MG MM&Advertising supplement to the Mail & Guardian October 2 to 8 2020

Loraine Tulleken

T he country’s R4.7-trillion retire-

ment industry, served by industry

body the Institute of Retirement

Funds Africa (IRFA), is gearing

up to increase its impact on the

national drive to address massive economic

contraction as well environmental, social and

governance (ESG) issues. IRFA’s forthcoming

virtual conference on November 19 and 20 is a

major step in that direction.

IRFA President Enos Ngutshane says: “Of

course, we serve the entire continent, and our

virtual conference will focus on change, resil-

ience, adaptation, innovation and invention to

equip delegates with knowledge and informa-

tion to rethink traditional boundaries. We will

examine trends and opportunities in technol-

ogy, investment markets, an inclusive pensions

sector, stakeholder engagement and the work-

place to claim the future for our sector, the con-

tinent and greater society.”

He continues: “The retirement sector has a

key role to play in the broader social and geo-

political environment and to address the need

for change, resilience and innovation. It must

acclimatise to the dynamic and changing con-

ditions in which it operates and bring original-

ity, resourcefulness and vision to the table. In

doing so it will claim its rightful place in the

socioeconomic landscape and influence posi-

tive and meaningful growth.”

The conference, t i t led The Retirement

Sector’s Role in Claiming the Future, has

already attracted a record number of delegates

from across Africa. It will equip delegates with

the necessary knowledge and information to

step beyond known boundaries.

“Importantly, we will also consider the role

of the retirement sector in the broader social

and geopolitical environment and the need for

change, resilience and innovation in ensuring

its potential contribution. To do this, we must

acclimatise to the dynamic and changing con-

ditions in which we operate. The challenge for

our sector is to bring originality, resourceful-

ness and vision to the table. In doing so, the

sector will claim its rightful place in the socio-

economic landscape and influence positive and

meaningful growth.”

Ngutshane emphasises that the Institute of

Retirement Funds Africa is well placed to advo-

cate for this role: “In South Africa we have the

ear of regulators across the board, including

SARS, the Pensions Adjudicator and Treasury,

that have, for example, asked for our input into

the Draft Taxation Laws Amendment Bill. We

will raise concerns about issues such as the

possibility of bursaries being taxed.”

While the institute’s first virtual conference

was originally approached as a “lockdown

necessity” it has, along with other regular webi-

nars, opened a highly effective and permanent

technological avenue. “Our first virtual confer-

ence is triggering a paradigm shift for future

physical conferences to be opened to larger

and more diverse audiences and to attract

more experts. There are virtual rooms on the

conference portal to kindle meaningful social

interaction between participants with shared

interests and the intent to network. Chat chan-

nels can facilitate real-time questions,” says

the IRFA president.

“Importantly, by leveraging on the available

technology, we have not compromised on the

benefits of our traditional annual conference.

Our virtual platform even features an exhibition

hall containing products and services of inter-

est to the retirement sector.”

He adds: “We experience dynamic and expo-

nential change in the economic environment,

in technology and in our daily lives. The retire-

ment ecosystem is no exception. For the sake

of our sector and the economy, we must engi-

neer innovative solutions that gear trustees

and investors to do more than blindly accept

consultants’ directives in board meetings. It’s

a massive challenge involving ongoing educa-

tion as the financial services sector undergoes

exponential change, not least new technologies

like blockchain that will significantly benefit

funds and their members. Regulation 28 is also

of huge interest.

“In short, we will unpack how funds should

take advantage of the technological edge, and

experts will open the conference conversation

on matters ranging from non-traditional playing

fields to the creation of better outcomes with

innovation, diversity and inclusion. They will

emphasise that transformation in the retire-

ment sector and a sustained growth plan must

include the marginalised.”

Ngutshane says that with R4.7-trillion in

hand, it is essential that those in charge of

retirement funds understand how best to

channel investments that meet ESG criteria.

“Investors need help to find companies with

values that match theirs, and trustees must

dig deeper into the empowerment and environ-

mental credentials of companies they invest in.

