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Dear reader Have you seen our new website? Take a look and stay informed, here... In this newsletter we explain our non-standard services and how they assist with your interests, and we report on an in depth discussion with Allan Gray, the latest developments at Namfisa and about withholding taxes due to be introduced in SA that will probably effect your fund as well. Please feel free to comment: tell us what you value and how we can improve the content. Regards Tilman Friedrich Tilman Friedrich's Industry Forum Benchtest Monthly 03.2011 In March our average prudential balanced portfolio returned 0.28% (February 1.21%). Top performer is Stanlib (1.4%), while Prudential (-0.9%) takes bottom spot. In very broad terms, Stanlib relative to the average prudential balanced portfolio, had 10% higher exposure to onshore equities (return of around 2%), compensated by a 5% lower exposure to onshore bonds and cash (return of around 0.4%) and a 3% lower exposure to offshore assets (return of around minus 3%). Prudential had a 2% lower exposure to onshore equities and 3% lower exposure to cash compensated with a 4% higher exposure to offshore assets. In both cases the performance should have closely resembled that of the average, the balance likely to be due to stock picking.On the basis of current trends in inflation and consumer sentiment, we would expect that the flow of capital into commodity based developing countries, such as South Africa, is likely to decline. This should remove the underpin of both our equity markets as well as our currencies. One major imponderable that may lead to a totally diverging development is the high crude price. This causes a funneling of capital flows into a few assets, such as US government bonds, commodities, precious metals and possibly even investment property. It diverts capital available for investment from the consumer to institutions and will undermine any broad based return of investors to the financial markets. It will cause speculative bubbles rather than sustainable growth. For further analyses and our views, click here... ‘Non-Standard Service Fees’ avoid cross-subsidisation In recovering the cost of services we provide, we distinguish between our ‘retainer fee’ for regular activities, determined as a percentage of pensionable payroll, and ‘non-standard service fees’ for irregular activities and ad-hoc services. Latter determined either on the basis of a standard rate per transaction or a time based rate.We believe that this practice is in the interests of our clients. Firstly, it limits the extent of potential ‘cross-subsidisation’ between clients who make extensive use of certain discretionary services and those that do not. Secondly it offers the option to clients to employ other resources rather than ours if this can be done more economically. In this manner, our fees more closely reflect the resources we actually employ on a regular basis while it encourages negotiation, planning and scheduling of other irregular activities and non-routine services. These ‘non-standard service fees’ are generally immaterial relative to our retainer fee. From fund to fund and year to year, however, this does vary significantly, depending on the demands placed upon us from time to time by our clients. Some of such ‘non-standard services’ are set out below.
Evidently it is very difficult to make provision for such services in our retainer fee in a manner that would be fair to all clients at all times. We therefore believe that it is in our clients’ best interests to recover our services based on actual resources employed.
Allan Gray – Quo Vadis?
What's new at NAMFISA Law and legal snippets South Africa to introduce dividend and interest withholding taxes Most Namibian retirement funds invest a substantial portion of their assets in South Africa. If you add to this dual listed SA companies, the investment in South Africa is likely to be anywhere between 50% and 70% of assets. Much of these investments will be dividend or interest bearing and will be subject to the withholding tax on dividends and on interest that is due to be introduced as from 1 April 2012 and from 1 January 2013, respectively. The additional tax burden for Namibian funds investing in South Africa is likely to be somewhere between 0.15% and 0.25% of total fund market value.This is not an inconsequential amount for any fund and your fund should address this topic with its portfolio managers in good time. Interesting media snippets What is a Fair Value for the Rand?The investor’s expectation of future movement in the Rand exchange rate versus other currencies is important in investment decision making. In the first instance, a strong Rand could present an opportunity for investing offshore. Secondly, a strong Rand could be the result of foreign investment flows into South Africa which in turn could be the reason for a strong local equity market. If both factors apply, one should obviously move investments offshore, and vise-versa. Sharenet discusses the question of fair value of the Rand in this article.
Charlotte Drayer's Admin Forum Reassured benefits provided by a pension or provident fund (Part 2) Members whose benefit cover entitlement falls above the free cover limit set by the insurer are automatically covered up to the amount of the free cover limit but have to provide medical proof of health in order to be eligible for the amount above the free cover limit.Once the insurer has assessed the medical information provided, the member will be advised of the result. If the insurer has identified a medical condition, the member’s benefit cover may be:
If the insurer has not identified any medical risk, the member is accepted at standard rates and conditions. To date the 20% rule has typically been applied. This means that if the benefit cover entitlement of the member increases by not more than 20% in one year, the member will automatically be covered for the full benefit cover entitlement. Medical evidence of health will only be requested again after 5 years. As soon as the benefit cover entitlement increases by more than 20% in one year, the member’s cover will be restricted to the last automatically accepted cover, increased by 20%. The member will then have to provide medical evidence of health for the amount of benefit cover entitlement above this pre-accepted amount. Sanlam is about to change this process and will accept increases in benefit cover entitlement without further medical evidence of health subject to certain periods, the age of the member and cover limits as set by Sanlam from time to time.
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