RECOGNISING YOUNG PROFESSIONALS AT THE HEIGHT OF FINANCIAL SERVICES

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REGULAR FEATURES

ABSIP Vision and Mission 1

Message from the President of ABSIP 2

Message from Young Professionals Chairperson 4

Invitation 6

2018 Highlights 8

Lessons to my younger self 10

What it means to be investment professional 12

2018 Market Wrap 14

What does transformation mean to me 16

Into the world of exchange traded funds 18

What will the role of investment professional be 22

Tips to manage up at your workplace 24

ABSIP Young Professionals 26

Personal financial Advisor or Robo-advisor 28

I don’t know how she does it 30

Office do’s and dont’s 32

Why alternative assets matter 34

ABSIP YP Causes 36

Committee 37

Book Review 39

Contact Us 40

Sponsors 41

RECOGNISING YOUNG PROFESSIONALS AT THE HEIGHT OF FINANCIAL SERVICES

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ABSIP will orchestrate positive change and growth in financial services to drive the development of opportunities for our members.

We will achieve this by:

• Leveraging key stakeholder relationships and partnerships.• Advocating for policies and practices that create equitable representation and inclusion.• Developing leaders and organizations that shape the future of the industry.• Recognizing individuals and organizations that contribute to ABSIP’s Vision.• Building a reputation for relevant and insightful thought leadership.• Providing a platform for connecting our members.

Guiding Principles:

While ABSIP is a member volunteer organization, we will always

Act with independence ensuring no individual interests supersede the mission and vision of the organization.

• Act with the highest degrees of professionalism; ethics and integrity in all we do.• Be accountable for all funds we raise and ensure they are used for the purpose intended.• Seek to avoid all areas of conflict of interest or potential conflict of interest.• Listen to the views of members and request input on all critical areas over which we pronounce

or have influence.• Fight vehemently against all forms of discrimination based on race, ethnicity or gender.• Use our influence responsibly and for the greater good in line with our overall vision.

A transformed, fully inclusive, ethically run financial sector that equitably represents black professionals and black business to enable sustainable growth for the sector and South Africa at large.

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Every young professional should have the limitless potential enthusiasm and desire to achieve

By Sibongiseni Mbatha

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The youth of today are the leaders of tomorrow,President Nelson Mandela once said.

Like our late first democratic president, the Association of Black Securities and Investment Professionals (ABSIP) regards the youth as the rock on which the future is built. That is why ABSIP launched the ABSIP Young Professionals Chapter (ABSIP YP) in November 2016.

We believe that every young person has all the power to be an achiever, the enthusiasm, desire to achieve, and above all, the physical energy within them. ABSIP believes that when the youth have the opportunity to lead, they become architects of their futures and change agents in their communities and across the nation.

The entire success of the nation depends on young people and I am excited that ABSIP is grooming young professionals so they can become better leaders of tomorrow.

I believe that providing the youth with leadership opportunities helps them grow into responsible adults. If we want the youth to work in partnership with adults, we must give them the opportunities to develop leadership skills that allow them to manage time, work as a team, set goals and solve problems. In other words, we must help them develop effective life skills in structures such as ABSIP YP to embrace their thoughts, ideas and visions to contribute to the organization’s values.

Young people under 24, as defined by the United Nations as ‘youth’ and ‘children’, now constitute nearly 50 percent of the world’s population. No one has a greater right to speak out. And it is the special privilege of the youth to rise beyond the narrow limits of short-term gain, to burn with the fervor of justice and strive toward long-term goals.

That is why the ABSIP YP should come up with a strategic framework for youth empowerment and development in the financial services sector to address key issues affecting youth, including:• Employment;• Skills development and• Youth participation.

Investing youth energies on the development of others is what will help us to solve the obstinate problem of youth unemployment and many other challenges faced by our youth in our country.

For example, the youth can find ways of developing creative solutions, including smart and accessible technologies or cell-phone apps, to ensure that every child, irrespective of where in the country she or he lives, has access to a quality education to allow them to compete with the rest of the world.

ABSIP believe that young people must get good education in order to become better citizens of tomorrow. We make sure they attain good education through the bursaries we offer to them.

Youth leadership is powerful, and it’s our responsibility to find avenues for every young professional to develop as a leader and youth represent a source of limitless promise and potential for change.

Sibongiseni Mbatha is President of ABSIP

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Tinyiko Ngwenya

Message from Young Professionals Chairperson

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Message from the ChairpersonThe journey of the ABSIP Young Professionals Chapter (ABSIP YP) has been an incredible one, one that I have been fortunate to have been a part of. The story of ABSIP YP is a story of young professionals who came together to find a home, young black professionals who wanted to connect with other like-minded professionals.

The financial services industry can be a lonely place for young black professionals, and by launching ABSIP YP in 2016 we not only gave them a home but we also gave them an opportunity to be part of the body that is driving the acceleration of transformation within the financial services industry.

The purpose of ABSIP YP is to help advance ABSIP’s vision of being “the lead custodian of professional interest and black business in the Financial Services sector” by specifically targeting the development of young black professionals and entrepreneurs within the sector. We cannot truly advocate transformation without ensuring that we have a strong pipeline of credible individuals that we can point to when the industry seeks to use the “lack of black talent” as a means to justify the slow progress of transformation.

By providing a platform for young black professionals to engage with each other and with industry leaders, we create a space where a diverse set of experiences can be shared amongst our members to equip them with lessons they may be able to use to develop themselves. By hearing the experiences of others, we not only realize that our challenges are very similar but we also get exposed to a set of tools that we perhaps have never thought of, that we could use to solve our own challenges. Since launching we have hosted events with speakers such as Professor Thuli Madonsela, Sizwe Nxasana, Nhlanhla Nene, Yegs Ramiah, Delphine Govender, Malungelo Zilimbola and many more industry leaders. Members of ABSIP are given access to high quality leaders that they can engage with on a one-on-one level. This is how we develop young black professionals, by providing a platform for them to connect.

In our industry, it’s no secret that ‘your network is your currency’ and ABSIP YP aims to ensure that it gives its members a head start to building one. I’ve told this story many times but it really highlights the progress ABSIP YP has made in helping its members build a network.

I was at the airport and saw someone that looked familiar. We gave each other the ‘I know you’ stare but for some reason it still didn’t click. After offloading our luggage from the carousel, we finally remembered where we had seen each other, at an ABSIP YP event! We then introduced ourselves, apologizing for not having remembered each other’s names and went on to have an interesting conversation. After exchanging contacts, I’ve kept in touch with that person ever since and even bounced a few ideas of them for work. That’s the power of building a network! Now I know an Investment Banker who can one day structure a deal for me and now that person knows an Economist who he can sense check his macroeconomic assumptions before presenting to a client. It’s easier to cold call someone when you know their name and can have small talk with before getting down to business.

The Western Cape Chapter has grown not only in numbers but also in strength, and is led by a committed team of exceptional young professionals. It is now time to take that model and apply it to Johannesburg and Pretoria where it is sorely needed. On 29 November 2018, ABSIP YP will be launching its Gauteng chapter with a speed-dating session to make sure that members get to know each other followed by a panel discussion with a lineup of guests who are the embodiment of young black excellency.

The Gauteng chapter is currently led by a phenomenal team, young professionals who approached me at the ABSIP Investment Management Summit earlier this year and put their hands up to say that they want to serve the organization. Once we have built our database and begin connecting with our Gauteng members, we will be able to identify what their concerns are and work at finding solutions to helping them advance in their careers.