Micro pensions are another issue that Africa

should embrace going into the future.”

He is also convinced of the importance of

improved financial education in schools, and

for the many women who carry the financial

burden of their families. Many draw their full

pension and end up broke and applying for a

government pension within a few months of

their retirement.

Conference geared to the retirement sector’s determination to claim the future‘The challenge for our sector is to bring originality,

resourcefulness and vision to the table’

IRFA president Enos Ngutshane

Institute of Retirement Funds Africa 2 Advertising supplement to the Mail & Guardian October 2 to 8 2020

Accountancy SA reports a growing con-

sensus that capitalism needs to be re-

imagined and, in the hunt for profits

with purpose, impact investing is gain-

ing traction in South Africa and globally.

Other sources also point to South Africa as an

ideal place for sustainable investment, yet IRFA

President Enos Ngutshane reveals that demand for

impact investing is outpacing supply.

“For example, an initial flurry to address the

problem of pit toilets quickly petered out. The fact

is, investors have little understanding of either the

needs or the opportunities presented by social

ills and inadequate infrastructure. It doesn’t help

that our pensions sector is far from inclusive. One

wonders why black asset managers still only sit

on about half a billion of the R4.7-trillion in the

pension funds investment kitty. Surely they have a

meaningful contribution to make?

“There is also the serious problem surrounding

trustees, who are indubitably aware of the crying

need for impact investment in this country,

but lack the confidence or knowledge to steer

Impact investment an under-used and misunderstood investment tool

Stitching responsible investing into the fabric of the future

CREDITS: Supplements & Special Projects Manager Chrystal Dryding Writer Loraine Tulleken Copy subeditor Derek Davey Design & Layout Russel Benjamin Sales Adriana

Botha Flair Media Solutions (PTY) LTD 082 386 1246 adriana@flairmedia.co.za

With investment experience and expertise over the years in both local and global markets to help people achieve their investment goals, Old Mutual Investment Group understands the signifi cance of responsible investment.

It means we incorporate Environmental, Social and Governance (ESG) factors into all our investment and ownership decisions. Our focus is always on the responsible stewardship of the assets we manage for our clients, whilst ensuring we deliver sustainable long-term returns that make a positive impact for a future that matters.

To answer more of your investment-related questions or queries, visit www.oldmutualinvest.com or email futurematters@oldmutualinvest.com

HOW DO WE CREATE A FUTURE THAT REALLY MATTERS?

Old Mutual Investment Group (Pty) Ltd (Reg No 1993/003023/07) is a licensed fi nancial services provider, FSP 604, approved by the Financial Sector Conduct Authority (www.fsca.co.za) to provide intermediary services and advice in terms of the Financial Advisory and Intermediary Services Act 37 of 2002. Old Mutual Investment Group (Pty) Ltd is wholly owned by the Old Mutual Investment Group Holdings (Pty) Ltd.

INVESTMENT GROUP

175 YEARS OF DOING GREAT THINGS

17839

fund managers towards a meaningful economic

transition. Believe me, I know how difficult it is for

them. I was also a trustee who had to learn fast to

be able to navigate the investment trajectory. But

change is imperative and urgent, as much for the

disadvantaged sector of our population as for fund

managers, to benefit from a fast-emerging ‘new

normal’ within the global financial sector.

“Accountancy SA advises that it is possible to

create measurable societal benefit that yields both

brownie points and financial returns. I expect this

will be confirmed in our IRFA conference. And, as

we look to the future, we would do well to consider

how the new generation expects both healthy

financial returns and sustainable investment.

“An Economist’s Intelligence Unit report

indicates that 87% of millennials believe business

success should be measured by more than just

financial performance, and 93% believe social

impact is key to their investing decisions. They

are motivated by the size of their impact and their

ability to measure it.

“Welcome to the new normal.”

Khaya Gobodo, Old Mutual Investment

Group’s MD, says that investing in a future

that matters has never been more rel-

evant.

