luyanda joxo, cfa head of institutional business b com ... update - june...

Business update, June 2015

We are a global multi-award winning firm …

Phone +27 21 670 6576 | Mobile +27 84 701 1271 | Email [email protected]

General telephone line +27 21 670 6570 | www.argonassetmanagement.co.za

In this issue

1) Growth in 3rd party assets under management

2) Investment performance returns

3) Our Global Graduate Trainee Programme

4) Global and domestic awards

5) Meet our Board of Directors

6) Our 10th year celebration

7) Market outlook

Luyanda Joxo, CFA

Head of Institutional Business B Com Hons (Fin Management) UCT B Tech (Cost & Mgt Accounting) CPUT

CFA Charterholder (CFA Institute)

mailto:[email protected]

http://www.argonassetmanagement.co.za/



Business update, June 2015 In my last communication to you through this medium I made reference to our broad strategy termed “Project Phoenix”. A quick reminder, Project Phoenix is our internal strategic project that we implemented back in 2010, the objective of which was to position our firm in line with global investment management industry best practice. We subsequently adopted our payoff line “An African investment firm with global standards”. Indeed, four years later we are An African investment firm with global standards. Being mindful that we operate in an “other people’s money” space, we appreciate that trust, client relevance and communication are critical elements of our ethos. Herewith, our latest Business update. Summary points 1) We have ZAR28 billion of third party assets under management across 42 institutional client mandates.

2) All our investment propositions have delivered positive excess returns relative to their respective

benchmarks and are in top quartile positions on a peer relative basis as published in the various investment consulting surveys.

3) Our offshore capability is operational, delivered through our exclusive institutional Southern Africa

partnership with the London headquartered and London Stock Exchange listed firm, Schroders Investment Management Limited, a global business with over US$500 billion client assets under management.

4) Our Global Graduate Trainee programme, jointly run with Schroders has delivered its first two

candidates, Katleho Motsohi who is now Junior Equities Analyst, while Siseko Joxo is an Equities Dealer.

5) We are a global multi-award winning firm, having been recognised both internationally and domestically during both 2014 and 2015.

6) We have launched our unit trust (collective investment schemes) range through a white-labelling

agreement with Boutique Collective Investments (BCI).



1. Assets under management Our 3rd party assets under management have grown organically to ZAR28 billion from a zero base in 2005. This growth has been achieved in a difficult market environment in particular the last six years post the 2008 global financial crisis. This is a period characterised by heightened client risk aversion, volatile markets, tighter client governance budgets and tight new business margins. In addition, regulation and market reform increased the cost of doing business. Going forward we expect more of the same. Retirement industry reform is likely to consolidate smaller institutional retirement funds into high governance and hopefully, cost efficient structures like umbrella funds. Client relevance, risk management and global standards is the name of the game going forward. It is our belief that we are in frontline position for this challenge.



2. Investment performance Our objective is to outperform client benchmarks and to attain top-quartile positioning relative to peers. All our funds are in the top quartile positions relative to peers for the period ending 30th April 2015 - see the Alexander Forbes Asset Consulting Surveys. Investment performance to 31st May 2015

Source: Alexander Forbes SA Equity Manager Watch Survey Source: Alexander Forbes SA Bond Manager Watch Survey

Source: Alexander Forbes Absolute Return Manager Watch Survey, The CPI + 4% category

Argon SA Equity Fund Relative to peers 1 year to April 2015 3 years to April 2015

4 out of 25 2 out of 24

Argon Absolute Return Fund Relative to peers 1 year to April 2015 3 years to April 2015


Argon SA Bond Fund Relative to peers 1 year to April 2015 3 years to April 2015




3. Argon / Schroders Global Graduate Trainee programme Our capacity building initiatives have produced the first investment professionals under our global graduate trainee programme. We are proud to announce that Siseko Joxo and Katleho Motsohi have now completed the graduate trainee programme. Siseko is now an Equities Dealer and Katleho a Junior Equities Analyst, both are now full time employees of our firm. You will recall that our strategy is to train and develop our own investment professionals of a global standard. This human capital strategy is delivered through our global graduate trainee programme that we run jointly with our exclusive global partner, Schroders Investment Management Limited.