I am excited for the year that lays ahead, for the voices that will be heard, for the leaders who will emerge and for the industry that will begin to acknowledge that it cannot ignore the plights of the young black professionals. Our forefathers have paved the way for us to have an opportunity to sit at the table, more work is needed for us to lift as we rise and truly transform the financial services sector.

Tinyiko Ngwenya is the ABSIP Executive for the Young Professionals

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2018 was an interesting year for the South African financial services industry. We had just been confronted with what is now the biggest fraud in South African history that saw R282 million of the tainted company’s market value lost in just one week. The Steinhoff debacle raised many questions in the industry, particularly those around corporate governance and how we should safeguard our client’s investments by ensuring that we invest in sustainable companies.

Ethical Leadership: Professor Thuli Madonsela

The Young Professionals Chapter took the opportunity to begin the dialogue of ethical leadership by inviting the “Mother of Social Justice”, Professor Thuli Madonsela to speak to our members at our opening event on 15 March 2018. The objective of the event was to focus and expand on the concept of ethical leadership, particularly a rare commodity called integrity which we had recently seen lacking in the financial services industry.

The event was well received by our members who were even kind enough to send e-mails following the event to thank us for creating such an important dialogue with a guest like Professor Thuli Madonsela. Prof. Madonsela in the talk stressed how your credibility is something that you need to protect, so guarding it means doing right at all times and not only when it suits us. The event was hosted at the University of Cape Town Graduate School of Business and sponsored by Legae Securities.

We cannot thank Professor Thuli Madonsela enough for taking the time out of her extremely busy schedule to come and speak to our members. She challenged the young professionals to think beyond themselves and acknowledge that ethical leadership begins with saying yes to what is right every single day.

2018 Highlights

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Our Role in Bridging the Skills Gap:Mr Sizwe Nxasana As the #FeesMustFall narrative was continuing and South Africa posted a shockingly high unemployment rate of 26.7% in the first quarter of 2018, we found it fit to address this concern by inviting the then Chair of the National Students’ Financial Aid Scheme (NSFAS) and former CEO of FirstRand, Sizwe Nxasana to speak to us about our role as the financial services industry, in bridging the skills gap.

As mentioned earlier, the purpose of ABSIP YP is to help advance ABSIP’s vision by specifically targeting the development of young black professionals and entrepreneurs within the sector. Therefore, it is our responsibility to ensure that we address the skills gap that exists in Corporate South Africa and this we discussed at an event hosted and sponsored by RMB Global Events on 18 May 2016.

The event was well attended, with the audience consisting of both members from the ABSIP YP Chapter and the ABSIP Western Cape Student chapters (UCT and UWC). Mr Nxasana’s key note address was both informative and inspirational. He gave meaningful insight into numerous issues facing South Africa, including those of skills development, the importance of language, transformation and business culture.

What our members appreciated the most is the one on one engagement that Mr Nxasana had with each and every one of them, spending most of the evening giving advice to the young professionals and students. Mr Nxasana embodied the characteristics of a leader who is truly interested in the success of every individual and his passion for uplifting South Africans through education resonated with every single one of us.

Transformation Series with Macquarie Securities

Normally we host four fairly big events during the year and then have smaller quarterly forums where we tackle the issue of transformation and ask corporates hard questions around what they are doing to advance the transformation agenda. These quarterly forums have come to be known as the “Transformation Series” and on 05 June 2018, our members were hosted by Macquarie Securities at the JSE in Cape Town. Chief Executive Officer, Fawzia Suliman and Head of Equities Sarah-Jane Wagg shared their challenges on transformation and even spent time discussing the Mazi Capital transaction that helped empower the company ownership structure as well as the new board which is now 71% female and 57% black.

Western Cape Women’s Day High Tea 2018

On the 20th of September 2018 we joined forces with ABSIP’s Women in Focus Chapter (“AWIF”) in collaboration with the CFA (Chartered Financial Analyst) Society of South Africa to host a Women’s Day event in Cape Town. The theme for this year’s event was “Gamechangers & Change Leaders” and the speakers proved to be nothing less of this.

Keynote speaker, Celiwe Ross, shared her interesting career journey from being the first black female Mining Engineer to becoming the Human Capital Director of Old Mutual Limited. Attributing her successes to her willingness to take risks as well as exploring opportunities outside of her comfort zone. Celiwe also stressed the importance of having the right career sponsors; people who are willing to go the extra mile and break down barriers for you.

The event also had CEO panel which gave further insights on what corporates are doing and should be doing to have a more meaningful impact in accelerating the development of female talent. Such as having more focused internal development programmes for females. The panelists included the CEO of Afena Capital (Grant Cloete), the CEO of Prescient Investment Management (Cheree Dyers), the Owner of People Dynamix (Gill Baronetti) and the Director of Institutional Investments at Old Mutual Investment Group (Tebogo Naledi).

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Lessons to my younger self

Fatima Vawda, Founder and Managing Director of 27four Investment Managers

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Q. If you look back at your career, is it something that you would have envisaged in your 20’s when you were mapping your career path?

A. Absolutely! My love for financial engineering and the financial markets naturally drew me towards the financial sector. I have been blessed by the many opportunities the sector has afforded me which ultimately led to the establishment of 27four Investment Managers 11 years ago.

Q. When you started working in corporate, were there any cultural differences that you had to face and how did you as a black professional navigate what is usually a white dominated industry?

A. I was subjected to race and gender biases. There were the unspoken invisible rules that lay bare the power of networks and fragmented human resources practices in corporate SA. Growing up during apartheid entrenched an ethos of inclusiveness and solidarity amongst black youth so it was incredibility difficult to adjust in a corporate environment driven by individualism and competition. The overall lack of support and mentorship meant that I had to do things the hard way, work much harder than my white peers in order to earn my standing within the system. After all it was the nineties when I entered corporate SA!

Q. Can you tell us about a time when you had a difficult boss? How did you handle the situation?

A. There were definitely multiple occasions during my career when workplace tensions arose as a result of a clash in ideas or strategy as well as incentivization. Taking a step back and having a good look at the reasons behind the friction as well as the bigger picture always helped make sense of such situations and over time fostered an appreciation of the power of diverse opinions.

Q. Financial services has many roles which are quite specialist in nature. As young professionals we are told not to specialize too soon to avoid risking being boxed in. Do you agree with this sentiment?

A. I am in full agreement with this sentiment. Financial markets are incredibly complex. A holistic yet sound understanding of the mechanics of how things work in relation to the flow of capital is an indispensable asset in one’s career. Technical competency is the stepping stone that eventually leads to multiple pathways.

Q. When did you know that it was the right time for you to set up 27four?

A. Only once I had learned how to crawl and walk I felt that I was ready to run. This came after a decade of building hard technical skills, capability and networks which provided me with the confidence to venture out on my own.

Q. Was there ever a time that you thought this was the end for your business and how did you push forward even with these obstacles?

A. I am always uncomfortable and never feel at ease and safe in business. This is a quality that pushes me to be imaginative to maintain an advantage and position our business to be future ready. Sticking to this recipe has proved to be a winning formula for me and my team.

Q. 27four is known as being the consultants who ask the tough questions, particularly on transformation. What is it that drives you to keep being an agent of change?

A. The promotion of inclusivity is part of our DNA. We are intent on supporting initiatives that build progressive institutions so that we can together conceive a future that appropriately addresses our country’s challenges.

