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In this newsletter:
Benchtest 11.2013, Africa Cup of Investments Conference part 3, equity markets trending down, PMR diamond arrow again awarded to RFS, more staff pass exams in financial planning, season's greetings and more...

Dear reader

With this newsletter we conclude 2013. We extend our sincere gratitude for the great support of our clients and the exceptional dedication of each member of staff over the course of 2013 and the years before! We wish all of you a peaceful festive season and a prosperous 2014! May the New Year be blessed with adequate rainfall for all who depend on it, with success in your business endeavours and with health and happiness in your private lives!

In this newsletter we have posted an extract from our general market commentary in the latest Monthly Review of Portfolio Performance. We provide feedback on the Africa Cup of Investments Conference (part 3) that always provides an interesting global overview of developments and trends in the field of investments. Three staff members passed their exams to advance their qualifications in financial planning; RFS awarded PMR diamond arrow for the second year running; Namfisa unaudited annual returns of pension funds due by 14 February 2014; notes from the last Namfisa industry consultation meeting and season's greetings and review of company developments over the past year.


For those who take an interest in the pensions industry we also provide links to a few interesting articles.

As always, your comment is welcome, so open a new mail and drop us a note!

Regards

Tilman Friedrich


Tilman Friedrich's Industry Forum

Benchtest Monthly 11.2013

In November the average prudential balanced portfolio returned -0.08% (October: 2.70%). Top performer is Namibian Asset Managers (0.35%), Investment Solutions (-0.94%) takes the bottom spot.

Tapering of the Feds asset purchase programme is pretty much a given, only the time is still a bit nebulous at this stage although consensus is that it will commence in 2014.

To counter another panic reaction when this happens, the Fed has already indicated that it will maintain an accommodative monetary policy and that it will continue with its zero interest rate policy. Markets seem to have started to discount these developments towards the end of November. As the result the SA Allshare index hardly moved in November and declined by nearly 6% from end of October to middle of December. Graphs 5.2 and 5.3 clearly evidence the panic response of foreign investors in local markets and indicate an 'overshoot' scenario that has also lead to the Rand being undervalued at 10.19 to the US$, by our measure

How much further markets may decline is anybody's guess. The Fed does not seem to be keen on equity markets turning negatively as this will impact negatively on consumer sentiment, which in turn will counter its intention of boosting the US economy. In such a situation however, sentiment is likely to lead to markets overshooting to then correct again after a while when the real impact of the tapering combined with a low interest rate environment filter through.

We would expect the current negative trend in equity markets and the depreciation of the Rand to continue for a couple of months as the result of prevailing negative sentiment and the uncertainty about the impact of the tapering on financial markets.

With an expectation that this will correct again, we believe that it will not be the right time to get out of the equity market now without a very clear objective when to get back into the market, or for the specific purpose of short-term parking of money. It is usually easier to foresee a decline in the equity market, other than as the result of panic reaction by investors, than it is to foresee a correction. Corrections typically happen rather rapidly. Missing out on a correction can seriously affect investment returns.


Read our full commentary, find out how these and other developments impact on our investment views and download Benchtest 2013-11, here...

Season's greetings

A short look at 2013

The past year was once again a year on which we can look back with humble gratitude for what we have achieved with the great support of our clients and each member of our team.

Over the course of the year, 7 new staff joined our team. Austin Thirion and Rudigar van Wyk both joined us at the beginning of February, Austin from Alexander Forbes and Rudigar from Metropolitan where both were engaged in the pensions industry. At the beginning of March we had Kai Friedrich joining us from PricewaterhouseCoopers where he qualified as a chartered accountant. Whitney de la Harpe then joined us during May from Gecko Drilling in Walvis Bay. Giovanni van Wyk joined us from Alexander Forbes during August. During October Hillie Petrus joined us from Methealth and our last appointment for the year was Sean Claasen who joined us during November from Old Mutual where he was also engaged in the pensions industry.

Founder member Mark Gustafsson left us at the end of June to pursue his own business interests. Thomas Kaber who joined us in October 2012 then left at the end of August to gain some foreign exposure with KPMG in Frankfurt, Germany. Renelyn Mclune left us at the end of November to join her husband's business. Finally, at the end of this year we will have to bid Esmé Mouton farewell. Esmé harboured the ideal of becoming a teacher for a long time and will take up a teaching position at the start of the 2014 school year.

Over the past 15 years we will have had 11 full-time and two part-time staff leave our service. This represents a staff turnover of a mere 3% of average annual staff complement, an exceptional achievement and a record that we would certainly like to maintain!

