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The Your clear view on retirement fund management
TRUSTEE
TIMES
Smooth Talking
Responding
‘Talk is cheap.
to the financial
Here are the facts!’ crisis
Economic
L
S PECIA T conditions &
N
INV ESTME prospects
ISSUE
Issue 42 | December 2008 | January 2009
Contents
02 Responding to the financial crisis 22 Capital Builder
The safe and smart way to grow
your wealth
04 Economic conditions and prospects
24 Keep the emotion out
of investments
06 Smooth talking
‘Talk is cheap. Here are the facts!’ 26 Never 2 old 2 b hip
10 Time to reassess?
13 Waste not, want not
Financial Wellbeing Programme
Our cover photo: The Investment Services
team, back row: Grant Sass; Monei Pudomo; Roy
16 Paying high fees for excess returns
but getting a lot of Beta
Singh; Dharmesh Dayal. Front row: Debbie Kline;
Lentswe Gopane; Sydney Sekese; Anita Griessel.
The Investment Services team recently held a
series of investment report-back seminars to
20
clients throughout the country. Read more about
this on page 20.
Investment Report Back Seminar
Stayintouch
Please write to Trustee Times with any suggestions for topics or questions you may have. We value your
feedback. Charlene Murphy - Tel 021 509 4656, Fax 021 509 4330, E-mail cmurphy@oldmutual.com
PO Box 81, Mutualpark 7451
Layout: Greenroom
Foreword
The world markets during the last quarter of 2008
will certainly be one for the history books!
That’s why, in this issue of Trustee Times, we have
a special focus on investments. The feature articles
include a special note to trustees during these turbulent
times, an economic update and we take a look at how
smoothing-enhanced portfolios have performed over
the last couple of months, plus more!
New MD of Old Mutual Corporate
I’ve recently been appointed as the Managing
Director of Old Mutual Corporate. Tim Cumming, my
predecessor, remains within the Group to focus on
Strategic Projects.
Seelan Gobalsamy
I have been within the Corporate and employee Managing Director
Old Mutual Corporate
benefits business for a number of years and I am
very excited to be taking on this role during these
challenging times. Old Mutual has always stood for
absolute security and peace of mind, which is even
more relevant now during these turbulent times. With I am a firm proponent of our core values of
one of the strongest balance sheets in the industry Accountability, Pushing Beyond Boundaries, Integrity
and capital of 3.7 times (as at 30 September 2008) and Respect, which will continue to guide all that we
the required minimum, we remain well positioned do. I look forward to engaging with you more into the
to continue delivering value to our clients into the future.
future.
As I reflect upon the challenges and opportunities Seelan
that lie ahead for our customers, I am confident that
my skilled and dynamic team will continue to provide
solutions that meet our clients’ needs, and create
value for them, during these times.
1
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a note to trustees
Responding
to the financial
crisis
The primary causes of the recent global financial crisis are known to be the
slump in the US housing market, the subsequent collapse in the values of debt
instruments tied to US housing assets, and the general collapse of global interbank
operations. What still isn’t certain is to what extent this crisis may continue to
affect global economic prospects, and for how long.
2
financialcrisis
South Africa has certainly not escaped the turbulence, In short, now more than ever the trustee or
and has been hit by the dual shock of collapsing intermediary has a vital role to play in ensuring that
commodity prices and a global flight for safety. The funds, employers and members do not become so
local currency and market has borne the brunt of focused on the here and now that they lose sight of
this, and economic prospects as well as the outlook the fact that retirement investment is, and always will
for consumers, are significantly less rosy as a be, for the long term.
consequence.
The Old Mutual benefit
Looking forward
Whilst the international crisis has undoubtedly led to
While prospects for financial markets remain uncertain local financial services institutions taking a number
in the short term, aggressive international policy of knocks in recent months, our country’s financial
stimulation looks set to pull the world out of the current institutions remain sound and there is no uncertainty
downturn towards the end of 2009. However, in the surrounding their credit quality.
short term, extreme volatility is likely to continue,
and episodes of panic selling will almost certainly still As an international company, there have been
occur. news reports about certain of Old Mutual’s offshore
subsidiaries having suffered under the financial crisis.
How should we be reacting? However, while this has had a short-term impact
on the overall share price of the company, the way
The correct response is to stay focused on the bigger the organisation is structured ensures that financial
picture and the longer term. As is always the case in difficulties within one subsidiary are completely
such situations, the crisis across the globe has been isolated from the rest of the Group.
driven by the reactions of stakeholders to specific
issues and individual events. Panic, as a result of the In fact, Old Mutual South Africa currently has the
collapse of individual banks, or the figures contained strongest balance sheet of all the South African life
in monthly reports, has caused most of the downward insurers, which means that our customers continue
pressure on markets. With that in mind, the only to enjoy absolute security. The capital held by the
sensible response, going forward, is to remain calm. business is 3.7 times (as at 30 Sept 2008) the
required statutory minimum – substantially more than
Within the retirement fund industry, it is trustees, any of our competitors – and sufficient assets are held
advisers, consultants and intermediaries who have the within policyholders’ funds to more than meet all our
responsibility to ensure such calm, by reminding fund obligations to our customers. The company also has
members and employers that retirement investment shareholder assets to provide additional security to
is a long-term plan. Investors or fund members our policyholders.
must avoid making decisions based on single events
or individual pieces of bad news. Fund investment Old Mutual has always stood for absolute security
policies must be reviewed regularly, to ensure the and peace of mind. It’s the assurance we offer all our
same prudent, long-term approach is upheld. Most customers, including our retirement fund members,
importantly, members whose funds have offshore and despite the crisis seen around the world we have
investments must be advised of the likely short-term not wavered from this promise.
drop in value that may occur, and be warned against
the risk of exiting their investments prematurely as a
result.
3
While the worst fears of a complete global financial system collapse have faded, severe
damage has been done to global economic prospects and the world now faces the longest
and deepest downturn since the Great Depression of the 1930s. Despite aggressive policy
stimulation the downturn is expected to last through most of 2009 and will likely result in an
outright contraction in economic activity in many parts of the world.
