirement reform, including the preservation and taxation of retirement savings.

Apart from T-Day and P-Day, a number of other reforms will be implemented to boost the protection of your retirement savings, including the enforcement of better behaviour by your retirement fund trustees and measures aimed at reducing costs. The reforms also propose to bring statutory funds, such as the Government Employees Pension Fund and the Transnet funds, under the ambit of the Pension Funds Act, giving members the rights enjoyed by members of non-statutory pension funds.

T-Day

The recommendations for the still-to-be-set T-Day will affect the taxation of your retirement fund contributions. The recommendations change those made last year by Finance Minister Pravin Gordhan, which were scheduled for implementation on March 1, 2014. The latest recommendations are:

* Your employer’s contributions will be added to your taxable income as a fringe benefit;

* You will be able to deduct both your and your employer’s contributions to a pension fund, provident fund or retirement annuity (RA) fund up to 27.5 percent of the greater of remuneration or taxable income;

* The premiums you pay on group risk insurance will be included in the amount you may deduct from your taxable income;

* There will be a rand cap of R350 000 on the total amount you may deduct from your taxable earnings in any tax year;

* Contributions in excess of the annual cap may be rolled over to future years when you may not reach the cap amount;

* Any non-deductible contributions will be added to your tax-free lump sum at retirement; and

* From T-Day, any new contributions made to a provident fund will be subject to the same annuitisation rules as pension funds, namely that at least two-thirds of the savings must be used to purchase a pension at retirement. Any provident fund savings made before T-day, and any investment growth on those savings, will not be subject to the new pension purchase requirement.

P-Day

Government is proposing tighter controls on preserving retirement savings, but it will allow you to access savings before retirement during periods of unemployment.

However, vested rights will be protected to avoid a repeat performance of people resigning their jobs or getting divorced to get their hands of their retirement savings.

Recommendations for the preservation of retirement savings are:

* From P-Day, all retirement funds will be required to identify a default preservation fund to which members’ savings can be transferred if they withdraw from the fund before retirement. The use of an existing retirement fund to preserve savings for retirement is already a no-cost option for members who, if the fund rules allow, can stay on as deferred members with their savings protected and growing until normal retirement age. However, currently, no withdrawals are allowed. This will change with the new withdrawal rules.

* Currently, you are limited to one withdrawal from a preservation fund before retirement, but the withdrawal may be 100 percent of your savings. The new proposal is to allow for an income stream in periods of unemployment, allowing for one withdrawal a year.

* Withdrawals will be based on a formula. The proposed annual withdrawal will allow members of preservation funds to withdraw an amount that is the greater of the state old age grant (R1 260 from April 1) or 10 percent of their initial preservation fund deposit, excluding any portion to which vested rights apply. Any unused withdrawal amounts may be carried forward to future years.

* From P-Day, retirement fund divorce settlements will be subject to the proposed new preservation withdrawal rules allowing for a limited income stream.

Consideration is also being given to relaxing the preservation requirements of RA funds, from which you currently cannot make any withdrawals before the age of 55. (When you do reach 55, two-thirds must be used to purchase a pension).

Treasury is considering allowing RA fund members to transfer their balances to preservation funds, under conditions that will prevent them from seeking out additional tax advantages. The conditions may include preventing individuals who have transferred money out of an RA fund from rejoining that fund, or, alternatively, from receiving a tax deduction in respect of any RA contributions, for a period.

TREASURY INTENT ON OVERHAUL OF LIVING ANNUITIES

Investment-linked living annuities (illas) are due for a major overhaul to ensure that pensioners using them are not left financially destitute before they die because of high costs, poor advice, wrong investment choices and drawdown rates that are too high.

Life assurance companies are set to lose their stranglehold on the provision of illas, with government proposing that the requirement of a life assurance licence to sell illas be dropped.

It is proposed that collective investment scheme management companies such as unit trust and exchange traded fund companies be allowed to sell illas without, as they currently need to do, registering as a life assurance company or renting a life assurance licence.

National Treasury hopes this will increase competition and bring down costs.

It says most respondents to an earlier discussion paper pointed out that an important factor underlying the choice of annuity at retirement was that people with a low level of savings tended to choose illas in the hope that, because they allow for higher initial pension payments than conventional annuities, they could maintain their living standards.

Most respondents were in favour of reforming, rather than replacing illas.

Treasury says:

* Many of the difficulties associated with illas may be direct or indirect consequences of the ways in which intermediaries, including investment platforms, are paid. The Financial Services Board (FSB) is already investigating these costs as part of its Retail Distribution Review on commissions paid for financial products, including illas. This review will include an investigation into the payment of rebates by collective investment schemes to linked-investment service providers, which are currently the main source of illas.

Illas are also part of the scope of the Treating Customers Fairly initiative.

* Consideration is being given to easing rules on using multiple types of pensions to allow retirees to choose different combinations from existing, relatively well-understood pension products.

* Proposed default illas, whether provided within or outside a retirement fund, will be permissible as a default option only if they meet strict conditions, including design criteria and limits on investment choices, drawdown rates and costs. Collective investment scheme managers will also be able to provide retirement funds with default illas, provided they meet the conditions.

Treasury says the progress of these reforms will be monitored through detailed compulsory reporting by product providers on annuity (pension) purchases made by individuals retiring from funds, investment charges and the asset mix of illas, and the purchase prices and terms of conventional annuity policies.

