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SANLAM INVESTMENTS
Johan van der Merwe24 April 2007
a winning pack –our clustera winning pack –our cluster
Today it’s about…
The cluster
Individual businesses
Today it’s about…
the cluster …
Our core purpose …
to createSouth Africa’s leading
investment management business
Guiding principles
Core concept: Strategic coordinator– Family of related businesses
– Strong Corporate Governance & monitoring
– Focus aggressively on top line leveraging
– Shared activities on “opt in” basis
Do what is needed to enable entrepreneurship to thrive
Outward competitor and client focus rather than internal
Leverage off and influence Sanlam Brand
Actively support to build quality Sanlam distribution channel
What is it?
Our capability to inspire investment businesses to flourish
within an entrepreneurial environment
differentiates it from its competitors
(“Small Business” Culture leveraging off Large Corporate
resource base)
Our source of competitive advantage?
Culture is paramount
Eventually it will be our culture that sets us apart from other firms and helps to make us a magnet for talent
Culture is the values, behaviours and beliefs that distinguish the people of one firm from those in another
Culture is changed through small steps, concrete actions and patience
Cultural capabilities: What really works?
Create a shared, focused, clear strategy
Develop operational excellence; execute flawlessly
Create an adaptive meaningful performance based culture
Build a flexible, fast, flat structure
Focus on:
Talent: Develop and engage high performers
Leadership: Secure committed leaders
Innovation: Ensure that innovation flourishes
Growth: Partnerships; mergers and new ventures
Strategic framework
Element
Clients first
Consistent performance
World class 'manufacturing'
Distinctive propositions
High performance culture
Strong distribution support
Rationale
Bedrock for everything else
= the 'product'
Investment platform critical
Must be clear why us
Impossible to win without
Complex market/'noisy'
Strategic framework
Element
Transformation
Right income mix
Entrepreneurship
Think global
Lean support structures
Leverage cluster skills
Rationale
Relevancy; FSC; flows
Diversification
Growth and innovation
Best benchmark / LT growth
Cost control
Innovation; share of wallet
AIM = Great Brand and Winning Business
Sanlam investment cluster
10Hedge fund of fundsOctane
n/aAlternative investment strategiesHedgehog Capital
12Property asset management and developmentSanlam Properties (SP)
n/aNiche debt and equity financial engineering solutionsSanlam Capital Markets (SCM)
26Asset management for emerging & developing economiesSIM Emerging Markets (SIM-EM) incl. Namibia
97Local and international multi-managersSanlam Multi-Manager International (SMMI)
4Actively managed long only international fundsSIM Global
n/aIreland-domiciled funds for the Sanlam GroupSanlam Asset Management (Ireland) (SAMI)
n/aDerivative, tax and legal-based structured productsSanlam Structured Solutions (SSS)
6Private equity fund of funds managerSanlam Private Equity (SPE)
n/aCustomised employee benefit solutionsSanlam Employee Benefits (SEB)
39Private high net worth client businessSanlam Private Investments (SPI)
53Single and multi-managed unit trustsSanlam Collective Investments (SCI)
243Traditional long only investment managerSanlam Investment Management (SIM)
AUM(R’bn)CapabilityBusiness (31 December 2006)
Compound annual growth 2002-2006 : 46%
Sanlam Investments: Profit before tax (R’m)
0
200
400
600
800
1000
1200
2002 2003 2004 2005 2006
Profits (R’m)
23
6 26
9
43
1
69
8
10
77
0
200
400
600
800
1000
1200
2002 2003 2004 2005 2006
A
B
C
D
E
Investment cluster
Profits 100 scale (R’m)
0
1
2
3
4
5
2002 2003 2004 2005 2006
A
B
C
D
E
Investment cluster
Cost ratio (%)
0.4
0.5
0.6
0.7
0.8
0.9
2002 2003 2004 2005 2006
A B
C D
E Investment cluster
Cluster fund flows (net)
-6.5
1.2
6.4
9.210.4
-10
-8
-6
-4
-2
0
2
4
6
8
10
12
2002 2003 2004 2005 2006
2005 net exclude PIC outflow of R 6bn2006 net exclude PIC outflow of R21.6bn
5%7%4%5%
3%
12%
1%11%
10%
2%
39%(R445m)
3%
SIM SPI SP SMMI
SCI SPE EM SAMI
Global SCM Octane Other
17%
3%
18%
4% 1%
64%(R136m)
SIM SP SMMI
SCI TASC SPI
2002 = R236m profit 2006 = R1 229m profit
Business is now well diversified
Results highlights: Transformation (Dec. 06)
Progress on most EE targets and on track to make 2008 FSC targets
2236Total
4359Other
15%2440-50%39Junior Management
10%1230%26Middle Management
4%220%-25%12Senior Management
4%1325%17Executive
Target ‘08Dec 06Target ‘08Dec 06
Black Women %Black Employees %
Today it’s about…
Individual businesses
Sanlam InvestmentManagement
SIM business model has evolved
DivisionIn Life
company
Asset Managementby InvestmentBank (Gensec)
Integrated Insurancebased Asset Manager
(inc. Private EquityProperty etc.)