Economic
conditions
prospects
South Africa did not escape the for government’s accelerating global developments and will
global turmoil and was also hit infrastructure programme. provide an ongoing strong boost to
hard by the dual shocks that the local economy.
hit most emerging markets: a But it is not all bad
collapse in commodity prices and news locally Global financial markets behaved
a flight of capital. As is to be very predictably, initially in
expected, the rand bore the brunt Despite the weaker rand, inflation response to the panic about the risk
of the adjustment as it fell sharply prospects are fast improving as of a global financial system collapse
against most major currencies. the petrol price is set to fall further, and, more recently, as regards the
food inflation is expected to slow intensifying gloom about economic
sharply owing to sharp declines growth and company earnings
Despite the weaker in the prices of key raw foodstuffs prospects. The aggressive policy
rand, inflation (like wheat) and weak demand will actions described earlier appear
prospects are fast limit companies’ pricing power. to have arrested the fall in global
improving equity markets, although extreme
As a result, interest rates may volatility still characterises short-
Local economic prospects have begin to decline by the end of 2008. term trading. While prospects for
consequently bleakened notably. Moreover, while the weaker rand will financial markets remain extremely
As a result growth in 2009 will increase the cost of imported goods, uncertain in the short term, the
likely be around 2%, compared to it does act as a cushion against aggressive policy stimulation
±3½% this year and 5% p.a. over adverse global developments currently being implemented
the previous five years. Consumers in providing protection to local around the world should pull the
will unfortunately bear the brunt of export industries and producers world out of the downturn towards
the adjustment (mainly via fairly competing with imports. In the end of 2009. As financial
high interest rates for some time addition, government’s ambitious markets look ahead, markets
to come) as slower consumption infrastructure programme will not should begin to recover well
growth is required to ‘provide room’ materially be affected by recent before the turnaround in economic
4
economicconditions
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Rian le Roux
Chief Economist OMIGSA
activity and earnings. In the short
term, though, extreme volatility is
likely to continue and more bouts
of panic selling could still occur.
There is little
concern over the
stability of South
Africa’s financial
system
Much the same goes for the local
markets.
While there is little concern over
the stability of South Africa’s
financial system, concerns over
the growth and earnings outlook
will remain the dominant driver
Key points
of market behaviour in the short The world now faces the longest and deepest downturn since the Great
term. A further complication for the Depression of the 1930s.
local market is the risk of a further South Africa was also hit hard by the dual shocks striking most emerging
sell-off of the rand, which will have markets: a collapse in commodity prices and a flight of capital. The rand
negative inflation implications and bore the brunt of the adjustment, falling sharply against most major
could postpone any local interest currencies.
rate relief. Looking forward, though, Growth in 2009 will likely be around 2%, compared to ±3½% this year.
the imminent decline in inflation will Despite the weaker rand, inflation prospects are fast improving.
lead to lower interest rates in due Interest rates may begin to decline before the end of 2008.
While prospects for financial markets remain extremely uncertain in the
course, while the weaker rand and
short term, the aggressive policy stimulation currently being implemented
more expansionary fiscal stance will
around the world should pull the world out of the downturn towards the
also begin to pull the local economy
end of 2009.
out of the downturn towards the
end of next year. Financial markets
should begin to price improving
prospects earlier.
5
With global financial
sentiment hitting an 80-
year low, the benefits
of smoothing-enhanced
portfolios have, as during the
1987, 1998 and 2003 crashes,
been highlighted for all to
see, leaving retirement fund
members invested in these
portfolios smiling.
Roger Birt
Product Actuary
Investment Services
(Corporate)
Smooth Talking
‘Talk is cheap. Here are the facts!’
Even though the local equity market lost approximately
How much more pain can your
25% over the three months to the end of October, all
members stomach, especially if they
Old Mutual’s smoothing-enhanced portfolios continued
are not invested in a smoothing-
to deliver competitive (and positive) returns over
enhanced portfolio?
the same period! With an immediate turnaround in
investment markets not expected in the next six months, can your members stomach, especially if they are not
the question therefore remains, how much more pain invested in a smoothing-enhanced portfolio?
6
smoothtalking
The table below shows returns over various periods to 31 October 2008.
Investment Strategy 1 Month 3 Months 1 Year 3 Years (p.a.) 5 Years (p.a.)
JSE All Share -11.6% -23.1% -30.9% 11.5% 19.9%
Aggressive Balanced -6.3% -9.7% -17.3% 11.8% 18.2%
Funds (Median)
Absolute Return Funds -2.3% -3.1% -4.7% 15.9% 17.5%
(CPI+5% Average)
Old Mutual Absolute Smooth Growth 0.5% 2.0% 19.6% 25.5% 22.5%
(50% guarantee)*
Old Mutual CoreGrowth 0.4% 2.0% 11.5% 18.3% 15.5%
(100% guarantee)
CPI 0.0% 0.9% 12.1% 8.4% 6.3%
* Backtested returns assumed prior to launch in April 2007.
Smoothing-enhanced portfolios
objectives, which are fundamental for satisfying any
Smoothing-enhanced portfolios
address all three of the typical retirement fund member’s needs.
objectives of any retirement fund
Although balanced market-linked funds may provide
Fundamental objectives reasonable inflation-beating returns over the long
term, there are extended periods when returns from
The superior value proposition of smoothing-enhanced these funds are lagging inflation. While investors opt
portfolios is that they address all three of the typical for more aggressive balanced funds in search of higher
objectives of any retirement fund: long-term growth, the cost of this choice is greater
volatility, increasing the risk that short-term returns
■ Providing inflation-beating returns – to ensure
lag inflation or end up being severely negative. More
sufficient growth on retirement savings to avoid
conservative funds reduce this risk, but at the cost
inflation eroding the purchasing power of members’
of giving up returns. The same argument applies
savings at retirement.
to absolute return funds. For both these strategies
a reduction in volatility is achieved through a lower
■ Significantly reducing short-term market volatility
allocation to growth (volatile) asset classes, which may
– to protect the interests of members, especially
impair long-term returns if inappropriately timed.
those that exit the fund (by retirement, death,
retrenchment, or other uncertain events), by
In comparison, the Smoothed Portfolios, Old Mutual
reducing the exposure of their savings to severe
market volatility, and therefore potential losses on Absolute Smooth Growth and Old Mutual CoreGrowth,
those savings if exiting the fund during times of have delivered longer-term returns in excess of inflation,
market turmoil. while over shorter periods, delivering bonuses that
have deliberately smoothed out the recent downturn
■ Providing explicit capital guarantees – to provide in equity markets. The smoothing-enhanced portfolios
a safety net below which members’ investment include explicit capital guarantees, and at various
values cannot fall, regardless of the world or local levels, presenting an array of risk/return options to
economy. cater for different member needs. This means that,
in severe market environments, negative returns are
As is clear from the table above, no other investment a possibility for portfolios with guarantee levels below
strategy offers a combination of the above three 100%.
7
1-year rolling returns to 31 October 2008
50% CPI +3% Old Mutual Absolute Smooth Growth (50% guarantee) ***
Old Mutual CoreGrowth (100% guarantee) Aggressive Balanced Funds (Median)*
Absolute Return Funds (CPI +5% Average)**
40%
30%
20%
10%
0%
-10%
-20%
Nov 99
Mar 00
Jul 00
Nov 00
Mar 01
Jul 01
Nov 01
Mar 02
Jul 02
Nov 02
Mar 03
Jul 03
Nov 03
Mar 04
Jul 04
Nov 04
Mar 05
Jul 05
Nov 05
Mar 06
Jul 06
Nov 06
Mar 07
Jul 07
Nov 07
Mar 08
Jul 08
Source: * Alexander Forbes Large Manager Watch survey for the period ending 31 October 2008.