Q. Which leadership skills were the most difficult to develop? What’s the most important leadership lesson you’ve learned?

A. That emotional intelligence is the key to both personal and professional success. The most important leadership lesson I’ve learned is that people are your only asset and that in order to be truly competitive, we must be highly competent.

Q. How important have your peers been in your career development and what qualities do you look for in the people you surround yourself with?

A. I learn from my peers each day as I have always hired people that I believe are smarter than me who can make me and the business we are building shine.

Q. What is the one thing that you wish you could have told your younger self?

A. That I maybe should have given more credence to the power of relationships.

Q: Question & A: Answer

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Fatima Vawda, Founder and Managing Director of 27four Investment Managers

What Association of Black Securities and Investment Professionals (ABSIP) means

to me as an investment professional

Phumlile Smith

Manager Research Analyst Absa Multi-Management

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ABSIP is an acronym that I became familiar with back in the year 2005 when I was a university student at the Randse Afrikaanse Universiteit which is now affectionately known as University of Johannesburg.

This was the year that ABSIP had officially launched their Student Chapters. I recall with a deep sense of nostalgia when Donaldson Chepape the then Head of the Student Chapter) approached me to become a member of the ABSIP Student Chapter Movement.

At the time, Donaldson was by far more “woke” than I was, and whatever he said to pitch the organization to me had two words that were used interchangeably and those words were “black excellence” and “black empowerment”. I automatically felt a sense of resonance – mind you at that time, I had no clue what he was talking me into because I was an active member of the Economic Society which just made much more sense than an acronym.

Little did I know or even begin to imagine I had older black brothers and sisters that were already standing in formation, during 1995 with the establishment of The Association of Black Securities and Investment Professionals (ABSIP). I surely can be forgiven for not knowing what was happening ahead of me and my time because I was still in Standard 2 (aka Grade 4).

The year 1995 is of particular importance because not only was it post the cusp of our first ever democratic election, it’s a year that also prompted my older brothers and sisters in establishment of ABSIP. The organization was set on with the ideals and notions of addressing the apparent lack of representation of black professionals in the securities and investment industry. The ellipses are left purposefully because the latter still remains an existing struggle that may be packaged differently. However, the purpose of this note is not to address those ideals nor those imperfections…

As a young, black female within the financial services industry ABSIP has afforded me a wide network that spans beyond what the naked eye can see, as well as a network that I would not necessarily have had access to because of my upbringing.

Albeit the network and deep societal issues which may typically resonate with many young South African professionals - the movement has opened my eyes to a world of opportunities and many key developmental areas. I have had the privilege of being part of the Tsheto Leadership Program, through AWIF which is spearheaded by Azola Mayekiso. This program not only addressed pertinent leadership discussions but also addressed softer issues such as emotional intelligence which a key crucial factor in becoming an effective leader.

The program is attended by like-minded individuals with hybrid personalities as well as skill-sets which we all equivalently learn from to build and develop ourselves. A meeting of minds and ideas took place which is one of the many things ABSIP is successfully able to do.

ABSIP to me has not just been a hub of black-excellence and black-empowerment as Donaldson had pitched to me more than 10 years ago, it has been a movement that has shown me not just as women of colour what is possible, but has shown me ideals while growing up that were deemed impossible. It is a movement that embodies success and such success is evidently seen within the many members of the organization as well as the country with key strides made also to the contribution of the Financial Services Charter.

The movement forces one in a positive way to dream, strive, work harder and smarter to occupy pages such as the organizations’ Game Changers Book. It creates opportunities, facilitates change, harnesses aspirations and supports educational growth through programs such as the Fordham International Programme in USA.

Above all else, the Association of Black Securities and Investment Professionals is a platform where there are a myriad of opportunities and a place where impermeable relationships can be made into perpetuity. As a member and based on how far one would like to reach, one just has to see those opportunities…

Phumlile Smith –Manager Research Analyst Absa Multi-Management

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POLITICS TAKES CENTRE STAGE

The Johannesburg Stock Exchange’s (JSE’s) Top 40 largest companies by market capitalization have seen shocking returns carrying on a drought in performance that we’ve had to endure for the past four and a half years. Finance theory dictates that long-term market performance can be explained as being the function of the growth in the company’s earnings (which usually trends the

long-term potential GDP of a country) and the growth in dividends (as guided by the firm’s dividend policy). However, in the short-term there are a number of events that can affect a security’s price. These can vary from daily news flow, macroeconomic indicators, natural disasters, geopolitical events etc.

2018 Market Wrap with Bright Khumalo

Over the last decade, the South African economy has grown at an average annual rate of 1.4%, a growth rate that has been lagging the rest of emerging market countries. The South African Reserve Bank (SARB) cut its 2018 growth forecast to 1.2%, lower than an earlier forecast of 1.7%, after a string of disappointing economic data in the first half of the year which has affected the market.

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2018 has been no exception as we rising fears around Trump’s hard stance on trade policies and how that would impact global trade. Locally we saw the market rally when Cyril Ramaphosa was elected as the president, a rather interesting phenomena referred to as the “Ramaphoria” which helped lift our market.

While there has been a notable uptick in business confidence, particularly in the mood of investors, Ramaphosa still has a large task ahead of him of implementing strong growth enhancing reforms. Investors need a clear and definitive direction on policies such as on land reform and the minimum wage bill amongst others.

HOW HAS THE MARKET DONE SINCE THE RAMAPHORIA?

When it comes to the year-to-date performance on the JSE top 40 companies, the results have been disappointing to say the least. The top 40 index is down 12.03% with just 13 companies in the green which has been worrying investors who have to answer to their client’s performance expectations. The top three performing local stocks this year were Anglo American, BHP Billiton and AngloGold Ashanti. These companies share a common trait: they’re all highly cyclical, diversified commodity mining companies. We’ve seen a Darwin like consolidation in this industry in the race to the bottom with the large companies surviving, making them some of the most well-run businesses in our market.

The top three losers where are Fast Moving Consumer Goods Giant Tiger Brands, Pharmaceuticals giant Aspen, and property company Nepi Rockcastle. The only common trait in these companies is that they all had company specific problems that led them to the bottom of the list. Tiger Brands being the listeria outbreak

in South Africa, Aspen’s business model coming into question after a report released by Viceroy and Nepi Rockcastle being at the centre of the Financial Sector Conduct Authority’s (FSCA) investigation into the Resilient group for possible insider trading and market manipulation.

SOME SILVER LININGS TO LOOK OUT FOR

While local market returns have been rather disappointing, The Vodacom Yebo Yethu BEE scheme has delivered spectacular returns for its investors. An investor who invested the minimum R2500 in 2008 received R7 300 in cash as a special dividend in the process of unwinding. In terms of capital appreciation, R2500 invested in 2008 saw value unlock of approximately R16 000 or 6.4 times the original investment. Majority of these returns were made towards the tail-end of the deal when the company announced that as part of the unwinding process, a special dividend of R67 per share was declared which is a return of 2.7 times the initial price of R25 a share.

I know lots of investment professionals who would kill to replicate these kinds of returns, especially under current market circumstances. The new Vodacom Yebo Yethu BBBEE transaction went through successfully, and if you are a qualifying BBBEE investor be sure to visit their website and speak to your financial advisor about how you can get involved.

With stocks being in the red comes buying opportunities with a lot more bargains readily available in our market today as compared to developed markets, which means that investors should expect above-average risk-adjusted returns in the long-term. However, the market is not pricing in a very favorable market environment in the next six months meaning that retail investors should save more, spend less, take their medicine and manage their expectations accordingly.

