Dear reader

In this newsletter we provide the usual extract of our commentary on investment markets where we examine the historical growth of the S&P 500 and the Allshare Index and of their P:E ratios, an update on staff changes at RFS, notes of the latest Namfisa sponsored industry meeting, a new reporting template circulated by Namfisa, a new administrator enters the market and more.

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

Our new mobile site

For the convenience of readers using smart phones with small screens we have developed a brand new mobile website. Try it out on your mobile at www.rfsol.com.na and let us know if you like it – and also if there is additional functionality that you want.

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

Regards

Tilman Friedrich

Tilman Friedrich's Industry Forum

Benchtest Monthly 02.2014

In February the average prudential balanced portfolio returned 2.06% (January: -0.34%). Top performer is Investec (3.19%), Allan Gray (1.09%) takes the bottom spot. For the 3 month period Investec is top performer outperforming the ‘average’ by roughly 1.1%. On the other end of the scale Stanlib’ underperformed the ‘average’ by 1.2%.

Since the start of 1989, the S&P 500 index gained an average 7.6% per year, over this 25 year period. US inflation over this period was an average of 2.7% per year, thus producing a real return of close to 4.8 %, excluding dividends. The FTSE/JSE Allshare index gained an average of 13.4% per year while Namibian inflation over this period was an average of 8.3%, producing a real return of 4.7%, excluding dividends, on par with the real return of the S&P 500 index.

What this indicates is that despite the local ‘bull run’ over the past 5 years that produced a real return of 14.4% per annum, this has largely been a catch-up exercise of our local bourse when measured against the US market. It also shows that over the past 25 years, local equity markets have produced returns close to the 8% generally expected of equities in the long run, when one adds dividends of between 2% and 4% to the real return of 4.7%.

Read our full commentary, find out how these and other developments impact on our investment views and download Benchtest 02.2014, here...

RFS sponsors Namcol achievers

RFS extended its sponsorship of Namcol achievers into 2014, with prize money totalling N$ 12,000. We would like to extend our sincere congratulations to Vemutonda Merorua (best PETE student Yetu Yama and best PETE overall candidate ) and Jesaya Naukusho (best PETE Ongwediva) – well done! With this level of dedication and commitment extended into their future career, Jesaya and Vemutonda no doubt will make great strides on their road to the top!

Our congratulations of course also extend to Namcol as an organisation, and to its lecturers, for their laudable contribution towards education in Namibia!

RFS staff movements

We are pleased to announce the permanent appointment of Mrs Hillie Petrus. Hillie joined us in October of last year from Methealth where she last served as a branch administrator at the Tsumeb branch. She started her working career as a pharmacist assistant at the Medica Pharmacy in 2001. She joined Metropolitan in 2005 where she gained valuable experience in the insurance industry over a period of 3 years, having served in various positions such as new business clerk, counter clerk and as  portfolio administrator. She joined Sanlam in November 2008 as a senior scheme administrator and resigned in May 2010 to join Seeff Properties as a property consultant. Hillie will strengthen our Local Authorities administration team as pensions administrator, to add much needed capacity required as the result of the continued growth of this fund.

We extend a hearty welcome to Hillie and hope to see her playing in our first team for many years to come!

Regrettably we also have to announce the departure of Lilia Cabatana, who has been with the company for close to 9 years. We wish Lilia all the best for the future and trust that she will keep us and her 9 years’ service with us in good memory!

Kai Friedrich will assume responsibility for our private fund administration team as Director: Fund Administration. We wish Kai all the best with his new responsibilities!

News from the Namfisa

Namfisa Industry Meeting 17 March 2014

Namfisa invited stakeholders to a pension funds industry meeting which took place on 17 March.

Find bulletpoint notes from the meeting here...

Download the presentation here…

• The meeting was poorly attended by fund officials.
• Namfisa expects at least the chairperson and the principal officer of every fund to attend.
• FIM Bill due to be laid before parliament in 2014.
• Standards and regulations under the FIM Bill remain work in progress.
• Quarterly reporting project delayed further due to capacity problems in Namfisa IT department.
• Instead of a 90 day reporting time frame Namfisa intends to reduce this to 30 days.
• Pension Funds Act soon to be amended to allow housing loans in unproclaimed areas.
• Multiple contraventions of regulation 28 will attract multiple N$ 1,000 penalties per day in breach.
• From its inspections of funds, Namfisa highlights the following findings:
  • Funds not paying levies;
  • Statutory returns are not submitted (on time);
  • Fund rules do not specify frequency of meetings;
  • Non-compliance to Regulation 28 provisions;
  • No assessment of BoT and/or PO performance on an annual basis;
  • Lack of governance policies (e.g. Risk Management, Investment etc);
  • Namfisa not being informed about changes in fund officials;
  • Minutes of meetings are not signed;
  • Funds operate on outdated service level agreements.

Quarterly reporting template

Namfisa has once again changed the quarterly reporting template, as was suggested, by only a few smaller changes.

Download the new template (zip file) here...