Siseko Joxo (Equities Dealer) B Com (Accounting) UWC Candidate, CFA Level 2, IMC (UK) Alum of the Schroders / Argon Global Graduate Trainee Programme

Katleho Motsohi (Junior Equities Analyst) B Com (Philosophy, Politics & Economics) UCT, M Sc Finance (Economic Policy) SOAS, Univ of London (UK) Candidate, CFA Level 1 , IMC (UK) Alum of the Schroders / Argon Global Graduate Trainee Programme



4. We are a global multi-award winning firm

World Finance Award: Best Investment Management Company, 2014 South Africa The award was presented at the London Stock Exchange on the 27thJune 2014 https://www.youtube.com/watch?v=WcDb4qAwsL8&feature=youtube

Global Banking & Finance Review Award: Best Asset Management Company, South Africa 2014 & 2015 The award was presented in July 2014 http://www.globalbankingandfinance.com/global-banking-finance-review-names-argon- asset-management-pty-limited-best-asset-manager-south-africa-2014

Global Banking & Finance Review Award: Mothobi Seseli, Best Asset Management CEO in South Africa (2015) award by Global Banking & Finance Review http://www.globalbankingandfinance.com

The European, Global Banking & Finance Review Award: Best Asset Management Company AFRICA 2014 The award was announced with their WEF Davos Issue. The award was presented on 16th February 2015 http://www.globalbankingandfinance.com

IAIR Excellence in Asset Management & Corporate Social Investment Africa The award was presented at the IAIR Awards Dinner on the 10th October 2014 in Milan, Italy http://www.iaireview.org/iair-awards-2014-winners-european-edition-548.html

Association of Black Securities and Investment Professionals (ABSIP) Award: Best Emerging Financial Sector Company 2014 The award was presented at the ABSIP Awards Dinner in September 2014 in Johannesburg

Imbasa Yegolide Awards 2015

Argon was nominated and shortlisted for the following awards: Best Equities Manager of the Year Best Absolute Returns Manager of the Year Best Bond Manager of the Year Best Overall Investment / Asset Manager of the Year

Award: Best Absolute Returns Manager 2015

We are true to our payoff line, “An African investment firm with global standards”. During the calendar year 2014, and year-to-date 2015, we received global and domestic recognition for excellence in investment management. This recognition was in the form of no less than 7 awards received from global financial publications and domestic industry bodies. The awards we received were from:



5. Meet our Board of Directors

Our board is majority independent, non-executive dominated, in line with good corporate governance codes.

Busi Mabuza, Cert Dir (IoD) SA (Non–Executive Director and Board Chairperson) BA (Mathematics & Computer Science) Hunter College City University of New York, MBA (Finance & Information Systems) Leonard Stern School of Business (New York University) USA IoD (SA) Certified Director

Busi holds a Bachelor of Arts degree in Mathematics & Computer Science from the City University of New York (Hunter College) and an MBA in Finance and Information Systems from the Leonard Stern School of Business (New York University). She has experience in fundraising, investor relations, portfolio management (both traditional and private equity) and business strategy. Busi currently serves as a non-executive director on the boards of the Central Energy Fund, the Strategic Fuel Fund, IDC, Development Bank of Southern Africa and is the current chairperson of the Airports Company of SA. She previously also served on the boards of the Minerals and Energy Education and Training Institute & AFGRI Ltd

Muriel Dube (Non-Executive Director) BA (Politics) University of Johannesburg MSc (Environmental Change & Management) Oxford University, UK Executive Development (Leadership & Finance) Harvard University, USA

Muriel has served as a nonexecutive director on the boards of Bidvest Group Ltd, Fluormin PLC, Enviroserv (Pty) Ltd and Vodacom. She also served as an expert on the United Nations Technology Transfer Group after being appointed to the role of Chief Climate Negotiator by the South African Government. Her expertise has predominantly been in multinational companies, geared towards advice on environmental, sustainable development and business transformation strategies. Muriel was most recently employed in the investment banking division at Investec UK.

Hugh Sundelson (Non-Executive Director)Member of the Institute of Stockbrokers RSA MA (Professional Dev / Coaching) Middlesex University, UK, Ph D (Org Systems Theory) candidate, Middlesex University, UK

Hugh is an Executive Coach and Change Consultant who works with large companies and multi nationals in many industries such as Old Mutual, Investec Bank, Rand Merchant Bank, Santam, Teljoy, Metropolitan Life, Safmarine, Vodacom and Oracle, specialising in the areas of change consulting and executive coaching. He has over 15 years’ experience in consulting, research, facilitation, performance management and people development in South Africa and internationally. Hugh is a qualified Stockbroker and member of The Institute of Stockbrokers South Africa. He was formerly an Executive Partner of a successful stockbroking firm for 12 years.