Bright Khumalo is a Portfolio Manager at Vestact Asset Management

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What does Transformation mean to Me?

“In my view, transformation is well under way - a bit slower than people would like, but change does not happen overnight. I see more and more young people of colour getting opportunities and the companies, in my view, are doing their best while looking out for their own interests too. Transformation is a marathon not a sprint”

- Lebo Mathibeli

“Transformation meant (perhaps still does) a regulation the industry had to comply with, however through this compliance it has grown to be about diversifying the industry as a whole from products, service providers, clients to “the big table”

- Lebogang Sekgabi

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“Transformation in the services sector means more representation of women and African black people at executive levels. The key decision makers at board and executive level need to be a representative of the country we live in. BEE deals involving financial ser-vices companies must also be transformative in nature and the black companies should not be made silent partners.” - Andile Hlanti

“Transformation means to me not only changing the spaces that we work in but it means redirecting how information is distributed. It means creating spaces that foster sustaina-ble development and enhancement of the previously disadvantaged especially African women. It means to diversify not only the knowledge base but also create products that speak to the diversified needs of the majority of people.” - Desmond Dube

“I believe that in the same way that the historical laws of South Africa heavily enforced the exclusion of young black professionals from fair practice, the present-day laws should enforce the fair inclusion of these same professionals so that qualification and not skin colour is the determining factor. The result of this can only be better efficiency and the sustainability of South Africa’s financial institutions.”

- Mpho Sebesho

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Into the world of exchange traded funds Maurice Madiba is the founder and Chief Executive Officer of Cloud Atlas Investing

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What does Exchange Traded Funds refer to? Exchange Traded Funds (more commonly known as ETFs) are securities that track a basket of assets. These assets can vary from equities to bonds or commodities.

In their structure ETFs are very similar to mutual funds the most significant differentiating factor is that as a normal stock, the prices of ETFs will change throughout the day as they are bought/sold therefore these funds tend to trade like common stocks on exchanges.

Where They Fit In?

Though their main attraction may be the low-cost advantages, ETFs also cut out the massive headache of trying to outperform the market via various stock picking strategies. As we all know picking individual stocks can tend to be quite a difficult task, with ETFs investors can avoid the big losses that can come with individual stock picking and managing these baskets tends to be a lot less time consuming.

There’s strength in diversification. In one share purchase you get exposure to different companies in different sectors. If there’s a problem with certain sectors and the stocks in that sector then only a small portion of your portfolio would be affected. It also means that you don’t miss out on growth sectors either, allowing you as the investor opportunity to exist in various industries and almost capitalise on the overall economic growth of different regions.

Why Pan African?

At Cloud Atlas Investing the most commonly asked question is why Africa-exSA? This question is then often followed by one on liquidity and coverage of African stock markets / information.

Though the primary reason of listing this ETF was to give easy access to Africa for the everyday man on the street (to allow Africans the opportunity to participate in Africa’s growth), the team at Cloud Atlas have built advanced models which deal with issues of liquidity and have built systems that allow for our in-house products to maximise the investors growth in these markets.

Defragmenting the bias

Africa has always been viewed in compartments such as Sub-Saharan Africa, Northern, Southern, Eastern or Western Africa as these aided investors in understanding the opportunities that exist on the continent. With all these classifications and even the formation of regional country blocks the opportunities in Africa still distinctly apply on a country by country basis.

South Africa in the context of Africa requires a different set of eyes compared to its other African counterparts for the simple reason that the sizes of the financial markets dwarf those of other African countries. What makes rest of Africa more attractive is the potential for these markets to boom in a way never seen before. It is on this basis that we created investments products that invest in the Africa ex-SA story and the numbers back us up.

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Just looking at the Big50 performance over the last 10 years

The AMI Big50 surpasses its Pan African ex-SA competition as it delivers superior returns and diversified exposure

The JSE has performed in line with other emerging markets, however on the backdrop of other African markets, SA lags behind.

Africa ex-SA is a darling when it comes to frontier market investing, when compared to emerging markets the rest of Africa fairs better and is more insulated from shocks often incurred in risk-off environments.

Going toe to toe with the S&P 500 is a stellar display of the potential Africa ex-SA has in comparison with the world’s longest standing and most respected market index.

Source: Thomson Reuters Eikon, Cloud Atlas Research As at 31 October 2018

AMIB50 Africa ex-SA vs Emerging Markets

AMIB50 Africa ex-SA vs S&P500

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Fundamentals of ETFs Summarised

ETFs provide an added advantage because they can be traded at any time of the day. Trading volume is not the only primary source of liquidity. Liquidity can be derived from the underlying basket of securities through the creation and redemption process.

Intraday Trading

ETFs charge minimal management fees as oppose to mutual funds. They charge brokerage commissions for every purchase and sale, same procedure used when buying or selling securities.

Low Cost

ETFs offer a wide variety of investment possibilities which include global markets and specific sectors, regions, industries and countries, as well as the standard asset classes and investment styles. There are also ETFs that just track certain specific investments.

Diversification

ETF holdings are always known to the market and usually change when the underlying index does.

Transparency

This essentially means one investor selling of shares does not typically create a tax event for the remaining investors in the fund, as it could for traditional mutual funds. This basically means that the transaction costs and tax consequences the investor may incur are typically confined to that transaction, just like when you buy or sell any security you own.

Tax Efficiency

YOUNG PROFESSIONALS 21

What will the role of Investment Professionals be?

As an investment professional, making considered predictions about the future is often a key part of the job description. However, a meditation on the future of finance itself requires a different order of thinking along with a fair measure of introspection. What does the future of finance hold, particularly in asset management?

To make a general observation: humans are wired to project a future that is constantly better than the present. Therefore, any directional forecast of the future of finance will be sure to keep with this optimism and balance it with some measure of caution.

The finance industry operates within a specific commercial environment, which in turn operates within a specific societal context. The future of South Africa is thus key in shaping the future of the finance industry. Conversely, the finance industry can and will play a role in shaping the future of the country.

The salient features that describe the society within which our finance industry operates are: inequality, poverty, and unemployment.

These are deep-seated structural issues and they pose a serious danger to a better future for all. This backdrop ultimately informs the questions that the finance industry will need to help answer in order to offer a compelling ‘reason for being’.

From a commercial perspective, the country has well-regulated, deep financial markets, and a large pool of assets. Asset management is a scalable business that allocates the capital of asset owners to companies, governments, and other institutions that need capital. In short – the commercial environment has good fundamentals for the asset management business.

Digging down into the specifics. The existing investment strategies that ought to play a prominent role in shaping the future of finance are quantitative and index-based. The reason quantitative investment strategies will likely play a prominent role in shaping the future of asset management is that they share some of the quantitative methods that underpin machine learning. Technology and particularly big data, machine learning, and artificial intelligence will undoubtedly shape the future.

22 ROOTED

This will blur the distinction between fundamental and quantitative even further. A real-life application of this, that I have come across at work, has been the use of quantitative methods to assess what is considered subjective. A machine learning process uses big data to read large quantities of news and uses that infer market sentiment of a particular stock. This allows one to process large sums of ‘subjective’ data efficiently, and in a systematic fashion, and apply this in an investment process.

