|In this newsletter:
Benchtest 07.2019, 20 years of RFS, minors to be expropriated, tax and annuities and more...
New taxes coming into effect
EY Tax bulletin 4/2019: Fuel levy rate increase
If you want to find out whether your service providers are registered, or whether you need to establish directly from NAMFISA because the service provider does not appear on the list, use this link...
In ‘News from RFS’, read about new appointments and our company anniversary.
Monthly Review of Portfolio Performance to 31 July 2019
In July 2019 the average prudential balanced portfolio returned -0.7% (June 2019: 1.7%). Top performer is Allan Gray Balanced Fund with 0.1%, while Momentum Namibia Growth Fund with -1.6% takes the bottom spot. For the 3-month period, Investment Solutions Balanced Fund takes top spot, outperforming the ‘average’ by roughly 1.2%. On the other end of the scale Allan Gray Balanced Fund underperformed the ‘average’ by 1.8%. Note that these returns are before asset management fee.
When is a good time to switch to another investment manager?
Retirement fund members who have become used to Allan Gray ‘shooting the lights out’ often can no longer bear with its performance lingering right at the bottom or close to the bottom of the performance ranking tables of prudential balanced managers, for periods up to 5 years as depicted in graphs 1.2 to 1.7 in our review. For the month of July Allan Gray managed to rise to the top, given that it is a very short period and bears no relevance.
As the result, clients more and more often contemplate or even decide to move their investments away from Allan Gray to another manager. The questions are - is it a good time to move away from Allan Gray and when is a good time to move away from your trusted manager?
I guess when we talk about buying or selling a house, there will be little argument about not selling when the market is at the bottom and not buying when the market is at the top. This is a sensible principle that one should apply to one’s investments and investment manager as well. The difficulty however is to know when any asset has reached the bottom or the top.
Read part 6 of the Monthly Review of Portfolio Performance to 31 July 2019 to find out what our investment views are. Download it here...
The Administration of Estates Act – where do we stand?
The Minister of Justice issued a second draft amendment to the Administration of Estates Act (AoEA) following a stakeholders meeting held on 10 July, that would bring about changes to the previously promulgated amendments of 31 December 2018 and draft regulations. For the purpose of the following analysis, I will not consider the previous draft amendment issued in July. I presume that the regulations on the ‘governance framework of the Guardians Fund’ and on ‘Knowledge management and financial administration regulations of the guardians fund’ are to remain in place and for completeness of my analysis my comments in last month’s newsletter are repeated below.
Key proposed changes or clarifications to the AoEA are –
1.) Subject to 2 below, all moneys due to a person under the age of 21 or under curatorship, which derive from
2. ) Benefits deriving from the following sources are exempted-
4.) The Minister may prescribe further requirements and conditions for exemptions under 2 above.
5.) The Minister may amend the list of benefits deriving from sources listed in 2 above.
6.) Provision is made for the voluntary transfer of capital in a testamentary or inter-vivos trust to the Guardians Fund.
7.) A person who is obliged but fails to pay over any money as required in terms of the above shall pay ‘…interest a prescribed under the Prescribed Rate of Interest [Act], 1975…’
It is interesting to note that –
An investment committee is established for the guardians fund which shall comprise of the Master as chair and two experienced independent external members appointed by the Minister;
Minister adamant to expropriate minors
In the preceding article under ‘Tilman Friedrich’s industry forum’ we comment on the second revised draft amendment of the Administration of Estates Act. This version was discussed at a stakeholders meeting on 14 August. Despite all assurances by the Minister and the proposed exclusion of pension funds paying annuities per the latest revised draft, the Minister made it clear at this meeting that none of the typical pension fund vehicles will be excluded and will be obliged to transfer all moneys due to a minor upon the death of a fund member to the Guardians Fund. A third revised draft was circulated on 27 August that no longer provides for any exemption of any vehicle registered under the Pension Funds Act and will be commented on in next month’s newsletter.
