Dear reader

When we opened our doors more than a decade ago, we envisaged being a small, quality pension administrator. Recently we looked back and realised that we have grown beyond our expectations and now administer more than N$ 10 billion in assets between the clients of Retirement Fund Solutions and the Benchmark Retirement Fund. Although we have grown in size, we put you first by the simple means of measured growth. We grow and train our team at the same time as the assets we administer. By following this approach, we ensure that we can sustain our exacting level of administration, provide you with information without undue delay and provide you with the information that you need to make decisions.

This is our commitment to each of you, no matter how large your assets and the assets we administer.

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 09.2012

In September our average prudential balanced portfolio returned 1.13% (August 2.30%). Top performer is Namibia Asset Management/Coronation (1.56%); Sanlam (0.37%) takes bottom spot.

For investors the question one needs to find an answer for is how the current financial crisis and the stimulus measures will pan out. Stimulus measures will remain in place until such time as developed economies start picking up steam again and this will not be soon. Until then consumer sentiment in the developed world will remain low. Demand for our resources in the developing world, including our natural heritage, will thus remain depressed for some time to come. The economic growth government had bargained on, and which is necessary to contain our debt and sustain its servicing, will not be as rosy as hoped for. Austerity measures will not be avoidable even for us in Namibia and is likely to become a necessity as from 2013 onwards, to last for a while.

For further analyses and our views download Benchtest 2012-09, here...

RFS company news

RFS welcomes new staff member

We are proud to announce the appointment of Thomas Kaber and extend a hearty welcome to him! Thomas joins us on 1 November from Paraselene Capital Management in Cape Town where he gained valuable experience in unlisted investments. Thomas matriculated at DHPS. He subsequently obtained his Bachelor of Commerce Degree in Investment Management at the University of Pretoria and an Honours Degree in Financial Analysis and Portfolio Management at the University of Cape Town. He has shown a keen interest in the pensions industry where his thesis was on SA Regulation 28.

RFS moves on its strategies

2013 will see further concrete moves in the pursuit of a number of our strategies. Firstly, we look forward to Kai Friedrich joining the company in the first half of 2013. This will provide the impetus for our resolve to improve and expand the Benchmark product offering to group participants and will add capacity to pursue our succession plan.

The appointment of Thomas Kaber is aimed at creating additional capacity to grow the Benchmark retail client base, where investment expertise and sound financial advice is the key to creating value for our Benchmark investors. Further moves in line with this strategy will be implemented in the first half of 2013 and will be communicated in good time.

Taking Social Responsibility serious

RFS promotes an internal policy of supporting financially and by any other means necessary, staff who personally engage in social responsibility endeavours. We believe that this underscores our philosophy of sincerity in contrast to spending shareholders' money to gain maximum press coverage. In the pictures below, staff members recently visited the frail care unit of Oude Rust Home once again to bring some colour into the lives of the aged.


Frieda Venter gives a flower and a hug to an elderly resident.


The oldest are the dearest. Amei Diener hands a flower to one of the oldest residents of Oude Rust.


Reaching out. Amei Diener hands a flower to a resident of Oude Rust.


Warmth in giving. There were bright smiles for this flower given by Anna Willemse.

News from the market

IMN Africa Cup of Investments conference

This annual conference focusing on institutional and retail investments, took place in Cape Town on 6 and 7 September. In the previous issue we reported on some of the more interesting observations, trends and discussions presented at this conference. Here is the continuation:

Part 2

Regulatory developments:

• FSB concerned about cost of investment management;
• Global re-examination of costs in defined contribution arrangements;
• FSB believes performance must be measured relative to risk;
• FSB is a proponent of passive investment management to reduce costs;
• FSB believes performance fees have shortfalls such as incentivising a wrong risk bias;
• FSB disfavours investment guarantees of investment products due to their high costs;
• FSB disfavours smoothing due to the lack of transparency;
• SA government considering obliging pension funds to invest in infrastructure projects;
• National Social Security System in SA;
• Oversight of credit rating agencies to be strengthened and conflict of interest to be addressed where the company to be rated employs the rating agency (consider the auditor as frame of reference. New Bill has been drafted;
• FSB issue a notice now requiring funds to consciously consider ESG (environment, social and governance) factors when investing.

Behavioural finance – some interesting observations
(presentation by Meir Stratman, US professor of Finance)

• Recognise the difference between expressive (I have status) and emotional (I feel proud) benefits vs. utilitarian (high return at low risk) benefits of goods and services (e.g. as analogy, why give a rose for Valentine’s day instead of the equivalent monetary amount?), the ‘feel good’ benefit is very important in customer psychology;
• Investors want high status and proper respect;
• Investors’ goal is to be freed of fear (downside protection) and to have hope (upside potential);
• Socially responsible investing is one way of combining expressive, emotional and utilitarian benefits;
• A successful adviser needs to –
  • Know himself and his client;
  • Know science (be an expert) and teach his client;
  • Be his client’s financial physician, i.e. ask, listen, empathise, educate, prescribe and teach.
• Knowing and teaching your client entails:
  • Client is aware of the emotional drivers fear and exuberance and their impact on decision taking;
  • Judgment errors emanating from overconfidence;;
  • Confirmation errors (i.e. looking for evidence to confirm your judgment rather than to disconfirm);
  • Herding errors (i.e. if everyone does it, it must be the right thing to do).

• The ability of pension funds to manage and control their investments in their own best interests is impaired.
• Being divorced from management and control of one’s assets militates against the principle of ownership and trusteeship.
• Costs and risk for the industry are likely to be substantially higher as the result of the proliferation of SPV’s.
• Each SPV will face its own challenges with regard to liquidity.
• Consistent valuation of assets will be difficult to achieve.
• Investors will have to incur additional costs in accounting for their unlisted investments separately from their conventional investments.
• Investors will have to incur additional costs in consolidating and reporting on their investments to Namfisa.

Tilman Friedrich is a qualified chartered accountant and a Namibian Certified Financial Planner ® practitioner, specialising in the pensions field. He is a member of the legal and technical committee of RFIN. Tilman is co-founder, shareholder and managing director of RFS, retired chairperson, now trustee, of the Benchmark Retirement Fund.