** Alexander Forbes Absolute Return Manager Watch surveys for periods ending 31 October 2008.
*** Backtested returns assumed prior to launch in April 2007
Balanced and absolute return funds from asset reserves fall below minus 15%) would still show that
managers do not offer any type of capital guarantees. Old Mutual Absolute Smooth Growth outperforms the
Absolute return funds aim to minimise capital losses, Median Aggressive Balanced Fund by more than 15%
but this remains only an aim, as many have delivered over the past year.
negative returns over the last year. Smoothing-
enhanced portfolios, in contrast, deliver more stable Recent enhancements
and consistent inflation-beating performance, not just
in bull markets, while also significantly reducing the The principle of smoothing-enhanced portfolios has
risk of extreme underperformance at the date of exit existed in South Africa since 1967, with the launch
through smoothing and by providing explicit capital of the Old Mutual Guaranteed Fund. In the last ten
protection. years, various enhancements have been made to the
way these portfolios are managed as the needs of
It should be noted that, while Old Mutual Absolute retirement fund investors have rapidly changed.
Smooth Growth’s performance exceeds that of the
Median Aggressive Balanced Fund by more than 36% Absolute Growth Portfolios have a
over the last year, the recent market falls have placed dynamic and aggressive investment
significant pressure on products’ underlying bonus philosophy that is well diversified
smoothing reserves. This means that, should the
market continue to fall further, a negative bonus could
be declared. However, even a negative bonus of 15% Last year, Old Mutual launched the Absolute Growth
(as per the bonus formula should bonus smoothing Portfolios, which have revolutionised the retirement
8
fund industry yet again. These portfolios start with a bonuses are possible on these versions in particularly
dynamic and aggressive investment philosophy that is severe investment environments (as their guarantee
well diversified (refer the article ‘Finding Alternatives’ levels are below 100%), but with a consequent higher
in the September 2008 Trustee Times issue), and then long-term return expectation.
deliver the returns to investors so that the volatility
(and therefore risk) thereof is even lower than for Benefits of smoothing-enhanced portfolios
conservative funds. The returns are delivered based
on an explicit CPI inflation target, like absolute return ■ Exposure to the most efficient, dynamic and
funds, but are declared before the start of each month. diversified underlying investment mandates
Wrapped around this are various guarantee levels, available, including exposure to direct property,
which are supported by Old Mutual’s balance sheet. private equity, infrastructure and international
alternative assets – all managed across a range of
The combination of features ensures that the portfolios investment boutiques and diverse expertise.
deliver superior performance as well as providing the
peace of mind that members’ retirement savings ■ Explicit inflation-targeting on a monthly basis.
are protected, at various levels, from severe market
downturns. ■ Significantly reduced short-term volatility, by way
of smoothed monthly bonuses, reducing the risk
These new era smoothing-enhanced portfolios also on members being forced to exit their fund in a
offer complete transparency (in terms of underlying severely negative market.
returns, their formula-driven bonus philosophy and
■ Formula-driven bonuses providing the facility
disclosing of reserve levels).
to forecast future bonuses under future market
environments.
Choice of smoothing-enhanced portfolios
■ Full transparency of bonus mechanism, underlying
The years of one size fits all are long gone, and
portfolio performance, reserve levels and costs
the same applies to retirement savings. Old Mutual
and charges.
therefore offers a range of smoothing-enhanced
portfolios to cater for different client needs. For
■ A choice of explicit protection levels, backed by
example, CoreGrowth and Absolute Secure Growth
Old Mutual South Africa’s balance sheet which
offer 100% capital protection (guaranteeing no
remains one of the strongest in the South African
negative returns) for risk-averse members, such as
Financial Services Industry.
those close to retirement. These portfolios differ in
that CoreGrowth invests in a conservative underlying
■ Unitised daily returns for easy benefit
asset mandate and Absolute Secure Growth in a more administration.
aggressive underlying mandate.
■ The experience of 41 years of efficiently managing
Also available, and becoming increasingly popular, smoothing-enhanced returns, in an array of
are low cost portfolios with high return objectives investment environments.
but still low volatility. Absolute Smooth Growth offers
higher prospects for returns (CPI+6%), for clients
valuing the smoothing benefits, but not necessarily a
high guarantee level. Finally, to complete the range,
Absolute Stable Growth offers a respectable blend of
growth and protection, with an 80% guarantee while
still aiming to deliver returns of CPI+5.5%. Negative
9
There’s nothing like hindsight to highlight the importance of being proactive.
And in the midst of the world’s first truly global financial crisis, some trustees
are assessing whether the strategies of the quiet past are adequate for the
stormy future.
Time to reassess?
Craig Aitchison, Head of Old Mutual not necessarily the best match to invested in the safest portfolio.
Actuaries and Consultants (OMAC), every member’s needs.
however, warns against trustees What about members about
making impulsive decisions. to retire?
Trustees need to recognise the Optimising the balance Certain lifestaging products
need for long-term planning and between investment offer portfolios for pensioners as
strategising and work towards growth and capital well and provide for a seamless
these long-term goals. In the mean
protection transition from active member to
time, if funds did not manage pensioner.
investment risks appropriately
there is a fair amount of disaster The lifestage approach creates An important aspect of the
management that may need to be several different portfolios of investment strategy is the portfolio
done first. descending levels of risk for that the member is invested in
members. That means members’ immediately prior to retirement.
Lifestage investment strategies funds are invested in the portfolio This is referred to as portfolio
may provide an appropriate long- that offers them the best mix of risk targeting.
term solution for funds wanting and returns, given their proximity
to find a better balance between to retirement.
investment growth and capital
protection. Younger members are placed in a
A single investment
more aggressive portfolio, which portfolio may not meet
Lifestage investing could be has little or no capital protection, every member’s needs
the solution for certain funds, while members closer to retirement
particularly during these troubled are placed in a portfolio that has
times. Modelling by OMAC has substantial capital protection. ‘The choice of target portfolio can
shown that a simple lifestage model Members with a middling time to determine the success or failure
could have improved the after- retirement would find themselves of the lifestage strategy,’ says
retirement income of a member in a moderate portfolio that has Aitchison.
retiring in October 2008 by up to some protection but is still fairly
30% compared to investing in a aggressive. The target portfolio should be as
balanced fund only. close a match as possible to how
As members age, they will be the money will be invested post-
The basics of lifestaging switched from the more aggressive retirement. Many members, even
Lifestage investing is an investment portfolios to the safer portfolios. those in funds with member level
approach which recognises that When members are very close investment choice, give little
a single investment portfolio is to retirement, they will be fully thought to how their money is
10
lifestage
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Craig Aitchison
Head of Old Mutual
Actuaries and Consultants
(OMAC)
invested for the 20 or more years and should be made in conjunction the match, the lower the chance
that they are pensioners and may with an accredited financial of the member’s savings and
only think about their retirement adviser. annuity prices moving in opposite
options in the year before they directions, resulting in lower
retire. However, the choice of post- ‘Matching closely is very important’ income levels for members.’
retirement investment is critical advises Aitchison ‘as the closer
In brief, members have a choice between a mix of investment types:
Post-retirement income What it is Closest pre-retirement investment
Cash Cash Cash
Level Annuity An annuity that pays a fixed Bond Fund
monthly income
Increasing Annuity An annuity that increases at Inflation-Linked Bond Fund
a predetermined rate,
e.g. 80% of inflation
With-Profit Annuity An annuity that increases in 100% Guaranteed Smoothed Bonus
line with smoothed investment Product
performance.