There has been a rise in index-based strategies and this will likely continue. The reduction in fees offer a compelling proposition to clients. Index-based investment strategies range from purely vanilla indices which are broad-based and are intended to be representative of an asset class, or sector therein. There are also index-based strategies that are higher up the passive-active spectrum. Smart-beta strategies, for an example, replicate active investment decision via index replication and aim to harvest systematic sources of excess (risk-adjusted) returns. The 2017 FTSE Russell global smart beta survey shows that many asset owners prefer multi-factor combinations with the trend to multi-factor index-based strategies likely to continue.

Source: 2017 FTSE Russell global smart beta surveyAn enhanced index I have worked on aims to replicate the economic exposure (e.g. sector and geographic weights) of a vanilla index, but tilts towards companies that generate their profits from more sustainable business models. The sustainability of the profits is judged on Environmental, Social, and Governance metrics. The strength of the process lies in the quality of the ESG data – but also on a systematic process that provides the ESG ratings.

FULLY FLEDGED

These products have the seeds of the future. Can they mature?

Investment strategies that optimize investment outcomes will remain a given. However, this will be a necessary but not sufficient condition that investment professionals will need to meet. An equally important consideration will be the footprint of the investments made in order to achieve optimal investment outcomes for investors.

The investor has a set of beliefs – about the world and how things ought to work. Their thoughts and hence actions are driven by these beliefs. Technology, in the form social media for an example, has given individuals the ability to express some of these views. The investment product of the future will empower people to express these views and beliefs by moving mobilizing their capital (i.e. their savings).

The investment professional of the future will be required to play the role of facilitating this. They will need to have the skills to enable investors, with their unique set of beliefs and causes, to express their beliefs strongly and accurately without compromising the investment outcome.

This will require an investment professional who is proficient in a number of fields. They will also need to combine these different disciplines to work cohesively in a way that enables positive returns.

Stanley Bisho is an Investment Analyst at Customised Solutions, an Old Mutual Investment Group boutique.

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YOUNG PROFESSIONALS 23

Tips to manage up at your workplace Dr Timothy Londonis a senior lecturer at the University of Cape Town Graduate School of Business

24 ROOTED

It is essential that you know what the priorities are for your line manager. This involves not just the most important issues facing them, but also the timelines attached to them.

A quick practical tip is to ask your manager what their major issues are and the related timelines; it’s often hugely helpful to also have access to their calendar so you can proactively do some planning. Secondly, if you’re raising a potential problem/challenge with your manager, come equipped with your concise analysis of the underlying issues and at least one possible solution or “next step”. While flagging potential liabilities is obviously important, you provide real value to your manager if it’s accompanied with some insights into how the situation arose and how it can be improved.

If you’re just bringing up problems with no possible improvements, you’re likely going to be seen as a negative or pessimistic person, or just a complainer. It is essential that you are concise with the information you share in these situations: don’t make your manager read a 5,000-word essay to convey the problem and related issues; a good rule of thumb is that if they have to scroll down to read all of your e-mail, it’s too long. Clearly and concisely state the potential problem, the key insights you have, and make 1-3 suggestions for ways forward. Don’t worry about telling them everything in the first e-mail/meeting: if they want to know more, they’ll ask, and you can go from there.

Thirdly, and related to these first two points, make sure you are delivering information to your manager in the best possible way for them to actually take on board your feedback. If they’re a “numbers person”, make sure you include statistics; if they’re more visual, utilize charts or figures; if they’re a “visionary”, make sure your points are clearly linked to the narratives they’re most concerned about. As noted above, if they’re pressed for time, don’t send them massive e-mails that they’ll never read!

There are more options than ever for sharing information these days, but you need to know what is actually going to work for the message you’re sending and the recipient you’re trying to reach: Slack is great, but your technophobe boss isn’t going to log on; innovative software that creates cutting edge visuals isn’t useful if your manager doesn’t have the software on their computer to open them. Besides classic face-to-face meetings and the (often overwhelming to the point of being useless) sending of e-mails, try simple things like improving your skills in common software packages (Word, Excel, PowerPoint, etc.) that they’re already using.

Branching out a bit, you can use the microphone built into every laptop or tablet now to record “voice notes” and send those (they open and play

automatically on just about every computer now): these are incredibly valuable as you can say much more via voice in a minute than someone could read, listeners can speed longer recordings up a bit, and they can listen to them at the gym or on their commute where reading wouldn’t be possible.

Lastly, don’t just consider the content and delivery method, but also the setting in which you provide information to your manager. There are three main engagements we have with our managers: we agree and provide support for moving the idea forward; we agree and provide additional insights or information (“Yes, and…”) to improve the idea; or we disagree with the proposed idea, which necessitates clear rationale and evidence in order for it to be compelling to your manager.

There are two key guidelines to apply during these engagements:1. If at all possible, provide positive feedback

in public and save disagreements for private settings. This isn’t about “kissing up”, it’s about creating an environment where they are more likely to actually listen to you. While some people are more sensitive to disagreements than others, there are few people in a position of power who won’t have a significant and immediate push back to being “challenged” in public; the ego is a powerful thing, and you want to take that out of the equation in evaluating your inputs.

2. Related to that, frame feedback around the broader impacts and benefits related to the idea. If you make it about their idea versus your idea, it becomes a battle of wills. Identify points of agreement explicitly and tie your feedback to common goals, i.e. “We both want to improve customer satisfaction, and your proposal helps us reach our online customers and I think we could do Project X as a way to more easily connect with our face-to-face clients.” One final point: while this article focuses on “managing up”, take all of these issues into account if you are someone else’s manager. In other words, consider how easy or hard you’re making it for people to “manage up” to you! If you think you’re missing the boat on any of these points, it’s fine to go to your people and explicitly tell them that you’re trying to make it easier for them to work with you, you’ve got some ideas that might help, but you’re also interested in their thoughts on how to make the working relationship more impactful. Dr Timothy London is a senior lecturer at the University of Cape Town Graduate School of Business

YOUNG PROFESSIONALS 25

ABSIP invited young people to apply for the Emerging Markets and Country Risk Analysis course offered by the Fordham University’s International Political Economy and Development (IPED) department. Ms Yonela Makwetu and Mr Ashley Daswa were the successful candidates of the ABSIP-Fordham Programme to study an Advanced Certificate in Emerging Markets and Country Risk Analysis. This is the only New York State recognised summer certificate program of its kind and it is an intensive 10-week program designed for international business professionals as well as current graduate students.

The program offers you the opportunity to develop the political, economic, and financial analytical skills that you need to evaluate the potential rewards and risks associated with the dynamic and volatile financial markets of Asia, Latin America, Africa and Eastern Europe.

Ms Yonela Makwetu Born in King Williams Town, in the Eastern Cape Yonela Makwetu feels very fortunate to have been selected to partake in Fordham University Programme, which she says came as a natural progression to add to her skills set.

“I am honoured that amongst peers I was given the opportunity to be part of the programme, the experience gave me more than a seat in a classroom, it gave me the front seat to the world, whether it be as a citizen, a professional or a student.” She revealed. Makwetu said she is thankful to those who laid a solid foundation in ensuring that young South Africans like herself are afforded opportunities like these. “As I look back, I am in awe of the amazing human beings that I have been fortunate enough to cross paths and learn from. I think one of the things the program

has reaffirmed is that we should forever be re-evaluating the dreams that we have set for ourselves as at times they are by-products of our limited experiences”, Makwetu alluded.

She continued to express that the Emerging Markets course has without doubt broaden her horizon and touched in areas she was yet to think about, the program challenged her to think critically about issues outside her comfort zone.