“The Covid-19 global pandemic lays bare the

Business success today should be measured by more than

just financial performance

In this journey, going it alone will not take us far

The initial flurry to address the problem of pit toilets quickly petered out

vulnerabilities of our societies

and economies; it has wreaked

havoc on the stability of existing

global structures. We live in a

world that is more connected

than any other time in history,

and this interconnectedness

spans our societies, markets and

environment. It is during this time

of crisis, which has highlighted

our global interdependencies, that

the importance of Responsible

Investment (RI) and its role in the

asset management industry going

into the future has become more

apparent.”

A fundamental RI principle

fostered by the group considers the

impact of unpriced externalities.

“By recognising these externalities, we

essentially force industry participants and clients

to consider the common wisdom of pursuing short-

term returns at the expense of long-term resilience

of social and environmental systems. We believe it

is critical to incorporate Environmental, Social and

Governance (ESG) principles into the DNA of the

asset management industry, so that investment

processes afford the opportunity to pursue

superior risk-adjusted returns, while also positively

impacting the communities and environment we

operate in.

“We drive impact related to ESG research

because, in essence, what RI asks of us isn’t new.

It is a resounding truth that we all know: in this

journey, going it alone will not take us far. It is

important that we work together as an industry,

a community, a country and the world, so we may

ultimately sustain our ecosystems.”

Visit futurematters@oldmutalinvest.com or www.oldmutualinvest.com

Khaya Gobodo, Old Mutual Investment Group’s MD

Institute of Retirement Funds Africa Advertising supplement to the Mail & Guardian October 2 to 8 2020 3

IRFA Vice-President Anthony Williams kisses the frog award he won for stakeholder engagement

Internationally recognised awards facilitate best practices sharing

Changemakes usresilient

Previously Investec Asset Management

Investing for a world of change

Ninety One SA (Pty) Ltd is an authorised financial services provider.

It is time to stop being fearful,

and instead be generous

IRFA’s annual Best Practices Industry Awards

have over 33 years evolved from a focus on

communication to six additional categories

related to the retirement industry. The judg-

ing process and its outcomes are respected inter-

nationally and a record number of African entries

were received this year. IRFA’s Vice-President

Anthony Williams suspects that there are oth-

ers who lack the confidence to participate, and

should be encouraged to do so.

Williams, who is also the SABC Retirement

Fund CEO, speaks from personal experience:

“I understand, because I doubted I was good

enough, but looking back I know my first

submission — which earned me a frog as a

prize for stakeholder engagement — was the

springboard for 17 international and 23 local

awards since. That frog produced a practice

prince, and I urge you not to get left behind.”

He adds it is important to understand that

the awards objective has always been to

share industry best practices for the benefit

of members of retirement funds, trustees and

management boards. “It’s an opportunity to

benchmark yourself and do better. IRFA gains an

invaluable resource as it liaises with government

bodies well beyond Africa.

“IRFA’s Best Practices Industry Awards judging

process relates to global benchmarks, and the

judges’ approach is to identify your strengths, not

to penalise you for faults and or weaknesses. It is

a sharing that has over three decades and several

political and economic rollercoasters positioned

our sector powerfully within the public and

private sectors.”

For those who have participated in the awards,

Williams is quick to warn against resting on

any laurels. “We dare not be left behind, and

it’s time to stop predicting ‘a new norm’ and to

work smarter and better. Our post Covid-19

era will be anything but normal — largely as a

result of the incredibly valuable opportunity

the lockdown space has allowed for refl ection,

Let’s mobilise the long-term savings pool to restore economic health‘We are encouraging large institutional allocators to consider

unlisted investments in a locked-up structure’

I t could take 10 years for the economy to recover and the long-term savings industry

has a key role to play, says Natalie Phillips, Deputy MD, Africa at Ninety One.

“Hence the introduction of the Ninety One SA Recovery Fund, in association with

Ethos Private Equity. There are good companies across all sectors with funding needs

that cannot be provided by the banks or the state, so we intend raising R10-billion via

two closes. This will be underpinned by a commitment to measure the social return of

the impact initiative. We believe it offers an attractive return.”