This places trustees in an extremely awkward position of meeting their fiduciary duties towards minor beneficiaries in terms of the Pension Funds Act and common law and a new requirement where it is clear from the start the Master is not geared to handle payments to minor beneficiaries yet. The Master has furthermore made it clear that its office will only make quarterly payment where the guardians of these beneficiaries were hitherto used to being paid on a monthly basis.
The Minister of Justice’s justification for the amendment of the Administration of Estates Act in parliament at the end of last year was unsubstantiated allegations of abuse of minors’ moneys by service providers and pension funds and of excessive costs having been charged to minors for the processing of benefits due to them.
However, as time has gone by, it becomes ever more evident that these allegations were but pretence for laying governments hands on moneys due to minors. Draft regulations issued recently, direct the Master of the High Court to carry all costs of administering moneys on behalf of minors and it actually requires that persons sitting on the committees that are to be established must be remunerated. Contrast this with so many pension funds that actually do not remunerate their trustees or their principal officer.
Any person who has or had dealings with the Master’s office will be able to testify to what extent there has been poor administration of moneys entrusted to the Master and any rational person will be able to assess how inefficiently and ineffectively the Master is likely to be in future. Those that do not have the benefit of experience with the Master’s office will come to learn whether the Minister has been the saviour of moneys formerly entrusted to pension funds.
Any annuity is taxable but what is an annuity?
In the light of the fact that an annuity always constitutes ‘gross income’ and is therefore always subject to income tax, it is quite important to understand what actually constitutes an annuity.
Old age grant
In Namibia any citizen is entitled to the state old age grant of currently N$ 1,300 as from age 60. The pensioner has not worked for this ‘windfall’, at least not directly. Is this an annuity and therefor taxable? Well there is no provision in the Income Tax Act exempting this grant and the grant is thus clearly taxable being an annuity payable for more than 2 years, as argued further on.
Maintenance upon divorce
The same question should be posed with regard to maintenance payments by one divorced spouse to the other divorced spouse. Section 16(1)(q) however exempts from income tax “…any amount received by or accrued to any person from such person’s spouse or former spouse by way of alimony or allowance or maintenance…”
Annuities from pension – and retirement annuity funds
‘Closer to home’, the Income Tax Act stipulates in the definition of ‘pension fund’ as follows:
“(a) that the fund is a permanent fund bona fide established for the purpose of providing annuities for employees on retirement or for widows, children, dependants or nominees of deceased employees (i.e. upon death in service)…”
The definition of ‘retirement annuity fund’ in turn provides as follows:
“(a) that the fund is a permanent fund bona fide established solely for the purpose of providing life annuities for the members of the fund or annuities for the spouses children, dependants or nominees of deceased members …” and goes on “(b) (vii) that where a member dies after he or she has become entitled to an annuity no further benefit shall be payable other than an annuity or annuities…”
Take note of the difference in the definition of ‘pension fund’ that merely refers to an annuity for members or their dependants as opposed to the definition of ‘retirement annuity fund’ that refers to life annuities for members and annuities for dependants.
So the Income Tax Act distinguishes between annuities and life annuities without defining these terms.
In South Africa two prominent cases in the Appellate Division dealt with this subject. In SIR v Watermeyer Holmes JA said the following in respect of annuities: “Used in regard to payments, the word, from its very nature, postulates the element of recurrence, in the sense of annual payments (even if made, say, quarterly during the year). And this element of necessary annual recurrence cannot be present unless the beneficiary has a right to receive more than one annual payment… Hence de facto recurrent payments, if voluntary and payable at will, do not qualify as annuities.” The decision in KBI v Hogan affirmed the principles laid down in SIR v Watermeyer regarding the characteristics of an annuity.
When Inland Revenue responded to a new product in the market referred to a living annuity or flexible annuity by way of practice note 1/96 it required that “…where the annuitant dies, the annuity available to the deceased’s spouse, children, dependants or nominees, shall constitute an annuity for a minimum of 5 years.” This practice note appears to be referring to annuities paid by retirement annuity funds (although it vaguely refers to retirement annuity agreements. Inland Revenue later issued practice note 1/98 that refers to flexible annuities paid by any pension fund and directs that “…where the pensioner dies, the annuity available to the deceased’s spouse, children dependants or nominees, shall constitute a life annuity.” Since the definition of ‘pension fund’ does not require a life annuity in respect of either the member or his/ her dependants, practice note 1/98 is ultra vires Inland Revenue’s powers to the extent that it require a life annuity for dependants of a deceased fund member.
