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PENSION LAWYERS ASSOCIATIONBREAKFAST SEMINAR – October 2019
“TRANSFORMATION AND RETIREMENT FUNDS -WHAT DOES THE LAW REQUIRE?”
Speakers: Lister Saungweme and Mark Davids
Facilitator: Carlyle Field
Retirement Fund B-BBEE Scorecard:A Practical Guide
Presented byLister Saungweme
CONTENTS
1. Retirement Funds: B-BBEE Reporting Requirements
2. Retirement and Umbrella Fund Scorecard
3. What Does This Mean in Practice4. Practical example5. Q&A
Reporting Requirements
• Amended FSC provides for a “Voluntary Dispensation” for Top 100 Retirement Funds (incl. Umbrella Funds) to report on B-BBEE annually
• ( FSC : DTI as per the BBBEE Act of 2003)
• “If sufficient disclosure by pension funds does not materialise then consideration will be given to revising this dispensation”
• B-BBEE annual reporting should include a narrative on the B-BBEE score achieved and plans for improving the score
• The Financial Sector Transformation Council (FSTC) will measure transformation on an annual basis – may include relying on surveys
• ( FSC : DTI as per the BBBEE Act of 2003)• Amended FSC codes : 1 December 2017
Reporting Requirements
• Amended FSC provides for a “Voluntary Dispensation” for Top 100 Retirement Funds (incl. Umbrella Funds) to report on B-BBEE annually
• “If sufficient disclosure by pension funds does not materialise then consideration will be given to revising this dispensation”
• B-BBEE annual reporting should include a narrative on the B-BBEE score achieved and plans for improving the score
• The Financial Sector Transformation Council (FSTC) will measure transformation on an annual basis – may include relying on surveys
Reporting Requirements
Reporting Requirements
Retirement and Umbrella Fund Scorecard
B-BBEE Status Level and Procurement Recognition
Fund Liabilities (“Ownership”)
• Report annually on proportion of fund liabilities attributable to black male and female members;
• Apply measurement principles enshrined in FS Code 100 (Ownership) – Independent Competent Person’s Report for Mandated Investments
Management Control Scorecard
Skills Development
• Annually disclose details of accredited SAQA-approved training foro Trusteeso Executive Managerso Principal Officerso Other Staffo Disclose value, average training per staff member, number of
staff trained, examples of key interventions
• Member education initiativeso Number of members trainedo Amount spent relative to size of membership (Rand per
member)
Preferential Procurement Scorecard
What Does This Mean In Practice
Managing the B-BBEE Cycle
Scorecard Preparation – Management Control
• Management Control
o Information related to demographics of Board and staff members;
o Distinguish on Black People and White People.
Who Qualifies As Black People?
Scorecard Preparation – Preferential Procurement
• Preferential Procurement• Keep record of spend per supplier;• B-BBEE Certificates of each supplier (there is procurement
software that can manage this, alternatively in-house);• Distinguish between Large, QSEs and EMEs; Also 51% Black
Owned – and 30% Black Women Owned suppliers;• Determine the base target requirement (also called “Total
Measured Procurement Spend” – see slide below).