We appeal to asset managers to ascertain that they will be able to report on all investment related information that is required per this template. Principal officers are urged to discuss these reporting requirements with their asset managers. This relates to the ‘External Asset Allocation..’ tab, the ‘Schedule to..’ tab, the ‘Other Assets..’ tab and the ‘Analysis of Unlisted Investments’ tab. We were informed by Namfisa that funds can have their asset managers set up on the Namfisa ERS system as authorised ‘submitters’ and that the system will automatically do the consolidation of the returns from the fund’s asset managers.

Whilst this is a major relief for funds, funds need to recognise that this reporting is the responsibility of the fund and not of its service providers. Failure to report or late reporting by any service provider, may attract penalties. Funds need to ascertain that the service agreements with their service providers define and demarcate responsibilities in this regard. Failing such an arrangement with their asset managers, principal officers need to make arrangements for the data fields in the Namfisa report to be populated manually from information to be provided by the fund’s asset manager.

Our comment:

These are once again massive changes, particularly with regard to investments and also with regard to unlisted investments. For an investment of between 1.75% and 3.5% of total assets of the fund, is it warranted to spend probably as much effort in reporting, governance and regulation on this immaterial part of a fund’s investments as will be spent on the remaining 96.5% to 98.25% of a fund’s investments? Funds and asset managers will no doubt turn grey in no time about these requirements.

News from the market

New administrator entering the market

A new administrator has entered the retirement fund administration market. Specialist Administration Services was recently established by former senior management staff of Alexander Forbes.

With this new entrant, there will be three administrators competing for a market of some 50,000 members spread across around 90 private funds.

We have always been of the opinion - and this has been borne out by the demise of 3 private fund administrators over the past 15 years - that this market can carry no more than 3 administrators, considering that a viable administration operation requires at least 15,000 members.

At the time Retirement Fund Solutions entered this market in 2000, there were 5 administrators initially. Sanlam first closed its private fund administration unit in 2001 followed by Metropolitan in 2005 and lastly by Old Mutual closing down its unit in 2012, most probably for the reason of these units not being viable anymore.

We understand that Namfisa welcomes new entrants into this market to create more competition. It remains to be seen whether the market will now be able to 3 carry administrators for an extended period of time, let alone 4 or more, particularly in the light of the National Pension Fund and general weariness amongst trustees of ever increasing demands and requirements of the regulator.

Old Mutual Investment Group appoints new CEO

Old Mutual Investment Group announced on 17 March the appointment of Mercia Geises as CEO effective 1 April 2014, succeeding Brigitte Weichert who acted in this position before the appointment of Mercia.

Read the official announcement here...

Media snippets
(for stakeholders of the retirement funds industry)

Know your administrator

Trustees have a fiduciary duty towards their fund and need to take all reasonable steps to ensure that the interests of members are protected at all times. This duty clearly extends to monitoring its administrator. The following areas need to be subjected to close scrutiny:

• Company culture
• Audit reports
• Administration system
• Administration processes
• Checking and internal compliance mechanisms
• Interface with third parties
• Conflicts of interest
• Service level agreement
• Turnaround times
• Fidelity and professional indemnity cover
• Interface with members/company personnel
• Reporting mechanisms
  • risk management
  • administrator efficiency measures
  • confidence in the administration system
  • insights from the auditors
  • claims and administration reports
  • exceptions reports
  • members complaints
  • administrator confirmation.

Download the full article here...

Do you have financial adviser anxiety?

Although this article by Robert Powel in Special for USA Today is written with a US perspective, it no doubt equally applies to the Namibian environment where people hesitate about sharing intimate information with others and feel a lot of shame around money.

Here is some good advice to those who have financial adviser anxiety, i.e. disclosure anxiety and evaluation anxiety. Read the full article here...

Media snippets
(for investors and business)

6 Secrets that make successful people insanely productive

• They start the day with the end in mind
• They know when to take a break
• They single-task
• They know the importance of productive apps
• They know when to delegate
• They work on what they are passionate about.

Read the full article by Thomas Oppong in Linkedin here...

Managing employee wellness

While most companies globally do not currently have a documented employee wellness strategy that differentiates them from their competitors, many recognise the need for employee wellness programmes. Those companies with health promotion programmes in place acknowledge that a workplace wellness initiative contributes towards key organisational benefits and links the company and its employees to a sound value proposition, whilst it also incentivises employees to commit to the organizationn.

The authors highlight the following constraints for an effective employee wellness programme:

• Disconnected strategy and values
• Increasing role of governance
• Taking responsibility for employee wellness
• Support from the board is critical
• Employee wellness manager

Read the full article by Dick Els and Terrance Booysen, which appeared in Cover of 20 March 2014, here...

Your finances in your 20s

In an article by Felicity Duncan in Moneyweb of 9 March 2014, the author gives advice to people in their 20s based on her own experience. She highlights the following key considerations:

• Build good habits now – make a habit of keeping track of your money;
• Get used to living within your means – do not get tempted into making bad decisions;
• Think about your risks and manage them – consider insurance cover and make sure you are safeguarding your future;
• Educate yourself and start investing – you are still flexible enough to learn new habits and styles.

Read the article here...

And finally...

"Mistakes are the portal of discovery." ~ James Joyce

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