Multi specialistBoutique Asset
Manager
10yrsago
7yrsago
5yrsago
Today
Current Business Model
Multi specialist business
Fundamentally driven investment process
Big platform with “small team” decision making (e.g. MPG)
Team based culture
Performance ethic supported by individual and team based incentivisation
Solutions driven via innovation
Advantages of current business Model
Size: Allows investment into various research projects, a largerteam and systems
Cultivation of a research culture
Investment into state of the art Decision Support Systems
Strong, diversified and very experienced team
Progress on Strategic Initiatives
Major focus on building a world class investment process and
establishing a stable highly experienced investment team.
Transitioned house into focussed specialised teams leading to
more independent decision making.
Increased focus on SIM’s retail offering, including fund line-
up, distribution support and marketing.
Increased marketing and improved PR of SIM as an
investment brand.
Continuous focus on Transformation and development.
Performance: Domestic LMW 12 month rolling rankings
2
11
2.75
0
3
6
9
12
15
Dec 99 Dec 00 Dec 01 Dec 02 Dec 03 Dec 04 Dec 05 Dec 06
SIM Unique Count Upper Quartile 12 month average
Dec 2006
Source : S&P Fund Services; Lump sum, NAV to NAV excl. initial fees, Income reinvested on ex-div date, total growth rate for periods 1 year and shorter
Performance: Retail Funds Highlights (31 December 2006)
1/6 and 27th overall (543 funds)
3/644.5137.28
13
Growth Fund
1/7 and 8th overall (543 funds)
1/71/7 and 1st overall (389 funds)
2/7 and 4th overall (302 funds)
48.4040.1246.2738.37
1235
Small Cap Fund
3/184/184/15
6.538.4413.02
125
Bond Fund
6/243/20
30.4622.53
35
Balanced Fund
%Years
37.56
31.92
38.5443.37
45.3232.71
Category ranking (and overall ranking where applicable)
Annualised returns Fund
1
1
23
35
2/7 and 6th overall (389 funds)
3/7 and 17th overall (302 funds)
Value Fund
4/24
2/17
2/71/7 and 16th overall (389 funds)
Pan Europe Fund
Property Fund
Industrial Fund
Strategic priorities (1)
Continued improvement of the investment performance
Focused attention on growing the third party book
Establish SIM’s equity capability in the market and growing the equity book
Continued improvement of SIM’s PR and building of the SIM investment brand
Further diversification of income and products
Increasing market share in Alternative Products space
New alpha products to enhance current institutional offering and increase margins
Strategic priorities (2)
Establishing a “traditional” international asset management capability
Continued focus on EE and transformation
Building a true performance and ownership culture
Sanlam CollectiveInvestments
Achievements
In line with group strategy - diversified into related areas:– Institutional business solutions– White Label partnerships– Third Party administration– Employee benefit administration– Transactional capabilities– Specialized CIS products
Enhanced operational efficiency– On-line transactions– Straight through processing– Electronic - statements
0
10000
20000
30000
40000
50000
60000
2002 2003 2004 2005 2006
Retail Institutional White Labels
Growth: Assets under management
R’m
Strategy and challenges
Implement transactional facility (debit card linked to Money Market Fund)
Expand White Label relationships (I.e. offshore)
Future prove admin systems
Opportunities identifiedEntry level marketEmerging markets Employee benefit admin
Develop other new CISCA based income streams
Sanlam PrivateInvestments
SPI achievements over last 2 years
Embedded new winning culture
Key appointments made
Launched Sanlam iTrade
Established first credit product
Link-up with Pictet Bank
Attracted R5bn new business in 2006
Grew profits by 47% in 2006 and 75% in 2005
… established SPI as serious business