Key Definitions – B-BBEE Procurement Spend
GN 1 – 2019 (PFA)
“Sustainability of Investments and assets in the
context of a Retirement Fund’s IPS”
Mark Davids
The SA Investment Industry -#TheUsualSuspects
2000 2008 2014 2018Buy List Buy List Buy List Buy List
African Harvest Allan Gray Allan Gray Allan Gray
BOE Coronation Coronation Coronation
Allan Gray Foord Foord Foord
Coronation Investec Investec Investec
Investec Prudential Prudential Prudential
Old Mutual
Peregrine
The SA Investment Industry
52%
48%
5 Asset Managers 100+ Asset Managers
Unsustainable concentration in SA Investment Industry
The SA Investment Industry – 20 Years ago
2000Asset
Manager
Total AUM
(Rm) 2000
1 Old Mutual 231,137.00
2 Sanlam 201,994.00
3 Stanlib 100,983.00
4 RMBAM 92,769.00
5 Investec 81,468.00
6 Coronation 44,442.00
7 Metropolitan 30,164.00
8 Allan Gray 19,863.00
9 Quaystone 17,086.00
10 Prudential 7,939.00
2003
Asset Manager
Total AUM
(Rm) 2003
1 Old Mutual 268,123.00
2 Sanlam 221,920.40
3 Stanlib 152,640.79
4 RMBAM 133,759.00
5 Investec 121,476.00
6 Allan Gray 69,175.54
7 Coronation 57,298.00
8 Investment Solutions 45,814.00
9 m-Cubed AM 43,048.58
10 ABVEST 39,961.00
11 Metropolitan 39,727.69
12 Futuregrowth 30,906.16
13 Prudential 17,479.00
14 African Harvest AM 15,365.44
15 CADIZ 13,217.98
16 Quaystone 11,878.40
17 Oasis 10,566.70
18 Old Mutual Symmetry 10,306.51
19 Prescient 9,525.85
20 Real Africa 7,567.00
21 Sage 6,741.00
22 Alliance Capital 5,128.63
23 Foord Asset Managers 4,673.00
2018
Asset Manager
Total AUM
(Rm) 2018
1 Old Mutual 644,721.00
2 Coronation 531,918.00
3 Investec 527,429.00
4 Allan Gray 522,334.00
5 Stanlib 483,360.00
6 Sanlam 477,767.00
7 Alexander Forbes Investments 311,937.00
8 Nedgroup Investments 249,805.00
9 Sanlam MM 208,519.00
10 Prudential 207,307.00
11 Futuregrowth 177,756.00
12 Momentum AM 139,501.00
13 Taquanta AM 138,409.00
14 Foord AM 136,094.00
15 ABSA AM 131,027.00
16 Old Mutual MM 101,252.00
17 Momentum MoM 98,588.00
18 Prescient IM 86,381.00
19 Abax Investments 76,366.00
20 Stanlib MM 75,803.00
Source: Alexander Forbes Annual Retirement Fund Survey. Figures in Rand millions
The SA Investment Industry – 20 Years ago
How do we move the dial for transformed asset managers
Barriers to true competition
- Fear Of Change- Comfort with the status quo
Transformed asset manager landscapeEmerging manager Mainstream manager
Start-up Ramp-up Expansion Maturity
Acanthin Lodestar Afena Aeon Taquanta
Balondolozi Makalani All Weather Mazi Aluwani
Cachalia Motheo Property Benguela Global Kagiso
Cartesian MSM Property First Avenue Oasis
Capital Link Ngwedi Mianzo Argon
Cloud Atlas PAM Prowess Mergence
Differential Sana Capital Perpetua
Excelsia Seriti Sesfikile
Effectus Satori Meago
Independent Alt Terebinth Sentio
JoPhi Umthombo Vunani
Legacy Africa
Lima Mbeu
R0 – R5 Billion
24 Managers
R5 Billion – R10 Billion
6 Managers
R10 Billion – R50 Billion
11 Managers
+ R50 Billion
2 Managers
Challenges facing emerging managers
Limited Relationships
especially Retail
Limited Budgets for advertising
and marketing
Financial advisers don’t
know them
Short track records
Investors –showing little
interest
Innovative manager research
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Start-up Ramp-up Expansion Maturity
Wei
ghti
ng
Using a different LENS to assess managers
People
Philosophy
Risk
Organisation
Specialist Equity performance
-10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0%
First Avenue
Mianzo
Benguela
ABSA
Vunani
Coronation
Aeon
Sygnia
Legacy
SWIX
Sentio
Prescient
Mergence
All Weather
Stanlib Core
Argon
JoPhi
SA Equity
SWIX (Benchmark Cognisant)
1 year to May 2019
Source: MOTSWEDI Research, Alexander Forbes Manager Watch
-6.0% -5.0% -4.0% -3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0%