With 7 new staff joining and 4 that will have left us by the end of this year, our total staff complement will have grown by three to 57 since this time last year. Next year should see a higher increase in staff numbers with 2 people due join in the middle of January and a few more appointments planned to be made. The new appointments are to create a bit more capacity for growth primarily in the Benchmark division and to get ready for Charlotte Drayer to move into a new role after her official retirement at the end of June next year.

Over the past year, total assets under management grew from N$ 11 billion to N$ just over N$ 13 billion.  Close to 32,000 active fund members have placed, what is most likely their biggest or second biggest, assets in our care, 7,500 of which are members of the Benchmark Retirement Fund. In total we cater for the retirement arrangement of over 170 employers in Namibia. Over the past year we were also once again fortunate not to have lost any fund to a competitor. Our appointment as administrators came up for review by 4 parastatal funds. Only one of these funds has reappointed us for the first time, the others having reappointed us repeatedly. These are achievements of which we are very proud and grateful to our supportive clients and our committed staff!


Africa Cup of Investments Conference 2013

Part 3

The theme of this year's conference was "Challenging the Investment Mindset". As in previous years it was a well organised, very interesting and informative conference that can only be recommended to anyone who has a role to play in the pensions industry. Here are some extracts from part 3 of our conference review.

Sustainability: An investment perspective

Glenn Silvermann identifies 4 unsustainable trends:

  • We live on a finite planet. The earth is full and since it does not get bigger the economy will stop growing. As far as our natural resources are concerned, we are busy eating into capital.
  • Inequality between rich and poor and a widening income gap.
  • Demographics, where the number of retired people continues to grow relative to those in employment.
  • Unsustainable government debt.

ESG idealism versus realism: overcoming doubts and demonstrating opportunities for returns

In this panel discussion some interesting comments were made that are worth sharing with our readers.

  • The market displays a natural trend toward 'short-termism' with regard to manager compensation.
  • Investors are hesitant to implement responsible investing principles because of the absence of data that measures its impact on returns.

A CEO conversation

In his CEO conversation Edward Kieswetter shared some interesting observations.

  • Increasing regulation and compliance requirements for trustees reaches a point of inflection where costs continue to increase but results actually worsen instead of improving.
  • He relayed the following 3 messages to government
    • It should stop talking about business as being its enemy where it is in fact the engine of the economy.
    • Be clear of the consequences of the actions its takes.
    • Engage the private sector in it's decision making process.

Read the full article here...

Compliment from a Benchmark Investor

"Thank you very much Mr F... Your service is amazing."

Read more comments from our clients, here...

RFS congratulates its achievers

As a small local company, RFS cannot and does not attempt to compete with the technological sophistication of its competitors who operate globally. What we offer our clients and prospective clients is 'rock solid fund administration that lets you sleep in peace', through well qualified and experienced staff and personal interaction, support and advice. These features we believe are unique to our company.

In this vein, Sylvia Kessler passed her last exams towards the Post Graduate Diploma in financial planning of the Financial Planning Institute. To top this achievement, Rauha Shivute and Kai Friedrich passed their exams towards the Advanced Post Graduate Diploma in financial planning of the Financial Planning Institute. Kai also passed the accreditation exams for the Sanlam Personal Portfolios product range.

We are proud of the commitment and dedication of our staff not only towards our clients but also towards the advancement of their qualifications so that they can offer an even better service to our clients and congratulate our staff with these achievements.


RFS awarded PMR diamond arrow award for second year running

We recently received the news that Retirement Fund Solutions will be awarded the Diamond Arrow award as the 'highest rated business' in the pension fund administration sector, in the PMR Africa Namibia Country Survey for the second year running.


News from the Namfisa

Annual Namfisa ERS returns due

Namfisa informed all pension funds that the annual return for 2013 is due by 14 February 2014. Extension shall only be considered under exceptional circumstances and late submission will attract a penalty of N$ 500 per day late. Principal Officers need to 'sign off' the returns and need to ensure that they have a profile on the Namfisa ERS system for doing so in time.

We will assist our clients with compiling the balance sheet, income statement and investment details, as in previous years, unless any client does not require us to do this. A client circular to that extent was sent out by us early December. To compile the investment information, we require the funds' investment managers to provide us with the required detail.


Notes of a Namfisa industry consultation session

An industry consultation session was conducted by Namfisa on 25 November 2013 at Hotel Safari. Namfisa conveyed the essence of regulations 26 to 29. It was pointed out that revised regulations will be issued soon as the result of the confusion that was created with the effective date of the regulation which will clarify that they will be effective 1 January 2014.