Warning that the country is set to experience the worst recession in living memory,

she advocates for a significant financial response involving all pools of capital and

equal to 15-20% of GDP. This is because the government has limited capacity, and local

equity and debt issuances are running well behind other markets.

This calls for a different level of client conversation in today’s economic climate. “We

are encouraging large institutional allocators to consider unlisted investments in a

locked-up structure — a clear departure from their standard decisions. Hopefully these

are just the first steps for the savings industry, in considering other asset classes that

can have a more direct and positive impact on the country’s future.

“Given the urgency of the economic situation, we are encouraged by a strong

response. Ultimately we hope to have a fund size of R10-billion. It’s a once-in-a-

generation challenge to underpin quality businesses, protect the nation’s productive

capacity and preserve thousands of jobs while supporting the South African tax base.”

technological innovation, a sharply

increased publ ic awareness

and the importance of providing

for retirement. The impact of

technologies l ike blockchain

will not reach their full potential

without the brave human element

that is underpinned by a generosity

of spirit, driven by meaningful

communication and interaction.”

He concludes: “My dream

stakeholder relationship motto

going forward is to be giving and

loving wherever we are, whatever

it costs, for as long as it takes,

and for whenever it is needed. It is

time to stop being fearful. Tata Ma

Chance and enter the 2021 IRFA’s

Best Practices Industry Awards.”

Tomorrow’s companies will link their strategies to externalities that

affect their business

The business of business is changing dramatically

One cannot think of a more germane time

than now to puncture the theory that the

only social responsibility a corporate has

is to increase profits within the rules of the game,

according to Premal Ranchod, Senior Manager

Research Analyst, Alexander Forbes Investments.

He advises: “By focusing on our future, we need

to prioritise tomorrow by concentrating on envi-

ronmental, social and governance (ESG) factors.

A recent Mecer survey of global talent trends

revealed how companies are rebooting balance,

purpose and profit. This is spurred by the younger

generation’s concerns, government directives,

investor requirements and business leadership.

In short, the new decade starts with a refreshed

mandate.

“Furthermore, executive demand for ethical

products has risen 40% in two years and 75% of

companies that have ESG metrics embedded into

the CEO’s agenda report revenue growth rates of

more than 6%. Not surprisingly, 72% of CEOs with

ESG responsibilities believe their organisation is

change-agile.”

This year, Ranchod reminds us, we have wit-

nessed leadership being summoned across gov-

ernment, corporate, public health services to

take action — and the average citizen. “We collec-

tively grapple with the new normal, and tap into

emotional quotient balances and sharpen toolkits

so that we are able to respond respectfully.”

These findings convince the research analyst

that a company should have the following in its

quiver:

Strong appreciation for ESG factors to be linked

to strategies and operations.

A capital allocation response plan that yields a

stronger workforce and client base, and an intan-

gible value add is preparation for recovery after

Covid-19.

Dividends and share buybacks that in the

longer term will have the market placing greater

weight on the strength of a business model.

A comprehensive, practical, yet evolving plan

to address business disruption should be under-

pinned by a balanced, diverse board, able to

address softer issues such as employee engage-

ment and morale. Stakeholders must look for

evidence when assessing if companies have win-

dow-dressed their responses.

Retrenchments, salary adjustments, and

executives’ compensation plans will have to be

assessed in light of the cash reserves in place

and legislative environment in a country.

Ranchod concludes: “In the post-Corona era,

companies will be measured by their agility and

flexibility, how they embrace trust and value

employee loyalty. Business preparedness will be

an agenda item on management committees.”

He offers two more nuggets: “Firstly, the clar-

ion call for climate change strategy and a compa-

ny’s response to the United Nations’ Sustainable

Development Goals. Secondly, the companies of

tomorrow will add long-term value, not by mar-

keting ESG and philanthropy, but by linking their

strategy intricately to externalities that affect the

business.

“Consider Covid-19 your dry run. Business is

unusual.”