OMIG Managed
Vunani
Benguela
AF Investments
Abax
Mianzo
CAPPED SWIX
Sentio
Legacy Africa
Excelsia Core
Stanlib Multi Factor
Prudential Select
Cachalia
Momentum
OMIG Fundamental
Afena Core
Prudential Core
Stanlib MM
Mergence
Argon
Umthombo
Kagiso
SA Equity
Capped SWIX (Benchmark Cognisant)
1 year to May 2019
Specialist Bond performance
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0%
ALBI
Precient Bond Quant
Prudential Yield Enhanced
Coronation Active Bond
Stanlib Core
Aluwani Active
SIM Bond
Futuregrowth Core Bond
MMI SA Bond
Ashburton Bond
JoPhi
Investec Triple Alpha
AF Investments Pure FI
Cadiz Houseview
Vunani Active Bond
PAM Bond
ABSA Bond
Stanlib MM
Umthombo
Kagiso Bond
Balondolozi Bond
Futuregrowth Yield Enhanced
JM Busha Bond
Precient Bond QuantPlus
Investec Credit
Prowess Credit
Argon Bond
Makalani FI
SA Bond
All Bond Index (ALBI)
1 year to May 2019
Source: MOTSWEDI Research, Alexander Forbes Manager Watch
Higher Purpose
ImpactOur roleOur
belief
Transformation
Sustainable & competitive
industry
Developing core skills
Stimulate growth
Thorough research capability
Support excellent Boutique Asset
Managers
Financial Sector Charter commits all participants to actively promote a transformed and competitive financial sector that reflects the demographics of South Africa which contributes to the establishment of an equitable society
GN 1 – 2019 (PFA) “Sustainability of Investments and
assets in thecontext of a Retirement Fund’s IPS”
How do funds currently “consider” ESG
• Annexure B to Circular PF130 – issued in 2007
• Most IPS are based on this blue print
What does it say about ESG
• Essential Elements of IPS• Primary objective is to provide optimum return for beneficiaries – then look at SRI
• Active shareholder• Proxy Voting
• All points are made with the basis of the primary objective
Portfolios construction
IPS • PF130
Mandates • ALM
Reporting
What does it mean for a BoT to consider ESG
• Reg28(2)(b) Reg28 (2)(c)(ix)IPS ESG
How does the seek to ensure Sustainability of Assets
• What is the philosophy of the Fund – not of the asset manager we select
Investment PhilosophyObjective
What does it mean for a BoT to consider ESG
• When thinking about Investing Sustainability what is important to us• Are we a mining retirement fund • Are we a financial sector fund• Are we a industrial sector fund
What are the priorities of my members
• Fair wage/environmental rehabilitation/gender equality• BBBEE / Quality Education / Good Health • Decent Work / Clean water / reducing inequality
What does it mean for a BoT to consider ESG
• South Africa’s National Development Plan• Eradicate Poverty, Eliminate inequality and secure decent std of
living
• Guidance from the UN SDG • Start thinking about the funds philosophy
“Consider” ESG should be read as Embed ESG
Report Monitor Mandate IPS
Investment Objective
Investment Philosophy
How does an Asset Manager Consider ESG
• Knowing what our ESG Philosophy is –empowers us
• Informs our conversation with asset managers • How does an AM embed ESG into their process • Does it resonate with the fund
How does an Asset Manager Consider ESG
• Shoprite Holdings example
• Board Independence • Not employed by Co., Not on Board for more than 10 Yrs• Not > 5% share holding
Source: https://www.unpri.org/
Disclosure and Reporting
• Disclosure becomes easier when we have a base to work from
• Report to Regulator and Members • The extent to which ESG has been integrated
• Sustainable reporting practices• IPS is enriched with ESG factors • Philosophy is summarised in IPS
• but a full document made available
• Financial Statements reporting - by Note: - Assets in compliance- Class and value
QUESTIONS?
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