Makwetu did all her studies at the University of Cape Town. She holds a bachelor degree in Economics and Statistics, honours in Financial Analysis and Portfolio Management (FAPM) and she is currently busy with her dissertation for Masters in Financial Management. Working as an Investment Analyst at Novare, her role is to find investment opportunities and conduct due diligences to ensure that they are suitable for the company’s portfolios. She concentrates mainly on South African hedge funds.

Mr Ashley Daswa

PhD candidate Ashley Khumbudzo Daswa from the Faculty of Economic and Management Sciences of University of the Western Cape (UWC) has inspired not only UWC students on his journey to Fordham University in New York but the leadership too. After he was accepted into the Programme based on his academic merit, UWC Registrar Nita Lawton-Misra said Daswa’s success is a credit to his own efforts, as well as to the hard work of the faculty. “Well done on this wonderful achievement and for flying the UWC flag high.” Said Lawton-Misra. Daswa started to display his leadership qualities early in his career at UWC, being elected as class representative for many undergraduate and postgraduate modules. He recently graduated with a Masters in Commerce (cum laude) from UWC’s School of Business and Finance, with his research focusing on Finance and Investments.

ABSIP Young Professionals: Two Young Professionals chosen for Fordham University programme

26 ROOTED

“UWC has always been my second home, and the leaders at the School of Business and Finance have played a huge role in my success,” Daswa notes. He however expressed that being in Fordham University transformed himself to something he has never envisaged.

“It was not a matter of excelling in academia but being in the space where you learn new things and meet people, that was an awesome experience for me,” Daswa stated.

In terms of being chosen for the programme, Daswa extended his gratitude to ABSIP and Fordham University.

“I am extremely thankful and grateful to ABSIP for such an opportunity. I consider myself seriously fortunate to have been trusted by both ABSIP and Fordham University, I will always remain humble, help those that are less fortunate,” he added.

Daswa, who due to a lack of qualified Maths teachers at his high school, entered UWC with Maths Literacy, which wasn’t ideal for the intensive calculations he was going to be performing in UWC, never felt discouraged to strive for success. He has never allowed anything to stand in his way to greatness. So, what made him to stand out as a candidate for the Fordham University programme is definitely his dedication, perseverance, along with a thirst for knowledge and a hunger to master challenges that drove him to success at any space he finds himself.

“I am also motivated by being an example or source of inspiration to many others,” Daswa concluded.

YOUNG PROFESSIONALS 27

Millennials represent approximately 27% of the South African population and are expected to grow their wealth significantly in the next few years mainly because the older millennials (ages of 28 – 35 years) are now entering their prime earning years, and increasing their liquid assets.

More millennials are leaving their corporate jobs to take a shot at entrepreneurship, which while increasing their risk also increases their returns generational wealth, now held by baby boomers will start moving to the millennials in the coming years.

With the growth in Fintech services, easily accessible markets and product information available online, millennials are developing their own financial plans. Long term wealth creation goals; however, require more than just a financial plan, they require investors to also consider their holistic needs and drawing a more comprehensive financial plan that

considers both risk products and savings products. While most would prefer using online platforms and technologies with limited human intervention, there is still a need for face to face conversations with human financial advisors who with the use of technology can offer holistic financial solutions. Financial Planners are beginning to realize that they need to shift their value proposition from solely focusing on asset allocation and choosing funds but rather adding value by understanding client’s financial and aspirational needs.

There are trends that are emerging such as the use of Artificial Intelligence for automated, algorithm-based financial planning services commonly known as Robo-Advisors. Robo-Advisors only have one job, which is to use algorithms to manage your investment portfolio and are not designed to manage the emotional component of investing and building wealth.

Personal Financial Advisor or Robo-advisor?

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Financial Planners are adding value to clients through the use of AI and behavioral coaching, which aims to assist clients in attaining their personal financial goals and not necessarily outperforming the markets.

The first step in reaching these personal financial goals is to develop a financial plan. A financial plan typically has three components to it; estate planning, investment planning and tax planning.

Estate planning ensures that the wealth accumulated by individuals is appropriately distributed upon death. It is said that 70% of wealthy families lose their wealth by the second generation and about 90% by the third. Something as simple as a will can help ensure that your children are well taken care of after your death. Wills are easily accessible these days with most banks offering their professional/private banking clients the service for free.

Investment planning needs to incorporate the investment time horizon, individual risk tolerance, liquidity needs, age and income requirements to determine the appropriate diversified asset and geographical allocation for your portfolio as well as the relevant investment vehicle (TFI, Unit trust, Retirement Annuity etc.). All financial advisors have to by law perform a needs analysis before they can offer products that meets a client’s needs. It is equally important for advisors to perform annual reviews to ensure that the client’s current investment plan is suited for the client. If your financial advisor is not having those annual reviews with you, make sure you ask them to.

Tax planning is a strategy used to ensure that your investment plan helps you maximize on your tax savings. Note that this has nothing to do with tax evasion and is rather the arrangement of one’s financial affairs to minimize tax liability within the framework of the law. One notable example of how one can maximize on their tax savings is by investing in tax free savings products and utilizing the maximum allowances. Financial Planners that effectively assist clients with this not only lower their taxes, but also free up cash flow which can be reinvested or used to reduce existing debt.

The second step is to reaching these goals is by assisting clients to stick to their financial plans. Investing evokes emotions and it’s understandable to want to

react to daily news flow to protect your savings. The irony is that even with the ups and downs that the local market has been experiencing given the country’s political climate and economic difficulties, the South African market was the best performing in the world from 1900 to 2017. This is according to the 2017 edition of the Credit Suisse Global Investment Returns Yearbook, which looks at market returns over 117 years in 21 countries. So, having a long-term view and staying invested is an important element of reaching one’s financial goals.

Both of the steps that were touched on above require both human intervention and the use of technology. Financial planners need to ensure that they retain their clients while still attracting millennials is by appropriately articulating their value proposition. Something as simple as understanding a client’s unique features like their race and ensuring that you make your black clients aware of any upcoming empowerment transactions that would help them meet their financial goals. The key is really in continuous engagement. Millennials have different needs in different stages of their lives and being on the entire journey with them and advising appropriately along the way can be a powerful way for advisors to add value to this tech savvy generation.

Didintle Mokonoto is a Business Development Manager at Allan Gray

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YOUNG PROFESSIONALS 29

I Don’t Know How She Does It?Delphine Govender is the co-founder and Chief Investment Officer of Perpetua Investment Managers

30 ROOTED

When she’s not running an independent investment firm with over R12 billion in assets under management, she’s bedazzling home-made crafts with her two children and shooting off e-mails in the wee hours of the morning to organize an event for the development of young black professionals. Work-life balance is something that many of us struggle with and while we look to inspiring business leaders such as Delphine Govender to try and learn the secret to finding this balance, Delphine believes that instead of obsessing over trying to find a balance, we should as humans seek to choose full lives. Whatever we choose to do shouldn’t be about applying strict trade-offs but rather about producing more harmony between the different elements, for it’s all one continuum of existence.

In this interview, Delphine takes us through this belief of hers and illustrates how we choose our own realities and that our work along with the different elements in our life are part of our identity.

Q. Having a work-life balance seems to be a trait that employers look for in the people that they hire which is why they ask questions about hobbies and sports. Why is having a work-life balance so important?