Mothobi Seseli (Executive Director & Chief Executive Officer) MA (Economics) RAU, IoD (SA) Certified Director, EPGC (Stanford Univ Graduate School of Business) USA, Private Equity Executive Programme (Saïd Bus School, Oxford University) UK

Mothobi has over 20 years financial services industry experience (retirement funds consultant, economist, investment analyst, own trustee training business & part-time university lecturer). His most recent experience is from RSA subsidiary of NYSE listed global asset manager, Alliance Capital Management LP (now Alliance Bernstein LP) & Investec Asset Management. Mothobi is also the past President of ABSIP Western Cape, a member of the National Exco and a regular presenter at industry conferences. He was recently recognised as BEST ASSET MANAGEMENT CEO SOUTH AFRICA 2015 by Global Banking and Finance Review.

Dr. Manas Bapela (Executive Director & Chief Investment Officer) M Sc (Mathematics) cum laude, PhD (Mathematics) University of Pretoria Global Investment Risk Mgt (Saïd Bus School, Oxford Univ) UK

Manas has over 18 years of relevant industry experience including lecturing, investment analysis, and portfolio management across the asset class spectrum, including derivatives. He has multi organizational experience at leading firms such as Standard Corporate & Merchant Bank and most recently Taquanta Asset Managers. In addition, Manas is also a published contributor to mathematics journals, a regular industry conference presenter and a member of the investment committee of the IRF (Institute of Retirement Funds).



6. Argon’s 10th year celebration We celebrated our 10-year anniversary on 8th May 2015. The event was held at the Inanda Country Club in Johannesburg. Invited guests included clients, staff, representatives from national government, Schroders representatives, various international dignitaries and other industry stakeholders. The Honourable South African Minister of Finance, Mr Nhlanhla Nene gave the keynote address at the event. Dr Phumzile Mlambo Ngcuka (former Deputy President of South Africa and current Executive Director of UN Women), Michael Dobson (Group Chief Executive Officer, Schroders) and Mr Bonang Mohale (Executive Chairman Shell SA) completed the speaker line-up. Our Chief Executive Officer, Mr Mothobi Seseli gave an account of the journey from inception, the challenges encountered along the way and the future plans for our firm. This was followed by the Reserve Bank Governor, Lesetja Kganyago who proposed a rousing toast to black excellence and Argon.



7. Market outlook: Elevated volatility is expected over the next six months Growth is recovering The health of the global manufacturing sector improved for the first time in seven months, according to May’s PMIs. This follows the slowest start to the year since the great recession of 2008. The PMIs for the US, China, the Eurozone and Japan all improved, while the little weakness there was, was in non-China emerging markets, mostly oil exporters such as Brazil and Russia. The market is positioning itself for the ‘great rotation’ After declining by 1.1% year-on-year (YoY) in the three months up to January, global inflation surged at 3.1% YoY in the three months up to April due to rising oil prices. Core inflation also rose faster than expected. Market movements are confirming this rising inflation trend. Inflation break-evens, commodity prices and bond yields are rising, credit and money supply are increasing, and financials and cyclicals are leading the equity market, while defensive shares are lagging. This rotation is typical to the beginning of an interest rate hike cycle. The Fed is expected to begin raising rates in September this year, and the market is selling interest rate-sensitive assets and buying growth-linked assets. Central banks are adding to market volatility Not only is the Fed lift-off date for rate hikes driving market volatility, but the most dramatic move this year has been the increase in 10-year German bond yields, from 5 basis points to 99 over the last month. This was driven by inflation expectations as well as short covering following European Central Bank (ECB) President Mario Draghi’s speech where he told the market to ‘get used to’ bond volatility. As quantitative easing (QE) becomes a bigger and bigger part of the financial system, with currently over $11 trillion on central bank balance sheets, the outlook of central banks will drive the direction of the market over the next year and increase volatility. We think the rotation will be temporary We continue to believe that growth will rebound temporarily, with support from QE in Europe and Japan, seasonality in the US, and monetary easing in China all driving the growth bounce. Similarly, inflation is expected to rise as the oil price fall moves out of the base. Rising growth and inflation will restrict liquidity in the short term. We are already tactically underweight bonds due to the seasonal pick-up in growth. However, in the long term (30 years), the markets are not pricing in any inflation, which we believe is correct. An excess of debt in the global economy and significant imbalances will keep growth muted. Therefore, interest rates are not going to rise much and if they do, they will choke growth. Either way, the rotation into growth assets is going to be temporary. In the long term, our preferred trade is still focused on defensive income assets (including bonds), due to the low growth and high liquidity environment. With Eurozone QE only ending in September 2016, the current weakness will make a good entry at some point.

luyanda joxo, cfa head of institutional business b com ... update - june...

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