Considering the judgements referred to above, Inland Revenue is probably also wrong in directing that the annuity should be paid for a minimum of 5 years. According to those judgements, living or flexible annuities can thus be accelerated to pay over a minimum of two years to members of pension funds and their dependants and to dependants of members of retirement annuity funds. The annuity payable to the member of the retirement annuity fund however, must be an annuity for life.
Provident funds facing a new Income Tax Act challenge
In last month’s newsletter we reported that Inland Revenue considers the following benefits current typically offered by provident funds to be inconsistent with the definition of ‘provident fund’ and has threatened to withdraw tax approval of funds offering such benefits, e.g.
Following a meeting with RFIN and industry participants NAMFISA has taken it upon itself to arrange a meeting between Inland Revenue itself, RFIN and industry participants to try and find a solution of the challenge retirement funds are currently facing. This meeting has not come about yet, so the matter remains in suspense. In the mean-time NAMFISA will return rules and rule amendments of provident funds that offer the deplored benefits.
So much for a narrow interpretation of the Income Tax Act
In the previous article on the challenge provident funds currently face with regard to a very narrow interpretation of the definition of ‘provident fund’, it just caught my eye that pension funds may yet face a challenge if Inland Revenue were to apply an equally narrow interpretation to the definition of ‘pension fund’.
Note that this definition refers to a pension fund being established “…for the purpose of providing annuities for employees on retirement or for widows…” In other words the definition presupposes that fund members are male. Where they are female the fund is thus prohibited from making provision for the surviving widower of the female member! Note too that the definition of ‘retirement annuity fund’ actually refers to ‘spouse’ where the definition of ‘pension fund’ refers to ‘widow’ only!
Such an argument would be discriminatory, is unconstitutional and would probably be thrown out by any court. Point is though that a very narrow interpretation of the Income Tax Act will produce more such surprises.
Can capital be transferred from a retirement annuity fund to an untied insurance product at retirement?
It seems to have become common practice in the market that members of retirement annuity funds, upon retirement, purchase an untied annuity from an insurance company. Is this practice consistent with the Pension Funds Act and the Income Tax Act?
Firstly, NAMFISA has confirmed in writing that it is comfortable for retirement capital to be moved into an untied insurance policy that then provides the annuity.
Secondly, from an Income Tax Act point of view, Inland Revenue bought the argument of insurance companies in support of being allowed to issue untied annuity policies with money derived from a retirement fund and to transfer the capital tax-free upon retirement from the fund, as this money does not constitute gross income and as the fund member is obliged to arrange an annuity. The obligation to buy an annuity can obviously only apply to a pension fund as it would always be optional in a provident fund.
But what about retirement annuity funds? The Income Tax Act in the definition of ‘retirement annuity fund’ sets out the benefits a retirement annuity fund may provide under various circumstances. In sub-paragraph (x) its states “that save as is contemplated in subparagraph (ii), no member’s rights to benefits shall be capable of surrender, commutation or assignment or of being pledged as security for any loan.” Subparagraph (ii) states “that no more than one third of the total value of any annuities to which any person becomes entitled, may be commuted for a single payment...” The crux of the matter is the word ‘assignment’. The Oxford English dictionary defines ‘assign’ as “to give something to somebody as a share of work to be done or of things to be used…”. Another dictionary defines ‘assign’ as “allot, apportion, ascribe, transfer”. Clearly, unless the annuity is purchased from an insurer in the name of the retirement annuity fund, it would imply that the member’s retirement capital is indeed transferred or given to somebody else.
My conclusion thus is that a retirement annuity fund cannot allow the purchase of an annuity from an untied insurance product once a member becomes entitled to a retirement benefit.
Avoid permanent loss but be prepared to give up value
If you own something you do not use, chances are you will lose – “use it or lose it” is a rugby rule. It applies to all spheres of life. What you use, no one will be able to take from you, if we equate ‘using’ to ‘consuming.