Living Annuity Pensioner selects income level Balanced Fund, i.e. mix of equities
each year, expressed as a percentage and bonds
of their accumulated savings
11
Historically, lifestaging strategies used members exposed to higher risk impact of these costs on investment
cash as a target portfolio. However, investments too close to retirement. returns and members’ benefits
this was inappropriate for members A way to manage this is to have the would have to be calculated and
who were not going to spend all of administrator report on switches modelled when the lifestage model is
their retirement savings shortly after and to ensure there is a high level designed.
retirement. of automation in the administrator’s
systems. Deciding if lifestage investing
The current thinking around is right for your fund
lifestaging is for trustees to choose For funds that are currently in The lifestage approach allows trustees
a target portfolio based on where aggressive investments, members to tailor the fund’s investments to
they think members are going to near retirement may find themselves better suit members’ investment
be invested after retirement or transferred into more conservative needs. Trustees can manage
for members to choose the target investments. However, this could investment risk more effectively and
portfolios for themselves. serve to lock in losses experienced as may be able to increase the overall
a result of recent market turbulence. level of returns earned by members
The good news is that members As members who are far away from over their working lifetime.
will need to make the decision at retirement are placed into more
most eight years before retirement. aggressive investments, they can Lifestaging is suitable for a fund
This means that younger members, be exposed to market risk. Should where trustees are prepared to invest
who often have limited interest in the member leave the fund, their the time and resources required in
retirement matters, can defer this benefits will be disinvested and paid managing the fund’s investments.
decision until retirement becomes to them in cash. There is a risk that a It is also a good stepping stone for
more pressing without jeopardising member would leave just as markets a fund considering offering member
their financial future. (and the value of his investment in level investment choice.
the fund) have dropped. Members
Possible pitfalls who are retrenched are particularly Small funds with few members or low
While lifestage investing should vulnerable as they have little choice assets may struggle to implement a
improve the risk profile of the fund, it over the date when they exit the full lifestage approach, as they may
is not for everyone. Trustees need to fund. not have sufficient membership or
satisfy themselves that each lifestage assets in a particular category.
portfolio is appropriate. Further, the The member’s best way of mitigating
performance of each portfolio has this risk is to immediately invest his ‘Being forewarned is being forearmed,’
to be monitored to ensure proper withdrawal benefit into a similarly says Aitchison. This is particularly true
management. invested preservation vehicle. for planning an investment strategy.
It may be too late to avoid some of
A further risk is that the administrator There is also the risk that higher the fallout resulting from the credit
may not switch members’ expenses may erode higher crisis, but ‘now’ is always a good time
investments on time. This could leave investment returns. The overall to plan for the future.
Lifestaging in short
■ An investment approach that recognises that a single investment portfolio is not necessarily the best match to every
member’s needs.
■ Younger members are placed in a more aggressive portfolio, with little capital protection.
■ Members closer to retirement are placed in a portfolio that has substantial capital protection.
■ Members with a middling time to retirement are placed in a moderate portfolio that has some protection but is still
fairly aggressive.
■ As members age, they will be switched from the more aggressive portfolios to the safer portfolios.
■ When members are very close to retirement, they will be fully invested in the safest portfolio.
■ For post-retirement, current thinking is around target portfolios – the trustees target an investment portfolio that
closely matches how the money will be invested post-retirement, or else for members to choose the target portfolios
for themselves. This ensures a smoother transition into retirement.
12
financialwellbeing
Waste not,
want not
It has been estimated that less than 6% of South
Africans are in a financial position to be able
to retire comfortably. While a lack of adequate
provision is primarily to blame, a failure by many
employees to carefully preserve their retirement
funds is also contributing to the problem. And it’s
going to take a concerted effort by all stakeholders Haddon de Waal
Head: Financial
to correct this trend. Wellbeing Programme
In contrast to many other retirement fund members realise to make preservation an integral
countries, legislation in South that, quite apart from the onerous part of retirement planning for its
Africa allows employees to receive tax implications of taking their fund members – and encourage
their accumulated retirement funds retirement savings in cash, failing to trustees and employers to do the
when changing jobs. And while preserve those savings represents same.
having access to their retirement a massive step backwards in their
money may be something of a preparations for retirement. In fact,
What can you do?
lifeline for some individuals who no matter how long they will still
have no income while trying to be employed prior to retirement,
Essentially, there are three
obtain new employment, the few, if any such employees are
temptation to spend the money likely to be in a position to be able ways in which retirement funds
unnecessarily is simply too great to restore their retirement savings preservation can be encouraged
for those who don’t understand the to the levels they would have amongst members. These are
dire consequences of such action. achieved had the funds simply through:
been preserved during their job
This fact is evidenced by research transition. 1. the provision of effective
done by Old Mutual Corporate financial education to ensure
into its umbrella funds, which With that in mind, it is clear that that employees and members
showed that more than two-thirds the industry players, trustees and make informed and correct
of members resigning from their retirement fund managers have a
decisions;
jobs prior to retirement age took responsibility, not only to educate
2. access to personal, expert
their retirement benefits in cash, members about the importance of
advice and assistance around
rather than transferring them preservation, but also to enable
preservation decisions; and
to a retirement annuity fund, them to effectively preserve their
preservation fund or their new retirement savings in the long 3. well structured incentives
employer’s retirement fund. term. designed to encourage
members to avoid the
This is a frightening statistic, This fact has prompted Old Mutual temptation of cashing in their
because it shows just how few Corporate to take action in an effort retirement savings.
13
Waste not, want not cont.
Old Mutual Corporate
recently announced that
Working together for the good of members
it has eliminated upfront
Obviously, implementing these approaches, and
administration fees for
achieving success amongst members in terms of
anyone who is currently a
their willingness to preserve their retirement savings, client of Old Mutual or who
requires collaborative efforts. is employed by an organisation invested in Old
Mutual, and who chooses to preserve his or her
Old Mutual has made the process a little easier with investment in our Protektor Preservation Fund.
the implementation of its Financial Wellbeing
Programme, which provides employers and trustees The move effectively makes the Protektor
with access to experienced trainers who can be called Preservation Fund one of the most economical
on to offer educational seminars to members on preservation funds on the market and the lower
various aspects of financial planning – including the fees incentivise preservation by translating into a
higher fund value at retirement
reasons and methods for effective preservation.