Institute of Retirement Funds Africa 4 Advertising supplement to the Mail & Guardian October 2 to 8 2020

KIN

GJA

MES

JHB

348

9

A sturdy membership base and strong links across the continent will encour-

age good practice, alternative investment and socioeconomic growth,

according to Thomas Mketelwa, Executive Committee member and lead for

the Institute of Retirement Funds Africa’s membership development drive.

Mketelwa, who describes himself as both an activist and serial volunteer, sees IRFA as

being positioned to “lead the dialogue” in a consultative and positive way for the benefit

of members of retirement funds across the continent .

“I grew up as a volunteer,” he says, “volunteers change people’s lives, they want

to be with people and are not purely driven by a profit orientation”. He notes: “It is

about restoring balance to the ‘trust deficit’ Retirement Fund members are currently

experiencing on the pending legislation and industry developments, some of which

would appear to be distancing employers from members of their pension funds.” He

cites “the current push” for umbrella funds and annuities favouring big life companies

as having an impact on the number of employer nominated trustees and fund

management boards.

“We need to simplify things,” says Mketelwa of his role and intentions as an IRFA

board member, “we need to decode the complexity of the industry and create platforms

for better understanding. It is my task to extend IRFA’s influence beyond the traditional

South African platforms, for knowledge sharing, for learning and for investment beyond

our borders. IRFA is an established not-for-profit industry association, and its work

can influence growth and change. It can build platforms to encourage a continental

focus, leading to seamless outcomes and strategic partnerships for the benefit of all.

Our member mandate is to support ESG, responsible investment and governance. As

the legislators deal with open free trade agreements in the continent, the retirement

industry must also align itself by being a seamless, one continent, one retirement

industry.”

Mketelwa mentions several initiatives planned by IRFA, aimed at increasing local

membership. “We are currently enhancing and updating our databases, encouraging

lapsed members to once again be part of our exciting progress, and more importantly,

evaluating and improving our benefit offering aligned to sector needs. 2020 has

seen IRFA working with all stakeholders to expand and grow, building on existing

relationships and increasing collaboration and understanding across the board to turn

challenges into opportunities. Challenges such as the current drive towards reducing

the number of funds needed, an understanding of member concerns and the human

element being replaced by call centre interactions,” he observes. Another challenge

he feels that IRFA should lead the dialogue on is “understanding pending legislation

around prescribed assets, while considering the social and economic impacts and the

best interests of members of retirement funds”.

In terms of creating opportunities, the capacitating of trustees and increasing

member confidence in management boards is crucial, and ensuring that trustees see

themselves as accountable to members of retirement funds, regulatory bodies and

governance structures.

Mketelwa concludes: “Another major opportunity for the industry is in the alternative

investment space. This is the time for democracy in action.”

Reports of government plans to compel pension funds to invest in state assets

and projects have caused alarm among investors. While ANC economics chief,

Enoch Godongwana, assures that prescribed assets will not be used as a policy

tool, what should investors make of this?

Many believe that boosting spending on infrastructure will grow the economy and

that Regulation 28 of the Pension Funds Act needs to be changed so pension fund

trustees have greater freedom to invest in infrastructure projects. But Allan Gray

portfolio manager Sandy McGregor disagrees: “Pension funds are already investing in

infrastructure through debt. The problem is rather a lack of suitable projects.

“State institutions tasked with infrastructural development have been crippled by

gross mismanagement and endemic corruption. Most public sector institutions have

become un-investable without a government guarantee. Where the private sector took

the lead, such as in the mobile phone network, renewable energy, commercial property

and private housing, there has been significant continuing investment, for which

finance has been readily available.”

McGregor adds: “The way to get investment going again is to fix state institutions

involved in infrastructure and give them greater freedom to recruit private sector

skills and resources to fulfil their mandates. Viable projects can be financed by banks,

pension funds or other savings institutions.”

Given the shortage of suitable projects, regulations compelling pension funds to hold

a proportion of their assets in infrastructure may force them to make inappropriate

investments, so he welcomes Godongwana’s assurances.