This wisdom also applies to your investments. Your capital is something you do not use and chances are you will lose. This is not to say that you will always lose, but there will be times when you will lose. The best thing you can do is to be prepared for losing at times.
One also needs to distinguish between different types of losses namely, a temporary loss and a permanent loss. A permanent loss is something you cannot recover as opposed to a temporary loss.
Since we are dealing with pension fund and personal investments, in terms of market conditions we find ourselves in a situation where we feel we have been on a losing streak for quite some time. But how do you actually define loss in these circumstances? Is it a loss relative to something inflation or is it a loss relative to the types of returns one has seen in investment markets until the advent of the financial crisis at the end of 2008 and from the middle of 2011 up until the middle of 2015? I suspect many investors are still clamouring for returns in the 20% and more. Important however should only be your real return, with inflation being your bottom line!
Where would you have invested had you anticipated developments in financial markets since the financial crisis? It was not too difficult to anticipate what the impact of quantitative easing and the low interest rate environment would be, but, no one would have anticipated such a strong recovery for a 4 year period followed by a flattening of financials markets thereafter. The readers that have been following this column would be aware that I have been anticipating flat markets for quite some time.
What alternative investments could you possibly have made in anticipation of what was to be expected - property, life stock, vintage cars or other exotic objects? Well test them one-by-one. Property in Namibia would not have been a good idea. Life stock in Namibia would have been a disaster. Gold or any other exotic object? Try and sell them when you need money for consumption!
That basically leaves you with bonds, equity and cash. Nowadays, it is quite common for investors to say, I want to be in cash because its returns are, let’s say, not worse than those of bonds and equity. So with that argument you are concerned about a loss of returns on equity and bonds relative to returns on cash. How about a loss relative to a real return, i.e. you are not achieving inflation plus 5% as the typical pension fund formula would expect?
It is common cause that cash is only for investment with a short-term horizon. Look at graph 6.1 which reflects rolling 1 year returns (short-term horizon) of the main conventional asset classes pension funds typically invest in. You will note that cash depicted as the black line is sitting on around 10%. Compare this to the other asset classes and the average prudential balanced portfolio, in particular. You will notice that cash generates very smooth returns while the other lines are very volatile, moving between minus 30% and plus 50% on a rolling one year basis. If you add the number of months the other lines are below the black line, you should find that the other lines are more often above than below the black line.
In graph 6.2 I have extended the period measured to rolling 2 year returns (short-term horizon). Note how the volatility decreases to between minus 15% and plus 30%. Note also that by-and-large cash returns are lower than those of the other asset classes.
Finally in graph 6.3 I have extended the period measured to rolling 3 year returns (medium-term horizon). Note how the volatility decreases further to between zero % and plus 23%. Again, cash returns are mostly lower than those of the other asset classes.
There are also those investors who believe that the smooth bonus portfolios can avoid the downs of investment markets. If you look at graph 6.4 and track the red line against the black line, you will note that they actually produce returns, less volatile, but very closely resembling those of the average prudential balanced portfolio. After all, they invest in exactly the same assets as any conventional pension fund portfolio does.
Going by the above facts, there is actually nowhere to hide. The assets you do not use will expose you to the probability of losing. The other assets that you do use, will give you the pleasure of their usage but you do not really know what they are worth.
You should at all-time try to avoid a permanent loss of your investment but be prepared to give up value from time to time. How do you avoid a permanent loss? It’s really about not putting all your eggs in one basket. Spread your investment across different asset classes, different continents and different countries. Know what your investment horizon is and invest accordingly. Have a strategy and stick to that, whether it means that you may not time the best moment for moving assets offshore or for buying into assets when it may not have been the ideal moment. You cannot time the market. As often as you may be right you will be wrong!
While the interest rate environment has not normalised, we will continue to experience low returns, not only in absolute terms but also relative to inflation.
If you have to live off your investments, you must adapt your cost of living to the returns your investments realise, i.e. the net rental income, net dividends and net interest earned. When you are in a pooled investment vehicle, you should work on a net return of approximately 3%.