Slide 34
K1 Data vanaf James Diergaardt se spreadsheetKarina da Paixao, 2004/10/20
Challenge
Building capacity
Building positive brand awareness in target market
Co-operation and cross-selling within Group
Shortage of black skills in industry
Major breakthrough in HNW black market
Possible exchange controls abolishment
Slide 35
K2 Data vanaf James Diergaardt se spreadsheetKarina da Paixao, 2004/10/20
Strategy
Offering more comprehensive services and products
Lifting profile in selected regions and target markets
Developing our offshore capacity
Covering fixed costs with annuity income
Attracting, developing and training right people
… becoming leading private client investment manager and stockbroker in SA
Slide 36
K3 Data vanaf James Diergaardt se spreadsheetKarina da Paixao, 2004/10/20
Sanlam Properties
Achievements last couple of years (1)
Property IndustryInstrumental in establishing the Property Sector Transformation CharterSP launched the black-owned and controlled Vusani Property Investments Fund with assets valued at R0.5 billion
ClientsEstablished MICC and Vukile on the JSE with assets valued at R0.9 billion and R2.0 billion respectivelyEmpowered Vukile by introducing a BEE shareholder into Vukile through Clidet 598 (Pty) Ltd (Clidet) which owns 25% (R0.5 billion) of VukileSanlam property portfolio out-performs the IPD 3 year benchmark return
Achievements last couple of years (2)
ShareholdersEmpowered its property transacting capability through the establishment of Khulela a black-owned and controlled companyOwn balance sheet property developments to the value of R0.4 billionEnsured an annualised growth since 2002 in after tax profit exceeding 35%
Challenges facing Sanlam Properties
New challenges due to a transforming property sector & the Property Sector Transformation Charter
Establish Khulela as the leading independent black-owned property company in South Africa in order to ensure access to new opportunities which would otherwise not be available
Further enhance and restructure Sanlam’s property asset base and BEE credentials
Strategy going forward
Grow Khulela as the leading independent black-owned property company in South Africa
Enhance property development/investment service offering
Attracting wider skills base & networks for SP through Khulela
Leverage of empowerment and establish appeal to broader property market with unrestricted ability to participate in all sectors of the property market
Restructure all Sanlam’s property holdings
Sanlam PrivateEquity
Major achievements
Established as a separate business in the Cluster in 2003
Johannesburg offices established in 2005
Assets under management reached R6 billion by end 2006
Obtaining R4 billion mandate from Sanlam in 2006 to invest in FSC compliant investments
Excellent team in place
Strategy next 3 to 5 years
Complete transformation from BEE Funder to Private Equity Fund Manager
Successful raising and managing of 4 third party funds in partnership with leading private equity fund managers
total R2,6 billion
Building own track record:
solid direct investments and co-investments
team stability
brand building
Challenges
Sourcing quality and sizable deal flow
specifically infrastructure deals
Attracting and retaining appropriately skilled private equity professionals
Attracting additional third party money
Sanlam StructuredSolutions
Background
Used to form the Structured Products Group in SCM / Gensec Bank
Provided the structuring capability and the deal flow for equityand fixed interest desks
Moved into the institutional cluster as separate business unit:Demonstrate independence to 3rd party clients Move closer to where the decisions are made on the management of Sanlam assets.