“It would be a wasteful application of South Africa’s inadequate savings and come

at a cost: lower economic growth and reduced pensions. Solutions could include

tapping internationally available concessional finance to reinvigorate parastatals such

as Transnet and SANRAL, and a business-friendly environment would promote private

investment.”

‘We need to decode the complexity of the industry and create

platforms for better understanding’

State institutions must be fixed first, argues McGregor

Member development and cross-border alliances are crucial to IRFA’s strategy

Should pension funds be used by the state?

Thomas Mketelwa, Executive Committee member and lead for IRFA’s membership development drive

Institute of Retirement Funds Africa Advertising supplement to the Mail & Guardian October 2 to 8 2020 5

Purpose.

Grit.

Opportunity.

Trust.

For 27 years we have actively grown the investments of millionsof South Africans. By staying the course, no matter the

market conditions, we create true wealth for all investors.

It all comes down to trust.

Particularly when it comes to investing.

Agility.

A Coronation statement says: When Coronation opened its doors back in 1993,

we committed wholeheartedly to the future of

South Africa, despite the uncertain times we were

living through. Fast forward to 2020 and times

are even more uncertain as the world learns to

cope with the impact of the global Covid-19

Trust is Earned

employees, 56% are black and 50% are female,

while 78% of our Board of Directors are black.

Of our total assets under management,

R228 billion[2] is managed by black investment

professionals. Additionally, many of our senior

leaders are black, including our CEO, CFO, COO,

Head of Institutional Business, Head of Fixed

Income and Head of SA Equity Research.

While there are still strides to be taken, we take

pride in what we have achieved and will continue

to build trust and deliver on our long-term

commitments to our stakeholders.

We are more than just a business. We are a

responsible corporate citizen who is committed

pandemic.

As South Africa grapples

with the twin crises of the

health emergency and

the devastating effects of

the economic lockdown,

now more than ever it is

important for businesses

to step up as corporate

citizens to build and grow

a sustainable and inclusive

economy — one that uplifts

the l ives of al l South

Africans.

We invest the savings of

millions of South Africans

and a portfolio of global

clients, a responsibility

that we take very seriously.

This is why, since the start,

delivering excellent long-

term performance to our

clients has been at the

heart of our culture and

remains our unwavering

focus.

But it doesn’t stop there;

we have continuously used

our resources and infl uence

to lead transformation in

the South African fi nancial

services sector and society

as a whole. Since inception,

we have played a signifi cant

role in driving diversity

in our industry through

our recruitment process,

growing and developing

black businesses, and in

supporting disadvantaged

communities through our

CSI programmes.

Transforming the industryPre-dating BEE legislation

in South Africa, we have

contributed to driving real

change in the local fi nancial

services industry through

bus iness deve lopment

and training. This includes

the estab l i shment o f

three independent black

businesses, namely African

Harvest Fund Managers,

Kagiso Asset Management

and Intembeko Investment

Administrators.

Since 2006, we have

allocated over R300 million

in brokerage to black

s tockbrokers th rough

the Coronation Business

Support Programme. We

have also funded and

trained 120 black IFA

pract ices through the

ASISA IFA Development

Programme and 92 black

ana lysts th rough the

Vunani Securities Training

Academy.

Driving transforma-tion at CoronationAs a proud South African

business and a Level 2

B -BBEE cont r ibutor [1] ,

we are passionate about

a diverse and inclusive

w o r k p l a c e . We h ave

recruited, tra ined and

retained exceptional black

and female talent across

our bus iness . Of our

Since its inception, Coronation has played a signifi cant role in driving diversity

to the future of South Africa.

To read more about how we support and

invest in our country for the long-term,

visit www.coronation.com.[1] As measured by the revised Financial Sector Code[2] As at 30 June 2020

Institute of Retirement Funds Africa 6 Advertising supplement to the Mail & Guardian October 2 to 8 2020

Understanding alternative or developmental impact

A long-term viewInvestments in both unlisted and listed assets require a long-term view, more so with unlisted

assets, due to the illiquid trading nature of these investments. There is no formal mechanism for

trading unlisted assets and, due to their niche or developmental character, it may take longer to

sell them. These investments may also need time to reach their optimal value.