So, with the necessary education, assistance and
As part of the programme, trustees and employers also
incentives in place, it is now possible to begin
have the ability to put individual members in contact
reversing the disturbing trend by fund members to
with Old Mutual financial advisers, who are qualified cash in their retirement provision when switching
to guide them regarding their retirement funding jobs.
decisions when changing employers.
Upcoming events
Old Mutual Actuaries & Consultants
(OMAC) Breakfast Seminars 2009
OMAC has a series of thought-provoking and
interesting seminars lined up for 2009. During the
first quarter, the topic will be around preservation
of fund benefits prior to retirement. Recent
legislative changes have made preserving withdrawal
benefits easier and from 1 January 2009, the
regulations around payment of death benefits will
change – making it big news for members and
trustees.
To find out more, please contact Rian Piek at
011 217 1091 or rpiek2@oldmutual.com
14
Are you on course for financial
independence?
Help your employees take a step towards achieving financial independence,
thanks to the Old Mutual Financial Wellbeing Programme.
Most people believe that their retirement fund will pay
out enough money to retire one day. While the average
retiree needs a retirement payout of around 13 times their
final year’s annual salary to be able to retire relatively
comfortably, research reveals that most retirement fund
members can expect their payout to be less than a quarter
of that amount.
Old Mutual developed the Financial Wellbeing Programme to
help guide members of retirement funds through the process
of successful, ongoing retirement planning.
How it works
Fund assessment
Old Mutual Corporate does a thorough assessment of the
financial status of the entire retirement fund and its individual
members. The results show precisely the level of financial
preparedness of fund members as individuals and as a whole.
This allows trustees to choose the appropriate workshop In addition, the programme also provides you with a range of
from the Old Mutual Financial Wellbeing Programme, based easy-to-use financial planning and decision-making tools
on the needs of their fund. and calculators, as well as access to ongoing consultation
and advice from accredited Old Mutual financial planning
Member workshops professionals.
The programme offers one to two-hour workshops with topics
that range from general information about your retirement The programme has been designed to fit seamlessly into
fund and the importance of proper retirement planning, to any organisation’s overall Human Resources Strategy or
insights and training around essential financial, risk and Employee Wellness Programme. The services and workshops
investment management principles and techniques. are tailored according to income levels, financial literacy
levels, language preferences, and geographical spread.
The programme also offers the ‘On The Money’ behaviour
change workshop, which is 7 hours in length. This workshop Old Mutual would like to partner with you to deliver the range
can be customised into a number of shorter sessions spread of products available under this programme, through the
over a period of time. establishment of a joint steering committee.
For more details on the Old Mutual Financial Wellbeing Programme, speak to your Corporate Consultant or contact
Haddon de Waal (Head: Financial Wellbeing Programme) at 011 217 1104 or hdewaal@oldmutual.com
Paying high fees
for excess returns
but getting a lot of Beta
Unlike the rest of the globe, where between 20% and 30% of all retirement plans utilise
some type of index-tracking core, active managers in South Africa often argue that
our local market is structurally different and does not lend itself to core and satellite-
wtype portfolio construction.
However, the facts of our market Currently, a blended portfolio of three these are the only ones they like –
would suggest the opposite – that the or four large active equity managers investment constraints are being
SA market has investment constraints in South Africa would be invested in forced upon them. Typically they
that make it more difficult for fund 130 to 135 shares. This may sound need a stock to have average monthly
aggregators to create an active-only like a lot, but relative to the Dow trade of over R100m per month, and
portfolio blend that will not result in Jones Wilshire 5000 Index it is a very there are approximately 80 stocks
a de facto passive core portfolio. This limited universe. In fact, the largest on the JSE that currently meet this
suggests that for a pension fund to 80 stocks within this blend account criterion. This is only R5m in trade per
pay high active fees on ALL its assets for over 96% of the aggregated day. To avoid trade impact costs it is
is a waste of money – given that a portfolio. advisable to not participate in more
component of the fund’s aggregated than 20% of the daily volume – this
equity return is purely derived from Managers do not decide to invest further restricts an active manger
the passive investable universe. in just 80 shares simply because to only R1m in available daily trade
A Tiny Universe Aggregated Top 11 Managers
Equity Holdings
Dow Jones Wilshire 5000 Index 5000
Next 10 Shares
1%
Other Shares
Top 80 Shares
3%
96%
S&P 500 500
Alexander Forbes SA Large Manager Watch 131
Number of shares
Source: Riscura, OMIGSA, Inet
16
investments
Craig Chambers
Deputy MD
Umbono Fund Managers
volume. It can therefore take weeks to execute even a
1% switch in house-view funds.
So what does this
unavoidable de facto passive core look like?
Since the advent of the Shareholder Weighted Index
(SWIX) almost seven years ago, the majority of active
managers have adopted it as their benchmark. (Inevitably,
even if they don’t utilise the SWIX, they will be utilising
some kind of Regulation 28-compliant, resource down-
weighted index.) So, when fund aggregators construct Top 11 manager blend vs SWIX composite
a blend of three or four active managers, one manager
35% Largest 11 Managers Aggregated Equity Pot (net of fees)
may have a slight overweight position in Sasol relative Composite: 70% manager blend, 30% SWIX (net of fees)
to the SWIX, another will have a slight underweight, but 30% 29.06% 28.87%
in aggregation they look very similar to the SWIX. This
25%
is especially true for the largest 80 stocks. Remember 22.07% 22.29%
20%
the SWIX index is faced with the same investability
constraints – so 80 stocks also make up a very large 15%
proportion of this index.
10%
The returns confirm this – if we look at the five-year 5%
annualised equity carve-out return of the largest 11
0%
3 Years 5 Years
managers (after a typical active fee) versus the identical
blend but with 30% of the composite invested in a SWIX
tracker (net of typical tracker fees), the two composites’
returns are very similar. In fact, the average realised
tracking error of the aggregated equity carve-out blend
versus the SWIX has been less than 2.5% a year over
the last six years – this is typically the active risk range
we use for an enhanced tracker.
So no matter how fund aggregators try to slice and dice
active managers in the SA context (deep value, growth,
GARP, etc.), the aggregated blend will always have a
portion of the portfolio that is 100% passive. This portion For more information on tracker and enhanced
should be costing investors 70% less than typical active tracker portfolios, contact Craig Chambers at
fees. 011 562 6039.
17
A handful of
disability cases
Old Mutual Group Assurance provides income benefits to thousands of disabled people
each month, and each claimant has their own compelling story. The following few cases
illustrate how Old Mutual works with all parties to achieve a fair outcome, whether the
claimant receives a long-term benefit or returns to work.