GOVT PONDERS COMPLEXITY OF SECURITY FOR LOW EARNERS

Government must still spell out the details of how it intends extending the retirement system to all employed individuals, particularly those in low-income groups and in irregular employment, who are mainly excluded from the current system and rely entirely on the social old-age grant, which will be increased from R1 200 to R1 260 a month.

The Budget Review says the retirement reform proposals released with the Budget “will lay the foundation for the eventual introduction of a mandatory tier of a comprehensive social security system that provides death, disability and retirement cover to all workers”.

The backbone of the extended system is likely to be the proposed National Social Security Fund (NSSF).

Patrick Craven, spokesperson for trade union federation Cosatu, in reacting to the Budget proposals, says the federation is increasingly frustrated by government’s failure to introduce comprehensive social security that will ensure that nobody falls through the safety net.

Cosatu also rejects the piecemeal reforms of the retirement funding system and wants retirement reform to be part of comprehensive social security reform.

But in its discussion paper, Treasury says the situation is complex. Currently, about half of formally employed workers are members of an employer-sponsored retirement fund. An analysis based on a labour force survey carried out in 2010 by the Centre for Research into Economics and Finance in Southern Africa indicates that 86 percent of workers who don’t belong to retirement funds earn less than the tax threshold, indicating that they receive no tax benefit for saving for retirement. Of these, nearly 40 percent work in sectors where employment can be erratic.

Source: IOL personal finance

How to select the right investment manager

It is challenging for investors and their advisers to differentiate between investment managers in an ever-changing landscape. When assessing who is best placed to manage your investments it pays off to gather as much information as possible upfront and to ensure that the evidence is relevant to future outcomes, not past returns. Ultimately, selecting the right investment manager is more of a consistency contest than a talent or intellectual evaluation. A good acid test is to ask: will the asset manager likely be doing the same thing in 10 years’ time? By answering this, you need to look at the incentives, the business structure, the team stability, experience, breadth and evidence of past investment conviction and temperament. These types of questions avoid the natural inclination of anchoring on past performance when it is the future that matters.

An extension of this thinking is to avoid focusing on funds: rather see a fund as an underlying business, team and process.

So, what evidence is at your disposal and what should you be looking for?

There are generally two types of information. First is the external message: you can source the information that the investment manager presents to the outside world. This is fairly straight forward and is usually available on their website and via newsletters. Second, and more complicated, is to source evidence that evaluates whether or not the manager actually does what it says. There are a few ways you can assess this, for example, you can evaluate their investment holding period and portfolio turnover by assessing the frequency with which their portfolios or top 10 holdings rotate. Are they long-term investors or do they respond to short-term events? You can also see if the top 10 holdings align with those in the index, which may give you further insight into their investment style. In addition, you can look at team changes: stable teams often result in more investment consistency. Websites reflect core people – you can track them and gauge their experience: how long have they been managing this mandate and do they have the requisite experience?

Key criteria

These are a few high level ideas. But complete research involves examining the business and the team and, if done properly, will take time and involve several rounds of information gathering. While it is not recommended to adopt a ‘tick-box’ approach, there are some key criteria which, if fulfilled, can bring you comfort that an investment manager will most likely deliver on its obligations:

1. A business and shareholder that understands asset management. Look into the intent behind the shareholders. Are they likely to overload their investment team with too many offerings? Will they grow assets beyond what is digestible for active management to thrive? How do they measure themselves? And do they support their portfolio managers during periods of underperformance?

2. One or two individuals who drive the investment process and who love investing (and who are, therefore, often averse to marketing).

3. A team that has significant experience with the specific asset class and has sufficient depth in resources. There is, at times, an odd anomaly with South African asset managers who seem to have far more people allocated to SA investments than global, yet there is materially more work to do in global. Always ask: is the ratio of people to investment ideas appropriate, given the mandate? More often than not, an analyst cannot adequately research more than 15 investment ideas.

4. A low staff turnover environment of senior investment people. Can you trust the track record if the team changes frequently? Also look at the calibre of people who are joining; peer endorsement is a good sign.

5. A clear investment process that is deeply engrained into all corners of the team. It needs to outlive any individual and make intuitive sense.

6. They do what they say they do. It is important to look inside portfolios to see whether past actions are consistent with what is written on the tin. Different people in the same business should be giving the same message.

7. Appropriate incentives: do they align with the client’s promise? Are fees appropriate? Are they invested alongside the client? It is usually a red flag when an investment business sees financial rewards as the key determinant of behaviour and culture.

In the end, the selection of an appropriate investment manager is always going to be a judgment. There is no perfect answer. But we think that if you look for consistency (and the drivers of consistency) above all else, you will likely select a manager who delivers on their obligations.

If you lack the time and/or appetite to perform your own due diligence and make your own assessment, you may want to make use of the services of an independent financial adviser. Independent advisers do regular research and can assist you in putting together a portfolio based on your needs and your risk appetite.

Source：Allan Gray GrayIssue

Up and Coming Funds on my Watchlist

South African equity funds:

36One MET Equity Fund36One MET Equity Fund

Momentum Best Blend Specialist Equity Fund

PSG Equity Fund

Imara MET Equity Fund

South African multi-asset funds:

36One MET Flexible Fund

Foord Balanced Fund

Prudential Inflation Plus Fund

Global multi-asset funds:

Coronation Global Managed Fund

Foord International Feeder Fund

Global Property Funds:

MET Global Property Fund

Stanlib Global Property Feeder Fund