Feedback was also provided on the status of the new quarterly ERS reporting. The programming of the ERS report is expected to be finalised by April 2014. 3 year historic information is to be provided by funds within a grace period of 8 months from date of notice.

Download the notes here...


Media snippets
(for stakeholders of the retirement funds industry)

PFA orders death benefit allocations to be set aside

In these two cases complaints were lodged with the Pension Funds Adjudicator about the allocation made by the trustees. In ordering the funds to set aside the death benefit allocations, the PFA found that the trustees had fettered their discretion by not taking into account all the relevant factors in the distribution of the death benefit allocations.

The trustees should have conducted a proper investigation regarding the level of dependency, the age of the dependents, the wishes of the deceased, current financial affairs and future earning capacity of the dependants.

Read the full article in itinews of 21 November 2013, here...


I am retiring, help

In this article in Moneyweb of 9 December 2013, Felicity Duncan discusses common financial pitfalls retirees should avoid in retirement:
  • Mistake # 1: spending too much
  • Mistake # 2: holding the wrong assets
  • Mistake # 3: waiting too long to make decisions
Read the full article here...

Media snippets
(for investors and business)

Financial adviser guilty of murder

A financial adviser has been found guilty of murdering his wealthy socialite client after stealing more than £300,000 from him. As Mr Troyan's financial adviser, David Jeffs was able to gain his trust but then quickly began to abuse that relationship to fund his own extravagant and excessive lifestyle.

Read this story on how far some persons are prepared to go in order to enrich themselves at the expense of others in BBC News of 29 November 2013 here...


Will the Rand weaken further?

In this interview by Hilton Tarrant of Moneyweb with Chris Gilmour of ABSA investments and Erna Moolman of Macquarie First South, on 11 December 2012, expert opinion is shared with the reader on how the Rand, inflation and the SARB repo rate are expected to develop over the next year. The view is that the Rand will weaken further, that inflation be under increasing pressure to the middle of next year and that the repo rate will only be raised in 2015.

Read the full article here...


Why 2014 will be a bad year for SA

In this article by Felicity Duncan in Moneyweb of 21 November, the writer comments that a "sword of Damocles" is hanging over emerging markets including SA.

The point is made that when the US Federal Reserve starts to reduce the size of its quantitative easing bond-buying programme emerging markets are likely to feel the pain. The Fed's enthusiastic bond-buying has been shoring up markets around the world by flooding them with liquidity. Emerging market stock exchanges, which are generally considered riskier than their peers in developed countries, have been a major beneficiary of the Fed boost. And that means that emerging markets stand to get burned when the spigots close.

Read the full article here...


And finally...

John Mauldin in his 'Outside the Box' newsletter of 3 December makes reference to a very thought provoking quote worthwhile sharing with our readers, from Friedrich A. Hayek's lecture "The Pretense of Knowledge," delivered upon accepting the Nobel Prize in economics, Dec. 11, 1974:

"To act on the belief that we possess the knowledge and the power which enable us to shape the processes of society entirely to our liking, knowledge which in fact we do not possess, is likely to make us do much harm. In the physical sciences there may be little objection to trying to do the impossible; one might even feel that one ought not to discourage the over-confident because their experiments may after all produce some new insights. But in the social field the erroneous belief that the exercise of some power would have beneficial consequences is likely to lead to a new power to coerce other men being conferred on some authority.

Even if such power is not in itself bad, its exercise is likely to impede the functioning of those spontaneous ordering forces by which, without understanding them, man is in fact so largely assisted in the pursuit of his aims. We are only beginning to understand on how subtle a communication system the functioning of an advanced industrial society is based-a communications system which we call the market and which turns out to be a more efficient mechanism for digesting dispersed information than any that man has deliberately designed.

If man is not to do more harm than good in his efforts to improve the social order, he will have to learn that in this, as in all other fields where essential complexity of an organized kind prevails, he cannot acquire the full knowledge which would make mastery of the events possible. He will therefore have to use what knowledge he can achieve, not to shape the results as the craftsman shapes his handiwork, but rather to cultivate a growth by providing the appropriate environment, in the manner in which the gardener does this for his plants.

There is danger in the exuberant feeling of ever growing power which the advance of the physical sciences has engendered and which tempts man to try, "dizzy with success," to use a characteristic phrase of early communism, to subject not only our natural but also our human environment to the control of a human will. The recognition of the insuperable limits to his knowledge ought indeed to teach the student of society a lesson of humility which should guard him against becoming an accomplice in men's fatal striving to control society-a striving which makes him not only a tyrant over his fellows, but which may well make him the destroyer of a civilization which no brain has designed but which has grown from the free efforts of millions of individuals."

 

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