A normal life like anyone else
The 31-year-old man was at university when his eyesight While he received a monthly disability benefit, his
began to deteriorate. Though unable to pursue his rehabilitation and training began. Given his potential,
studies, he was determined to work and found a job at a Old Mutual paid for all his training. He first learned to walk
supermarket. about independently and with confidence, despite his poor
vision. He then mastered adapted call centre technology,
which enabled him to return to his previous employer
When his vision got worse, his manager adjusted the work
as a Personal Helpdesk Practitioner. He now has a much
to accommodate his limitations. Later, working as a packer,
better income than when he worked as a packer in the
he began to miss some of the items the clients had bought supermarket.
– clearly an unsatisfactory situation for all stakeholders.
Interaction with the employer and employee indicated that His employer wrote: “I would like to say thank you to
he was a motivated and ambitious young man. Yet he felt Optima (the training facility) and Old Mutual for giving
that he had reached a dead end, as he was not aware of him an opportunity to explore and to gain his life and self-
the rehabilitation services that are available to people with esteem back… He can now socialise and lead a normal
poor vision. life like anyone else. Thank you for opening doors of
employment for him.”
Member of a lift club
The 50-year-old man had been struggling with the blood and gradually increased the work requirements until he
supply to his legs for a number of years. He continued became fully productive again. During this time Old Mutual
to perform his administrative job for as long as he could continued to pay a partial benefit to top up the salary that
cope. he earned.
He was already receiving a disability benefit when the Transport to work proved to be the final stumbling block.
doctors decided it was time to amputate both legs due to Though it would have been possible to adapt his car so that
his chronic condition. Over time the wounds healed well and he could drive it with hand controls, the car was considered
he adapted to the loss of his legs. too old to make this a viable option.
He now wanted to return to work and his employer was For the time being he is a member of a lift club with his
willing to accommodate him, once they understood the colleagues – this green solution might well be all he needs
situation. They agreed to begin with a part-time commitment even in the long term.
At death’s door no more
There are many stories like his – people who have been Another two years went by. He was alive and well – and
very ill before they began treatment for their chronic eager to work. The company doctor and management
health problem. This 42-year-old man already had major wanted some evidence that he was really better before
complications such as tuberculosis, dementia, paralysis giving him an opportunity to return to work. Fortunately
and bedsores, and death seemed certain. his remarkable recovery was supported by up-to-date
medical information and he was able to return to work full
After two years on treatment, the medication was making time.
a difference and some of the complications were being
addressed. He began to wonder about returning to work, A few months later he wrote: “I want to thank the assessor
but the doctor believed that he would never be able to very much for the excellent service in the last four years.
work again. She made me believe in myself and gave a lot of information
I needed at the time. She was also ready to listen to me
and she returned my call every time I called. I am back at
work now and enjoy every minute of it.”
Inappropriate enthusiasm for work
During a relapse of her psychiatric condition, one of the gain better insight into her condition so that they can
claimants wanted to return to work. Though this is usually support her more effectively. The doctor was also able to
encouraged, a claims assessor must always consider the stabilise the psychiatric condition during the three weeks
situation from all angles. that she spent in hospital.
Given her condition and history, she is not expected to Though she will not be able to return to work, her caregivers
be able to work again. To ensure that all stakeholders are now in a much better position to understand and
understand the situation, a thorough psychiatric evaluation meet her needs. In this way the quality of her life has
was arranged. It helped her family and close friends to improved.
Unfortunately some fake disability
The specialist medical examination and x-rays found There was no sign of the disability that he had demonstrated
nothing wrong – only the usual wear and tear associated to the assessor less than an hour before!
with his age group. Yet when he attended the Old Mutual
assessment he could hardly walk through the door, was Given the challenges of real disability, those who fake
bent over and very dependent on his crutches. it should not make it as far as disability benefits are
concerned. Any discrepancy between the medical facts and
He did not know that Old Mutual asked a private investigator their impact on the person’s ability will be investigated to
to follow him home. He tucked both crutches under his ensure fair play.
arm and quickly walked into the house.
For more information go to www.oldmutual.co.za/groupassurance
Investment Client update!
Report Back
Seminars Old Mutual Corporate held its annual
Investment Report Back Seminars throughout
the country during the last quarter of 2008.
The main objective of these sessions was to
provide existing clients in the Old Mutual
Smoothed Bonus Portfolios and the Absolute
Growth Portfolios with an update of the
investment performance of these funds.
Here’s what some clients had
to say about the seminar:
“Seminar was informative and
has assisted me in understanding
the current state of affairs in the
retirement industry.”
“Leon Louw was precise and brilliant
and addressed our fears.”
“…reassured in these troubled
times”
“Speakers appeared very
professional and knowledgeable on Anita Griessel (Old Mutual Corporate)
the current topics and have made it and guest speaker Leon Louw
easier for clients to understand the
current economic scenario and fund
The guest speaker for the event was internationally
investment, e.g. Smoothed Bonus.”
recognised economic, political and environmental analyst,
and director of the Free Market Foundation, Leon Louw, who
presented some interesting views on the global financial
crisis and the future for South Africa.
Old Mutual Investment Consultants Anita Griesel and
Dharmash Dayal provided a comprehensive overview of the
current economic climate and how the Smoothed Bonus
and Absolute Growth Portfolios have delivered favourably
despite the rollercoaster ride of the markets.
20
groupnews
News from Old Mutual
Trustee Times brings you some
of the latest news from our
business via recent media
releases. For the full articles
and more, please visit the media
section on Old Mutual’s website:
www.oldmutual.co.za
5 Nov 2008 25 Nov 2008
Hospital staff set to benefit from onsite
financial advice
OM’s massive
Charlotte Maxeke Johannesburg Academic Hospital and Old Mutual (South
volunteer
Africa) today announced a partnership aimed at making the lives of its
dedicated healthcare professionals easier through the revamping of the
project to uplift
relaxation area and the opening of a client self-service terminal and onsite
access to financial advice.
communities
More than 2 780 civic-minded
Old Mutual (South Africa)
6 Nov 2008
employees have stepped out of
Q3 Interim Management Statement 2008 their comfort zones in one of the
country’s largest volunteerism
“We have delivered a resilient performance in what have been extremely campaigns – Care and Share.
challenging market conditions with our South African and Nordic businesses
continuing to deliver excellent results,” says Chief Executive, Julian Roberts. In the first week of the campaign
(3 to 7 November), 12 houses were
“Despite the fall in equity markets and movement in exchange rates we built in Cape Town, Johannesburg
remain well capitalised and we have liquidity that is in excess of our needs and Durban as part of Care & Share
for the foreseeable future.” Habitat for Humanity Builds.