Pension fund governance - a toolbox for trustees
The following documents can be further adapted with the assistance of RFS.
From a principal officer of one of the largest funds in Namibia
After all these years of professional co-operation I have never had any reason to question the professional conduct of any member of the RFS Team...”
Read more comments from our clients, here...
RFS celebrates its 20th anniversary
This year marks a very special occasion in the life of Retirement Fund Solutions Namibia. The company was incorporated on 19 August 1999 and commenced business on 1 September the same year. The company has therefore been in business for 20 years.
RFS’ staff complement has today increased to over 70 staff members, whilst members of funds under RFS’ administration have increased to more than 36 000.
We proudly share the history of our growth in figures as follows:
RFS recognises that employees are its most important asset and believes that its people are more important for the success of the company than technology. We understand that our employees can only be successful if they enjoy the support of their families in all their occupational endeavours. Hence we make a point of undertaking events that involves their families.
RFS welcomes new staff
Janolene Rittmann joined our permanent staff complement on 1 August 2019 as receptionist from Schoemans Office Systems where she also held the position of receptionist. Janolene matriculated in 2007 at David Bezuidenhout High School. She started her formal career in 2011 as a buying clerk at Woermann & Brock, where she worked for 5 years. She resigned from Woermann & Brock to join her husband at the coast, but the couple moved back to Windhoek after a few months.
Zane-Lea Drotzky joins our permanent staff on 1 September 2019 as a Fund Administrator in the Benchmark team. Zane-lee grew up in Rehoboth and matriculated at Dr. Lemmer High School in 2012. She started her formal career at Alexander Forbes as a fund administrator in 2014 where she was employed as a team leader. Zane-Lee is enrolled as a third year student at NUST for a Bachelor Degree in Business Management. She also attended a number of in-house courses at Alexander Forbes.
We welcome our two new staff members heartily and look forward to them applying their traits for the benefit of our team and our clients!
Old Mutual launches new disability income products
Old Mutual recently held a road show to introduce new disability income products that will complement the standard disability income benefit that is typically offered by retirement funds.
Analyses of claim trends in medical aid schemes in South Africa and Namibia that typically result in disability claims in retirement funds reveal some of the following disconcerting trends over the past 5 years that are likely to lead to significant increases in group risk premiums in future.
As the result of these trends it is expected that the medical aid industry and the insurance industries will continue to see costs increasing in future.
To curb the on-going increase in costs Old Mutual has launched two new disability income products complementing the standard disability income benefit that offers an income until the earliest of recovery, death or retirement, and a 2 year temporary disability income benefit.
The first complementary product is a 5 year medium term disability income benefit that can be dove-tailed with a lump-sum disability benefit with a 5 year waiting period.
The second complementary product is a 2-tier disability income benefit offering an income until the earliest of recovery, death or retirement. However instead of offering a fixed percentage income replacement, the income benefit at commencement is reduced by 50% after an initial period. The premiums and benefit of this product can be set with reference to pensionable salary or to total guaranteed package.
Two draft standards issued under FIM
NAMFISA issued the following 2 new draft standards for comments by 13 September:
Pension funds industry meeting coming up
The date of the upcoming pension funds industry meeting will now take place on 19 September.
Employers to ascertain that contributions are paid timely and correctly
In this case of Municipal Workers Retirement Fund v Ndlambe Local Municipality that served in the Eastern Cape High Court, the municipality had made regular payments to the fund, but as it was revealed many years later, the payments were calculated incorrectly. As the result the municipality had underpaid over an extended period.
In its first defence, the municipality argued that the shortfalls that arose more than 3 years prior to the summons having been issued, had prescribed. To this defence the court ruled that the employer had acknowledged its liability for the payment of contributions to the fund in terms of the rules and prescription therefor had been interrupted.
In its second defence, the municipality argued that the underpayments were an honest mistake and that no late payment interest should be applied to the amounts the municipality had not been aware it was liable to pay, particularly as the fund had not alerted it to this mistake.
It was also stated that although the Pension Funds Act allows a grace period of seven days for the payment of contributions, interest is calculated from the first day of the month following the month in respect of which the contribution should have been paid.