A. Interestingly enough for me as a “hirer” I actually look to see when in an interview the interviewee brings up work-life balance – not the other way around! It is not that I don’t think it important for individuals to be well-rounded, and also different interests tell you how a person thinks; their broader personality as well as what motivates them in a complete sense. But work-life balance seems to mean different things to different people. For me I don’t see “work” as being separate to “life” – work is part of my life and my life involves me working. I don’t see work as a reluctant choice and that I would rather be off “living” instead of working! As a result, I look to see if the people I hire feel similarly. The important thing to recognize is that there are many facets which make people and work environments and firms should embrace all of those – this way they too see their lives as an integrated outcome of work, family, hobbies etc not this “either/or” existence.

Q. There is a belief that when you’re young, you should sell your soul to the Devil and work long hours to move up the corporate ladder. How does one know how far to push themselves before they burn out?

A. I have never subscribed to a belief that my personal ambition needed to be fulfilled at all costs. I believe there are healthy sustainable ways to achieve your ultimate career success and

there are perhaps less healthy, more “political” approaches that could be pursued. Ironically as a black woman in a white male dominated industry, I knew there was no way (thankfully) for me to build, earn or develop “political capital” so working hard, performing at a high level and being associated with high standards was the only capital I could earn. Some days long hours were needed to deliver on my output but working those hours wasn’t to impress anyone per se, but rather it stemmed from a sense of accountability to ensure I delivered what was expected of me and what I signed up to do – and perhaps always just a little more than was expected….so then I could be noticed.

I don’t believe I once worried about burn out – for ultimately working hard was what was needed to ensure I didn’t disappoint myself. Naturally we are all only human and there are stressful times but then there are less stressful ones too. Work as in everything comes in cycles and I have always sought to embrace the requirements of the path I have chosen based on what I believed I needed to deliver, and not through a lens of what I needed to be seen to be doing.

Q. You were instrumental in launching the ABSIP Young Professionals Chapter in Cape Town and are currently working with the CFA Institute to promote a female community to empower women. What drives you to be a vehicle for change within these organizations?

A. I grew up in a home that was entirely non-racial and non-sexist in terms of the way I was raised. While I understood our country was quite materially different at the time, in my own microcosm I didn’t realize that my home environment was unusual per se as it was the only reality I knew. This meant that my expectations of the country I was born in; the society I exist in; the workplace I function in – all only make sense to me if they too emulate this non-racial, non-sexist and fully inclusive existence. For now this reality is not the case in our industry, our broader workplaces (I would like to think Perpetua is different!) ; our society and our communities so I remain resolute and committed to ensuring I can somehow be part of the truly integrated and truly inclusive society we need to achieve and we must achieve – this not for any greater reason or less reason than its simply the right thing, full stop.

Delphine Govender is the co-founder and Chief Investment Officer of Perpetua Investment Managers

Q: Question & A: Answer

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HOW TO DRESS FOR THE OFFICE

Writing this article is like sharing my own experiences in the office. Oh yes, before finding my passion for fashion I used to be an accountant believe it or not, a fashionable one might I add.

So, this hits home.

Office dress codes are important as companies need to manage the perception of their clients even through the way their employees are represented. But truth is, one can still remain

fashionable and professional at the same time. How? I will tell you one thing, although I loved expressing myself at the office, I was never called in for inappropriate dressing because the lines were never blurred. Being fashionable means understanding the Dos and Don’ts and making sure the lines between them are clear.

Office Do’s and Dont’s

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YOU ARE WHAT YOU WEAR

Being presentable in the office begins with knowing who you are presenting. According to a 2010 national Poll conducted by the Centre for Professional Excellence at York College of Pennsylvania, the way you dress speaks volumes, hence it is very important to know how to dress. People who are conscious of their appearance and try to look good are often those who exude more confidence in the workplace. “Dress for the role that you want” is a common phrase which really reflects how clothing can have a significant effect on your self-esteem.

Professor Karen Pine from the University of Hertfordshire conducted a study in 2014 to illustrate how specific clothing can make people more confident in all sorts of situations. In her book Mind What You Wear she claims that what you wear can discern how confident you feel about yourself.

So now that we understand that what you wear says more about you than an adherence to your office dress code, let’s look at what you should and shouldn’t incorporate into your work outfits to maintain the right amount of professionalism. Sorry gents, this one if for the ladies.

OFFICE DOs

• Simplicity is key when dressing up for the office, however be sure to add a little bit of details to add a fresh look to the outfit, like this dress with studs.

• Bold colours mixed with neutral colours. You can either do it with a slim figure belt on a dress or even having a bold jacket over a neutral coloured dress.

• Pencil skirts are a classic look and tulle skirts are awesome and easy to rock. The best thing about them is that you can keep recycling one skirt with new shirts to create completely different outfits (they’ll never even know it’s the same skirt).

• Power suits are very in right now, you can dress them down by leaving the blazer at home and dress them up for a bold statement. If you don’t already have one, make sure you invest in a tailored suit that has pants and a skirt for the blazer

• High heels, ladies don’t be scared to rock your Louboutin’s, wear them as often as your curves will allow. They give a perfect posture and boost of confidence when you’re walking. If you watched the movie THE DEVIL WEARS PRADA you will get it.

• If you are into making statements, fur coats over a formal dress are still cool as long as the colour is as neutral as possible (i.e. cream, brown)

OFFICE DONTs

• Ladies, I know having anything more than an A cup is a blessing but let’s please keep our cleavages locked in. I know it’s sexy but sexy isn’t the main objective. You want your colleagues to be paying attention to you when you speak up in a boardroom instead of being distracted by your twins.

• Anything see through is a No! No! I can’t even qualify this statement, it should go without saying.

• A slit that goes up to your upper thigh is very inappropriate. Your thighs are only for your eyes (and your partner if you have one)

• Hair and makeup should be minimal and as natural as possible, no face beat and contouring if you don’t want to be taken as a doll. Stick to simple earrings if you love jewellery, big earrings are a No! No! - infant I’m pretty sure that their a safety hazard for the workplace. Anything could get hooked in there!

Invest in the way you look and own it. Pumla Bikani is the founder of Style Inc.

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There is a much-vaunted term in the South African investment landscape and that is Alternative Investments. Where previously this term meant only investment into Private Equity instruments (which is taking up shares or securities in unlisted companies) that term has been expanded to include all newer assets classes and some older but unlisted Investment instruments.

As such the new and broader definition of Alternative Investment would read as follows: Alternative Investment is the allocation of assets for investment in unlisted investment vehicles which include, Private Equity, Private Debt, Unlisted Real Estate, Infrastructure and Hedge Funds. This may include the investment directly into vehicles that access such investments or thro ugh Fund of Fund structures that pool resources together before making smaller allocations into these direct managers.

The sector continues to grow in diversity and in terms of product offering with Afro-investment slowly creeping in as a stand-alone sub sector of investment in the alternative space, though generally looked or invested in through Private Equity type vehicles with the same restrictions and terms as Private Equity per Regulation 28.

Despite the clear definition of what the sector is and how it works and how it can be accessed, the allocation still remains relatively small at about R173bn in South Africa out of the R8tn available from pension funds and life companies in South Africa. It is even more worrying that if you strip out the international investors from the amount invested in Private Equity then that number drops to barely over 1% of the assets invested by Private Equity.