13 Nov 2008
Old Mutual collects two customer excellence accolades
Old Mutual has been voted the best customer service organisation in the long-term insurance sector and claimed
the top position in the After-Sales Service category in the 2008 Ask Afrika Orange Index TM survey.
In total, 15 737 customers were interviewed with a minimum of 250 being interviewed per brand.
21
Capital Builder
the safe and smart
way to grow your wealth
Absolute Return Investments, a boutique within Old Mutual Investment Group
SA (OMIGSA), has developed a fund that can perform well in these volatile
times. It combines the safety of quarterly capital protection with the smart
investment in tax-efficient, long-term equity growth.
The Old Mutual Capital Builder Fund aims for quarterly effectively minimised losses to provide stable returns.
capital protection while generating stable growth in While the fund is structured to guard against falling
excess of inflation. The fund targets a return of CPI markets, it is also designed to benefit from rising
+ 5% per year, over rolling three-year periods. It is markets. The bar chart below shows the portion of
aimed at investors who want to achieve tax-efficient, the market’s performance that the fund experienced
inflation-beating returns through most market cycles. under different conditions – emphasising its strong
positive correlation when the market rises and lower
Active risk management correlation when the market falls.
Risk management is a key feature of this fund — both
in terms of short-term losses and long-term inflation To entirely eliminate market risk would adversely
erosion. The graph illustrates how, during periods affect the growth potential of the fund. So while it is
when the FTSE/ JSE All Share Index delivered negative highly unlikely that the fund will experience negative
returns, the fund’s risk management techniques returns over a 12-month period, under certain market
Reacting to market drawdowns Capturing upside, minimising downside
Average monthly returns from 1 December 2005 to 30 November 2008
FTSE/JSE TOP 40 Index Old Mutual Capital Builder
115 Portion of the market performance experienced by fund
JULY 2007 JANUARY 2008
FTSE/JSE TOP 40 Index Capital Builder
110
TIMES OF TIMES OF
105 NEGATIVE MARKET POSITIVE MARKET
RETURNS RETURNS
42%
100
4.2%
1.8%
95
-0.4% Stronger correlation to
market outperformance
90 9%
-5.2%
85
Lower correlation to market underperformance
May-07 May-07 May-07 May-07 May-07 May-07 Nov-07 Dec-07 Jan-08 Feb-08 Source: OMIGSA
22
investmentproduct
conditions investors could experience negative their risk characteristics, both at a share and portfolio
quarters. level. The fund management team favours shares
that are highly liquid and capable of hedging cost-
For those investors unable to tolerate any short-term effectively.
risk in the value of their investments, a 100% capital
Performance
guaranteed option can be selected. This protects the
quarterly returns from falling below zero. Month 2005 2006 2007 2008
The table on your right shows Capital Builder’s monthly,
Jan 5.1% 1.8% -0.3%
quarterly (based on tax year quarters) and annual
Feb 5.1% 1.8% -0.3%
returns since its inception in December 2005.
QUARTER 1 5.1% 1.8% -0.3%
Mar 3.6% 2.9% 1.6%
Attractive after-tax returns Apr 1.2% 1.8% 2.7%
Returns are predominantly generated from capital
May -0.7% 0.7% -0.6%
gains and dividends, which are more tax efficient than
QUARTER 2 4.1% 4.0% 3.8%
interest bearing assets. The example below looks at the
Jun 2.0% 0.5% -0.1%
effective tax implications based on the Capital Builder
Jul -1.0% 0.8% -2.8%
Fund’s returns since inception. This is compared to a
Aug 2.0% 0.9% 1.9%
portfolio fully exposed to interest-bearing investments
QUARTER 3 3.0% 2.2% -1.0%
(with a tax rate of 28%).
Sep 1.5% 1.7% -2.2%
Oct 1.9% 2.2% 0.6%
Example of potential tax rate for companies: Nov 0.5% 1.0% 1.1%
QUARTER 4 2.9% 2.8% -0.4%
SOURCE OF RETURNS RETURNS GENERATED (as a % of the whole) Dec 3.8% 1.3% -1.8%
Annual 16.8% 11.2%
Capital Builder Interest-bearing
Institutional Fund investment
(tax rate) (tax rate)
Return in excess of cash 9.4% 1.8%
Interest income 19% (28%) 100% (28%)
The Capital Builder’s returns (gross of fees) are used since its
Dividends 17% (0%) 0% (0%)
inception to February 2008, thereafter the Old Mutual Capital
Capital gains 64% (14%) 0% (14%) Builder Fund Class B returns are used (in the green block).
TOTAL 100% 100%
Potential total tax
rate (ex deferral) 14% 28%
Note: This example does not take any interest income tax exemption into account. Highly experienced investment team
Capital Builder is managed by an experienced portfolio
Investment strategy management team — with specialist derivative and
The fund can invest across most asset classes, including risk management skills. With its need for constant
cash, fixed income, listed property and equities. The monitoring and adjustment, the fund is overseen
equity holding of the fund (between 65% and 75% of the by a team of three managers so that it can always
portfolio) is invested primarily in select large capitalisation be positioned appropriately given changing market
shares of the FTSE/JSE Top 40 Index, with the balance conditions. The team has regular contact with a large
generally held in cash and money market instruments. number of banks and derivative brokers and focuses
Downside protection (put options) on the direct equity on securing the best prices in the market in order to
holding is purchased to reduce the portfolio’s equity minimise trading costs for the fund.
market exposure to between 0% and 40%.
For more information on Capital Builder please
Shares are selected quantitatively, based primarily on call Cornelius Schoonees at +27 21 509 3740.
23
The response by
investors to the current
volatility in global stock
markets highlights the
dangerous tendency
for investors to make
decisions based on
emotion, rather than
reason.
Keep the emotion
out of investments
Globally, $487bn moved into money emotion driven and is not a good
market funds in the first quarter strategy for investors, particularly
of 2008 compared to the $250bn those with a long-term investment
in the last three months of 2007. horizon,’ says Megan Butler, head
The majority of this came out of of research at Old Mutual Actuaries
equity funds. In South Africa, the and Consultants (OMAC). ‘This is
Association of Collective Investments due to the fact that when markets
(ACI) reported at the end of the June recover, cautious investors miss out
2008 quarter that money-market on the often substantial recoveries
accounts gained popularity with net in share prices.’
quarterly sales of R10.2bn.
She adds that similarly, rocketing
share prices not supported by
fundamentals are caused by herd
Rocketing share mentality, when investors derive
prices not supported comfort from investing with the
by fundamentals herd. ‘Unfortunately, these so-
are caused by herd called bubbles can have devastating
mentality consequences for investors when
sanity prevails.’