From 1 Jan. 2007 Sanlam Solutions team also joined SSS exploit all synergies between 2 teams; one entry point into Sanlam Group for all derivative transactions and structured solutions
Vision, strategic objectives & focus areas
Vision:To be the leader in derivative and structured solutions
Strategic Objectives:Grow profitability to become 1 of the largest players in clusterDevelop innovative new products & solutions across market sectorsGrow external client baseDerivative advice, implementation, risk management and support to the Sanlam Group
Focus Areas:Dynamic hedgingCapital reduction strategies in SanlamNew solutions for marketing to Pension Fund marketALCO
SIM Global
Micropal performance (in US$)
Sanlam Global Financial Fund – as at 31 March 2007
A.G.R.Rank A.G.R. Rank A.G.R. Rank A.G.R.Rank A.G.R.Rank A.G.R.Rank A.G.R.Rank A.G.R.Rank
Coronation Global Financial Fund 25.3 3 -5.7 3 1.6 1 69.5 1 30.5 1 N/A ---- N/A ---- N/A ----
Sanlam Global Financial Fund N/A ---- N/A ---- N/A ---- N/A ---- N/A ---- 35.98 1 20.2 33 3.77 1
Argenta Secteur Euro-Banques -4.53 16 -22.64 26 -10.03 5 59.9 2 21.31 6 11.2 17 36.36 4 3.65 2
Fortis L Eq Finance Europe C N/A ---- -20.77 19 -20.18 25 40.68 14 17.92 19 9.34 23 34.09 6 2.46 3
ABN AMRO Financials EUR B N/A ---- N/A ---- N/A ---- N/A ---- 18.13 17 16.08 7 19.65 34 2.41 4
CLI Framlington Financial N/A ---- -11.75 8 -13.92 12 38.92 18 19.37 10 13.88 8 40.79 3 2.29 5
Royal Skan £ Fram Financial N/A ---- N/A ---- -14.15 13 37.71 21 19.02 12 12.5 12 20.43 31 2.25 6
SPI Obiettivo Assicurazio R N/A ---- N/A ---- N/A ---- 20.6 38 15.65 25 12.43 14 22.6 21 2.22 7
Royal Skan £ Fidelity Fin Ser N/A ---- N/A ---- -12.19 9 31.59 35 16.21 22 19.42 3 25.51 15 2.04 8
Dexia Eqs L Europe Finance C N/A ---- N/A ---- -22.79 34 43.78 7 18.51 15 10.5 19 18.2 36 1.92 9
Jupiter Global Financials L € N/A ---- N/A ---- N/A ---- N/A ---- N/A ---- N/A ---- N/A ---- 1.86 10
Parvest Europe Financials C 6.82 13 -21.85 23 -22.21 31 40.99 13 19.7 9 8.06 27 33.59 7 1.74 11
Fidelity Fds Financial Serv A N/A ---- -16.02 10 -10.82 7 32.8 31 18.22 16 19.09 4 28.54 12 1.67 12
Cleome Index Finance&Utilities N/A ---- -20.21 18 -20.05 23 44.16 6 25.15 2 10.78 18 23.65 18 1.61 13
20052004 2006 YTD 07Offshore and International Funds Sector - Finance
2003200220012000
Micropal performance (in US$) - Best Ideas Fund
A.G.R. Rank
PAM (L) Equities Opport. C 33.07 1
Kapitalfonds LK Family Bus 31.78 2
M&G Global Basics Euro A 31.72 3
StarCap Priamos 30.88 4
UniValue Fonds: Global A 30.65 5
Sanlam Global Best Ideas Fund 30.42 6
AIGLI/New Star Global Opps 29.97 7
M&G Global Leaders Euro A 29.93 8
Fortis L OBAM Equity World C 29.8 9
M&G Offshore Global Leaders 29.36 10
Actio Croissance Plus EUR 28.46 11
GLG Performance (Distr) A 28.13 12
AIGLI/M&G Managed Growth 27.88 13
Berenberg FoF - Globalway Fds 27.08 14
Kapitalfonds LK Global Value 26.99 15
Mean/Count 18.05 562
Standard Deviation 4.56
Offshore and International Funds Equity Global
30/03/2007
30/09/2004
Since Inception
Global Financial Fund & Best Ideas Funds vs benchmarks
31 March 2007 (US $)
90
110
130
150
170
190
210
Au
g-0
4
No
v-0
4
Fe
b-0
5
Ma
y-0
5
Au
g-0
5
No
v-0
5
Fe
b-0
6
Ma
y-0
6
Au
g-0
6
No
v-0
6
Fe
b-0
7
GLOBAL BEST IDEAS
MSCI WORLD
60
110
160
210
260
310
360
410
460
Au
g-9
9
Fe
b-0
0
Au
g-0
0
Fe
b-0
1
Au
g-0
1
Fe
b-0
2
Au
g-0
2
Fe
b-0
3
Au
g-0
3
Fe
b-0
4
Au
g-0
4
Fe
b-0
5
Au
g-0
5
Fe
b-0
6
Au
g-0
6
Fe
b-0
7
GLOBAL FINANCIAL
MSCI FINANCIAL
MSCI WORLD
Funds under management
US$ millionUS$ millionUS$ millionUS$ million
47.466.846.7n/aSanlam Global Trust Fund
643.4408.5176.551.2Total Funds under Management
159.60.4n/an/aSanlam Emerging Market Fund
335.0242.055.3n/aSanlam Global Best Ideas Fund
80.065.443.626.7Sanlam Global Financial Fund
21.517.215.510.8Nedbank Financial Fund
n/a16.815.413.7Sanlam Financial Fund
Mar 07Jun 06Jun 05Jun 04
Our objective
Continue outperformance!!