Download the full article that appeared in Pensions World magazine of June 2019 here...
Section 37C and nominees – can an artificial person be nominated?
The question whether a fund member can nominate a non-natural person as a beneficiary as contemplated in section 37C comes up here in Namibia quite regularly too. The conclusion reached in this article that an estate cannot be a nominee is based on section 37C (1) (b). This section is identical to the SA section 37C (1) (b). Hence the conclusion reached in SA is equally relevant to Namibia.
“...Although the Act does not define the concept of a “nominee”, the wording of section 37C as a whole provides clear guidance as to who may qualify as such. Section 37C (1) (b) reads as follows:
“If the fund does not become aware of or cannot trace any dependant of the member within twelve months of the death of the member, and the member has designated in writing to the fund a nominee who is not a dependant of the member, to receive the benefit or such portion of the benefit....”
Clearly a deceased estate cannot, in law, be a person "who is not a dependant of the member".
The interpretation of the concept of “nominee” has been tested in court. In the matter of Martin v Beka Provident Fund (2000) 2 BPLR 196 (PFA) the member had nominated his deceased estate as the sole beneficiary of his death benefit. The Adjudicator held that the deceased’s estate cannot be a nominee on the basis that Section 37C specifically excluded death benefits from a member’s deceased estate. Therefore, the nomination of the estate by the deceased should not have carried any weight at all in the trustees' considerations. The benefits are only payable to the estate by “default”, i.e. in the circumstances set out in subparagraph (b) (to the extent required to settle the unpaid debts of an insolvent estate, where a member has nominated a non-dependant as a beneficiary and the trustees do not become aware of any dependants within twelve months, after which the nominated beneficiary receives any balance) and subparagraph (c) (where the fund is unaware of or cannot trace any dependants within twelve months of the member's death and no nomination has been made).
Similarly, in the matter of Muir v Mutual & Federal Pension Fund (2002) 9 BPLR 3864 (PFA) the deceased had completed a nomination form in which she indicated that she wished the entire benefit to go into her estate. The Adjudicator held that a nomination in favour of the estate is in fraudem legis (i.e. in circumvention of the rules of law) and thus invalid. At paragraph 17 he held as follows:
“Section 37C (1) (b) makes it additionally clear that an estate cannot be a nominee. The provision states that if there are no dependants and "the member has designated in writing to the fund a nominee who is not a dependant of the member", then the benefit should be paid to the nominee. Clearly a deceased estate cannot, in law, be a person "who is not a dependant of the member". While the trustees would have been obliged to bring into consideration any nomination of a person as a beneficiary, the nomination of the "estate" as beneficiary may not be treated in the same way as other nominations, since the Act refers only to nominees who are dependants and nominees who are not dependants, and an estate cannot be either. (my emphasis)
It is clear from the above cited case law (read together with the Act) that the member’s deceased estate cannot be a nominee for the purposes of section 37C (1). Similarly, when applying the logic followed by the Adjudicator in both matters, neither can a juristic person such as a company or a non-profit organisation.”
Read the full article by Liz de la Harpe in FA News of 5 June 2019 here...
This is how much you need just for medical aid in retirement
“The generally accepted wisdom is that when you reach retirement you need to be able to secure an income equal to 75% of your final salary. This is because there are many expenses that you can trim once you stop working.
· you no longer need to save for your retirement.
· You also won’t be travelling into work every day
· If you and your spouse were using two cars before, it might even be possible to downsize to one.
· There will probably be less need for formal wear and shoes.
There is however one expense that is not going to decrease...
“Over the last few years, the average increase in medical aid contributions has exceeded inflation by 3% to 5% per year,” says Karen Wentzel, head of annuities at Sanlam Employee Benefits.
According to Sanlam, the average contribution for an adult member is now between R3 000 and R5 000 per month. In many cases, individuals who are still working will have part of that paid by their employer. In retirement, however, you’re likely to be on your own...
“Unfortunately no pension fund will pay increases of 15%, thus your medical aid contributions will be a bigger portion of your income every year.”