Gary Hartwig, an actuary at OMAC, Megan Butler
Head of Research (OMAC)
‘Unfortunately, the decision to says a study of behavioural finance
move from high equity products to shows us investors are often driven
very conservative investments is by emotion, rather than facts,
24
investments
Gary Hartwig
Actuary (OMAC)
allowing for irrational behaviour ‘For example, judging a particular They will make short-term or tactical
when making investment decisions. asset manager over a short-term calls on exposure to equity markets
time period will not necessarily give in order to lock in returns when
‘To illustrate the point, with children you an accurate picture of ability markets do poorly, and to maximise
in your home, would you consider over the long term, which may lead returns when markets recover.’
a swimming pool or gun more to serious errors when allocating
dangerous? In fact swimming pool assets.’ Investors should spend time
drownings are 100 times more likely focusing on their investment
than gun-related accidents. In the strategy, taking a view appropriate
same way, markets are more likely to their investment time horizon
Investors should avoid
to rise than fall on any given day and not making decisions based on
although sadly not in the ratio of 100
looking at short-term
the last 2 or 3 years of performance.
to 1! Hartwig says. ‘Unfortunately,
performance to make ‘Investors should not be influenced
shocking negative events tend to
long-term decisions by the fear of regret, but strip out
receive far higher volumes of media emotions to provide an objective
coverage and stick in people’s viewpoint based on common sense,’
minds.’ Hartwig concludes.
‘Heat-of-the-moment’ decisions
‘In an investment context, investors can have far-reaching negative
should avoid looking at short-term consequences for investors,’ says
performance to make long-term Butler. ‘Investment decisions are
decisions as they are more likely complex and should be thoroughly
to see unusual events and may not examined. I encourage investors
get a true reflection of the actual to consult an expert in the field who
performance,’ Hartwig comments. is able to view markets objectively.
25
Never 2 old
short for ‘be right back’, by the way (the abbreviation
for which is ‘btw’).
2 b hip
Don’t be alarmed by their clothes. Torn and tattered
jeans that hang well below the waist do not mean your
kids need new pants or are not eating enough.
As an adult (or anyone born before the The more expensive and fashionable the label, the
conception of the internet, for that matter) more derelict they often appear. Buying them a belt,
you may have noticed that kids these days or threatening to staple their jeans to their waists will
seem to be expressing themselves in a whole undoubtedly be frowned upon. Shoes are no longer
new way – from clothes to shoes, hair and shoes. They’re trainers, sneakers or kicks - and if they
language. Especially language.
even have laces, these are certainly never tied.
To keep up with youth nowadays, you need to be hip.
No, not the kind in your body... the kind that means
to be ‘cool’, or ‘in the know’. So, here is a crash course
on how to communicate with, and understand, any
teenagers with whom you come into contact.
If your kids greet you with something that sounds like
‘Whassup G-diddy, droppin’ it fo real in da hi-zouse!’
do not panic or call a psychiatrist. Loosely translated,
this means the equivalent of ‘Hello. It’s great to see
you! How are you?’ The best response is to calmly nod
and say, ‘Fine, thanks.’
Alternatively, throw them off kilter with a cool:
‘Whassup homie. Fo shnizzle mah nizzle.’ You don’t need
to understand it. Just practise it until you sound
fluent.
On another note, ‘sweet’ is not something that gives If your daughter comes waltzing into the room dressed
them cavities. It means ‘excellent’. ‘Jam’ is no longer a in too tight black clothing, two shades of purple lipstick
preservative that goes on toast; it means ‘party’. ‘Sick’ and black nail polish, she is probably not a Satanist.
is not an indication of poor health. Ironically, it refers Makeup is as much a form of expression for adolescents
to anything that’s amazing. these days as music, speech and lying upside down on
the lounge chair. Give her a hug (she probably still
You may even hear your kids say ‘bee are bee’. This is likes that, even though she’ll never admit it) and tell
not an indication of the grammatical standards taught her she looks very ‘emo’ (short for ‘emotional’ – the
at schools these days. Nor is it some kind of new age style of music linked to that look).
Zen mantra. It’s simply evidence that in the age of
cellphone-speak, youngsters no longer use full words. Chances are good that hauling out the boardgames
So, be on the lookout for abbreviations. Oh, and BRB is to amuse the kids will result in a sudden clearance of
26
lighterside
ON SALE
NOW…
the room. The playing board has been swapped for
the keyboard and console. The playground has given
way to the playstation. And when they tell you they’re
‘chilling’ with their ‘homies’ in their ‘crib’, it doesn’t
mean you need to give them a cardigan, or something.
It just means they’re relaxing in their room with their
EQUITY EXPOSURE
friends. The best response is to leave them alone.
THAT COSTS YOU
They’re plugged in, logged on,
uploading, downloading, instant 70% LESS
messaging and e-mailing. Over the last 6 years active managers have
performed in line with the SWIX. Now you can
invest in a SWIX tracker fund and get similar
If there’s something they don’t know, they don’t look it
exposure to equities at considerably lower fees.
up in a dictionary or encyclopaedia. They ‘Google’ it on
In addition, tracker funds avoid market timing by
the internet. They’re plugged in, logged on, uploading, remaining fully invested at all times.
downloading, instant messaging and e-mailing. All
from the same cellphone. And if you thought Walkmans The 2007 Alexander Forbes Retirement Fund
were fancy back in the day, think again. These days Survey shows that Umbono equity tracker fund
ice creams in the park have been replaced with iPods annual fees are between 61% and 74% lower
than the average active manager’s fees. By
in the mall. And, unfortunate as it may seem, the
using a SWIX tracker fund as the foundation of
importance of ‘Nana’ now pales in comparison to the
a diversified portfolio, investors can benefit from
essential accessory known as Nano.
paying lower fees while still getting full market
exposure.
Umbono Fund Managers provides cost-effective
access to investment markets via index tracking
and enhanced tracker solutions. These solutions
are designed for clients seeking low cost, low risk
‘core’ holdings to complement a larger investment
portfolio.
For more information on Umbono’s tracker
and enhanced tracker portfolios, contact
Craig Chambers at 011 562 6000.
Ultimately, though, the new generation is not too
different from what it was when you were a teenager.
Your grandparents probably didn’t understand you
either. And if all else fails, you can always give them
a taste of their own medicine. Hit them with a few
age-old expressions like ‘gee willikers’, ‘shucks’,
‘gadzooks’ or ‘criminy’. It may not catch on, but
it might just give you some extra room to manoeuvre
when it comes to reaching a mutual understanding
that bridges the generation gap. Oh, and good luck, Umbono Fund Managers is licensed as an approved financial service provider
(No. 721) in terms of section 8 of the Financial Advisory and Intermediary
btw. Services Act 37 of 2002. Reg. No. 2000/028675/07. Investors should note
that share price fluctuations, exchange rates and other economic factors
may have an effect on the value of investments. Performance is further
affected by uncertainties in government policy, taxation, foreign exchange
controls and other legal or regulatory developments. Past performance is
not necessarily a guide to future investment performance.
27