Sanlam Multi ManagersInternational
Achievements over the past 3 years
Integration of offshore and local business
Acquisition of Coris
Strong organic growth, particularly on the retail side
Growth in staff compliment and experience levels
Investment performance – most mandates ahead of benchmark and also well placed in surveys
Established as second largest multi manager in SA with a global and local presence
AUM almost R100bn
Product range
Comprehensive product range
A variety of investment platforms
From implemented consulting to fully discretionary
From reporting-only to wrap funds
Balanced, specialist and absolute return funds
Global and regional mandates
Fixed and tactical asset allocation
Life stage and umbrella funds
DB and DC funds
A good balance between local, global, retail and wholesale clients
Challenges ahead
Maintaining investment performance
Investing in systems and processes to ensure ongoing scalability
Retaining and growing talent
Growing assets, particularly in the SA wholesale arena, but in all other areas as well
Continuing to listen to our clients and provide innovative products
SIM EmergingMarkets
Background
Integrated as a stand alone Business Unit in the Institutional Cluster on 1Jan, 2006 following ALA acquisition
Primary role set to develop domestic fund management businesses ex RSA
Focussed on extending SIM franchise in the emerging World
Major achievements
All erstwhile ALA Fund management operations successfully integrated into SIM EM
Set up AMC in Kenya complete
Set up AMC in Nigeria complete
Successful business plan developed for India-await execution
Return on Equity in all operations well in excess of internal hurdle rates
Key strategic imperatives 2007-2009
Maximise significant potential in Southern, West & East African markets
Develop and manage Pan Africa focussed funds
Develop SIM in India into a full scale , diversified Investment cluster
Make opportunistic inroads into other key markets in Middle East & South Asia
SIM EM contribution to SIM operating profits to double from current 3%
Create an self sufficient, independent EM hub for optimisation with SIM CT
Octane
Octane update
AUM: $1.3 billion
Performance: Top quartile (since inception)
Clients: Largest SA pension funds
Now focusing on Europe and Asia
New solutions: Octane Signal, Octane Medium Hub,
Zenith, Executive, Union
Cape Town office: 1 February 2007
Octane approach
One product fits all - not optimal
Select more than one advisor
Size impacts performance
Tailor make solutions to client’s liability profile
Strong global & local presence
Aggressive
Low AggressiveRisk (volatility %)
Ret
urn
(%)
Octane Medium Hub
Octane Stable
Octane Liquid A
Octane Diversified
Octane Zenith
Risk/return - solutions
Octane Guaranteed
Octane Signal
Octane Medium
Investment advisers - fund track record
0-3 years31%
3-6 years37%
6-10 years20%
10-15 years10%
15+ years2%
Genesee; ManchesterParker Global; Torrey
Culross; ERAAM;Persimmon; Reliance;
Terrapin
Jupiter; Muirfield
Hedgehog
• The following slides show the broad achievements for 2006/2007 , as well as the very broad targets for 2007 looking ahead
• Both achievement and targets are broken down into Strategic / Operational / Financial
• Strategic Achievements– Set up JV between SIM & NAC for the incubation of fledgling hedge funds– Sourced / Approved Seed capital to build a track record from shareholders– Contracted / JV’d 9 Top tier single strategy funds, secured via various strategic relationships– Maintained positive risk adjusted returns (Nov06-1.84%, Dec06-1.79%, Jan06-1.61%, Feb06-
1.57%, March06-1.87%) with low correlation to the market
• Strategic Targets– To launch additional uncorrelated and less common single strategy funds– Lock-up manager capacity, build relationships– Build solid, uncorrelated track record of abs returns above hurdle– Build & Expand product line, with exclusive access for shareholder client base– Expand marketing drive and build exposure with
larger pension funds– Launch own Prime broker
• Operational Achievements– Set up offices, with full operational infrastructure
– Set up SLA’s with independent vendors to cover
• Fund administration (Independent data services)
• Compliance (Independent Compliance services)
• Risk management (RisCura)
• Auditing / Accounting (PWC / SIM accounting)
• IT and disaster recovery (Clear Channel Business Technologies)
– Move first managers into new HHC Premises
– Launched HH Diversified Fund
• Operational Targets– Ensure stable operational environment
– Strengthen quantitative skills
– Launch additional Multi-strat fund with pure
Incubation “flavor”
– Secure more managers to move into HHC
premises
• Financial Achievements– Secured R600million effective investment in HHC
– Breakeven achieved on income statement after 5 months
• Financial Targets– Strengthen mix of true equity managers in the incubator, reduce simple
rebate manager exposure
– Strengthen income statement and cash flow position with performing managers (greater performance fee success)
– Get to positive cash flow position in next 6 months
– Increase assets under management – NBNB!!
– Control costs • Salaries are the largest cost - (not employ new staff until
additional assets under management)
• Migrate IT to full independent infrastructure
The road aheadThe road ahead
Top priority remains consistent upper quartile LT investment performance across all platforms
Organisational structures in place – new and emerging businesses to be fully bedded down
Solid platform established to serve as springboard for further growth – offshore acquisition of conventional asset manager a possibility
Obsessed with building a winning culture and engender PASSIONATE OWNERSHIP
thank youthank you