This compares poorly to global trends where Private Equity accounts for between 26-32% of the investment by Pension & Endowment Funds and Insurers. This being rationalized by the fact that over whatever investment horizon one looks Alternatives have outperformed listed investment and have been a stronger catalyst for economic growth in the areas where the strategies have been deployed

Recent SAVCA reports showed ‘’that the private equity industry delivered a 10-year (in Rand terms) internal rate of return (IRR) of 12.9% as at September 2017. The 5-year and 3-year IRR remained relatively stable over the quarter at 13.6% and 13.7%, respectively.” The quarterly report showed the industry outperformed both the ALSI TRI and SWIX TRI over all periods analysed.

Tanya van Lill, SAVCA CEO, has been quoted as saying, “Despite a slight strengthening of listed market returns, private equity’s performance against these indices over the 3-year period continues to be solid. This can be observed by the positive Direct Alpha and a public market equivalent of greater than one. All achieved amidst turbulent market conditions as well as last year’s prevailing uncertain economic and political environment.”

Unfortunately, South Africa’s Regulation 28 is rather stringent on what proportions of funds can be allocated to investing in Alternatives. This prescription or limit is two-fold and speaks to how much can be allocated to firstly to the asset class itself and then further to a single manager strategy.

Investing in real assets means contributing to real growth

Currently, pension funds are invested predominantly in listed markets and the asset owners exert little control over the companies in which they are significant stakeholders and financiers.

Why Alternative Assets Matter?

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Also, in the context of the present-day Constitution of the JSE companies and their operations, it is debatable that investing in the JSE really supports the local economy. 65% of revenue generation on the JSE comes from abroad with a significant number of entities such as Naspers deriving a large amount of their value outside of South Africa.

In addition, it is widely accepted that large listed companies are not the primary vehicles for job creation in any economy. In fact, they are more likely to shed jobs in the search for greater efficiencies. Job creation continues to take place in smaller, emerging, disruptive companies, which are usually unlisted.

It is also important to note that the 4 main metros in South Africa currently account for 60% of the economic activity and have suffered from infrastructure pressure due to inward migration in search of opportunities by people from across other parts of the country. South Africa remains one of the most unequal societies in the world with a very high unemployment rate and a growing number of youths that are unemployed with very few graduates being absorbed in the job market.

Government has also rightly so highlighted quality healthcare, education and delivery of essential infrastructure as priority points. It is key to highlight that as government says this, they say it from a shrinking fiscal base and with an already overwhelmed small and diminishing tax base that cannot take any further tax hikes.

What are the solutions?

While recognizing that the solutions need the entire players in the economy to play a role in driving this change, the truth is that the largest available funds to drive this kind of change is with pension funds. Pension funds can play a critical role in ensuring that there is directed investment that achieves the social returns whilst also achieving the financial returns required.

It is important for pension funds to start directing more of their investment into entities that will drive increased social impact coupled with the required financial returns. This is usually through alternative investments such as private equity, venture capital or/and private debt funds who play in the middle market and unlisted space in growing companies that are key drivers for job creation. Within the confines of the existing legislation investment in private equity is limited to 10% in Alternatives and yet at present pension fund are only allocating less

than 2% of funds towards private equity. Much less than the maximum allowable contribution. Moves to invest more in this space could have a real transformative impact in the economy.

Private Equity can also be used to drive transformation in South Africa. Private Equity has been one of the most successful vehicles for financing empowerment transactions where real returns have been realized by black managers and by the investors who are predominantly black on exit. There has also been a growing trend to enshrine and prescribe that empowerment should not wane on exit with more PE Funds exiting to black investors or in some instances enabling their investment by bringing in the required equity component of an investment

Langa Madonko is an Investment Principal at Summit Africa and a Director of SAVCA

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ABSIP YP Causes

FUN LEARNING FOR YOUTH (‘FLY’)

is a not-for profit organization with the purpose of providing mathematics and life skills tutoring services to high school learners from various schools in disadvantaged communities in Cape Town and Joburg.

By joining the 80+ network of young professionals who serve as FLY tutors and mentors, you will not simply be giving up your time on a Saturday morning, but rather joining an organization that is committed to making an impact by EMPOWERING YOUNG MINDS!

Contact sellznalane@gmail.com or visit our websitewww.funlearningyouth.org.za

Afrika Tikkun has invited us to visit one of its home in January 2019. If you’re interested, please e-mail: yp@absip.co.za with the subject Afrika Tikkun Visit. Once we have a group of members we’ll be able to coordinate a date that works for everyone. About Afrika Tikkun:

Afrika Tikkun was founded in 1995 by the late Chief Rabbi Cyril Harris and Philanthropist/Businessman Dr Bertie Lubner to providing education, health and social services to young people and their families through centres of excellence in South African townships. Our main goal is to create a sustainable future for the youth of South Africa and using a Cradle to Career 360° model. We have built 4 centres of excellence across Gauteng and 1 in the Western Cape.

Visit our website: https://afrikatikkun.org

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Western Cape Committee

Thabiso RatshefolaConstellation Capital

Zizile NdzibaAfrican Infrastructure Investment Managers

Yanela SongcaInvestec Asset Management

Yonela Makwetu Novare

Phomolo RabanaPerpetua Investment Managers

Rachma IsmailSanlam Investment Managers

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Gauteng Committee

Mvomvo NogwinaAlexander Forbes

Langa MadonkoSummit Africa

Lisebo MothabengInvestec Wealth and

Investments

Adelaide MaphikeABSA Wealth and Invesments

Didintle Mokonoto Allan Gray

Maurice MadibaCloud Atlas Investing

Gregory MakamaGraviton SA

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Book Review

Focus by Daniel Goleman That a book titled Focus becomes a bestseller says a lot about our era. A simple task, yet made complex due to the unstoppable distractions which we face every day.

I couldn’t help but feel ashamed when Goleman described a scene of friend’s traveling together and pulling out their phones the moment they got into a cab to head to their destination. I have been guilty myself of making everyone wait to eat so that I can get the perfect shot of the meal, small habits that endanger the human moment. Meaningful conversations with others, having an awareness of your surroundings, listening to the sounds of birds and insects, these moments are necessary for a well-balanced brain.

Being the science journalist that he is, Goleman highlights three key parts, mainly the inner, other and outer focus and gives an in-depth understanding of the anatomy of attention. I admittedly had to pull out my dictionary a few times while reading this book, Goleman has quite an esoteric lexicon that may intimidate an infrequent reader but the true message of the book should not be lost in all the language.

When we lack focus, “we store no crisp memory of what we’re learning.”

This well-researched book will have you looking at your phone less, keeping open tabs on your browser to a minimum, disabling notifications for all your apps and finding a time of solace, a “creative cocoon” where you can just let the mind wonder. You’ll be surprised at how your perspective in life alters when you have less distractions around you.

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ABSIPAddress: 5th floor, Fire Station Rosebank 16 Baker St, Johannesburg, 2196

E-mail: info@ABSIP.co.za | Tel: +27 010 203 9013/14/15/25 | Website: www.absip.co.za

Mpho KhorombiAdministrator

Queen SulloAdministrator

Tapiwa EliasAdministrator

EXCO THANKSTHE ADMINISTRATIVE STAFF

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THE ADMINISTRATIVE STAFFABSIP wishes to thank all stakeholders and sponsors for

their kindness and gratitude in strengthening the image of the financial services sector.

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5th floor, Fire Station Rosebank 16 Baker St, Johannesburg, 2196

Phone: +27 010 203 9013/14/15/25E-mail: info@ABSIP.co.zawww.absip.co.za

www.absip.co.za

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