This is a reality that retirees need to plan for... However, few people appreciate exactly how much capital is required just to meet their medical aid expenses.
The following table puts this into perspective:
Source: Sanlam Employee Benefits
What this shows is that a woman who retired today at age 55, and whose medical aid costs increased by 3% above inflation for the rest of her life, would need retirement capital of R1.77 million just to cover that expense.
“A couple consisting of a male aged 60 and a female aged 55 will need between R3.5 million and R4.5 million to cover their life-long medical aid premiums, assuming a monthly medical contribution of R5 000,” says Wentzel...”
Read the full article by Patrick Cairns in Moneyweb of 20 June 2019, here...
Don’t lose faith in a good manager
“If your fund manager delivers poor returns over a period - even a protracted one - it doesn't always mean it's time to dump them and move to a new manager.
In fact, a manager's poor performance may well be followed by strong returns and disinvesting at the very lowest point may make you lose out on the recovery and realise an investment loss.
But there are managers who deserve to be fired, say those who research fund managers. The trick is to know one from the other...
Knowing your manager's style and how and why it will perform are key to understanding any periods when it underperforms, Köhler and Jugmohan say.
Different funds perform in different market cycles. If you want more consistent returns you need to invest across managers with different styles, Köhler says.
Joanne Baynham, the director and head of strategy at MitonOptimal, which sets up investment portfolios for financial advisers' clients, says if a manager is good at its job but its style is out of favour, stick with it...In fact, she says, the time to buy into a value manager's funds is precisely when its performance has put it among the managers who rank lowest on performance.
Jugmohan says if you judge managers on performance only, you may well fire a manager just when it is about to deliver its best returns, and investors make this mistake time and again.
Jugmohan recently plotted the annual returns of managers over three years to the end of December 2015 against the annual returns over three years to the end of December 2018 and found most managers had very different returns in each of these periods...”
Read the article by Laura du Preez in Sunday Time Business Times of 14 August 2019 here...
Nine skills you should learn that pay off for ever
“The further along you are in your career, the easier it is to fall back on the mistaken assumption that you’ve made it and have all the skills you need to succeed. The tendency is to focus all your energy on getting the job done, assuming that the rest will take care of itself. That’s a big mistake. Recent research from Stanford University tells the story. Carol Dweck and her colleagues conducted a study with people who were struggling with their performance...They discovered that learning produces physiological changes in the brain, just like exercise changes muscles.
Dealing with dissatisfaction
“Very often I find myself listening to people talking about their levels of dissatisfaction. Dissatisfaction in their work environments, work relationships, personal lives and even marriages. What always takes me by surprise is how long people spend in states of dissatisfaction - feeling helpless and unable to see the options available to them. As a psychologist, my role is to use frameworks to help people find a way out of what it is that they are stuck in. One such framework is the simple Change Situation offered by Adam Grant in his book Originals (2016).
Grant (2016) suggests that when facing a difficult decision or dissatisfaction in an organizational setting or even a personal relationship you have 4 choices. You can Exit, Voice, Neglect or Persist. They are visually displayed below:
The options are further split up into passive and active. The bottom two options, Neglect and Persist are both passive in the sense that they will continue to maintain the status quo. If you choose to Neglect the situation, you will be emotionally, mentally and perhaps even relationally checking yourself out. In the work context this looks like the ostrich with its head in the sand at best, and a very aloof disinterested employee at worst...
You can also choose to Persist. This option is less harmful to the organization than neglect because you are still engaged in your work function, but it also still maintains the status quo and nothing actually changes...
Exit needs no explanation. You’ve looked at your situation conducted some analysis and realized that this organization is not a good fit for you and potentially you are not a good fit for them...
The last choice, perhaps the most difficult is Voice. Voice requires action. It requires you to speak your mind in the right way to the right people at the right time. It requires courage and often persistence...”
Read the full article in TomorrowToday’s Tuesday Tips here...
What African countries largest exports are
Did you ever wonder why??
WHY: Why do ships and aircraft use 'mayday' as their call for help??
BECAUSE: This comes from the French word m'aidez - meaning 'help me' - and is pronounced, approximately, 'mayday.'