It therefore means that investors need to ascertain the fund’s investment horizon and where

the various deals sit within the current cycle. The decision could affect whether there is a wait-

ing period or ramp-up phase before client monies are deployed, so ask your manager if there is a

ramp-up period for a pension fund’s access. The final aspect is, historically, how quickly the cli-

ent’s money can be deployed in the fund, and the reasons for any anomalies.

Against the backdrop of increased

interest in alternative or develop-

mental impact investments, Future

Growth’s Angelique Kalam, Manager:

Sustainable Investment Practices, addresses

some complex issues.

“Regulation 28 of the Pension Funds Act now

affords higher allocations to alternative invest-

ments, which are usually unlisted and without

official rating. All these should not be regarded

as separate asset classes as they need to fit

within an already defined asset allocation strat-

egy. These classes can involve debt, equity or

property ,and commonly form the building blocks

for developmental impact investment mandates.

Typically long term in nature, they act as a natu-

ral asset/liability match for retirement funds and

must provide investors with sound commercial

risk/return attributes.”

On project bonds, she notes how financing of

infrastructure projects has become more dif-

ficult, with stricter regulations on banks and

their lending requirements since the global

financial crisis. Some retirement funds with

fixed income mandates only allow investments

in a listed form. Against this backdrop the JSE

and The Association for Savings and Investment

South Africa have liaised to create access pro-

ject bonds as an alternative form of financing.

These will allow infrastructure-related projects

to source funding from a new pool of capital via

the JSE’s listed debt portal.

Despite their “listed” nature, they carry the

same level of risk as a typical “unlisted” project

finance transaction.

“So, by providing access to a sustainable vehi-

cle to fund initiatives in the infrastructure and

development space, pension funds invested in

impact funds are able to gain exposure to sec-

tors such as energy, healthcare, transport,

education, SMME development and housing, to

name a few.”

Kalam warns, however, against impact wash-

ing, whereby investors are lured by clever mar-

keting that camouflages the underlying impact

of their investments — or lack thereof. “As a first

step, pension funds should define their social

and developmental mandate before making an

allocation into impact investments. The steps

include clarifying their objectives and the out-

comes they want to achieve, without compromis-

ing on sustainable risk-adjusted returns for their

underlying beneficiaries.”

Sectors that facilitate diverse impact include

those that address South Africa’s infrastructure

backlog and a lower historical deployment of

capital. Most are aligned with the government’s

National Development Plan (NDP) goals and con-

tribute to the economic and social development

of South Africa, which, in turn, stimulates job

creation.

“The entire market has access to listed assets

on an exchange, but these are limited to what

is available. The unlisted market, on the other

hand, can provide investors access to a broader

selection of assets, across a variety of infrastruc-

ture and developmental sectors. These include

transport, water, renewable energy, education,

healthcare, affordable housing, agriculture and

Impact washing is where investors are lured by clever marketing that camouflages the underlying impact of their investments

SMMEs. Some may be in a niche market, diffi-

cult to replicate and have little competition,” she

advises.

Impact measurementIn addition to earning appropriate risk-adjusted

returns, investors require compensation in the

form of tangible social or developmental out-

comes or impact. Although measurement can

be highly subjective, this can be minimised with

tangible criteria.

“For example, metrics for an affordable hous-

ing investment could include the number of

homes built, jobs created, and the extent of

‘green’ building materials or technology used in

the construction. It is possible to align impact

and developmental objectives with concrete out-

comes that are measurable and that do not com-

promise financial returns, when they are identi-

fied upfront. Not all types of impact are created

equal. For example, providing low-income hous-

ing has a higher impact than holding a listed par-

astatal bond.”

Questions to be asked include:• How is the social or developmental impact of

the fund measured for the underlying invest-

ments, and what criteria or indicators are

used to measure the impact?

• How do you assess what is high impact vs low

impact?

• Are the underlying investments linked to the

Sustainable Development Goals (SDGs), and

how is this reported?

• How many jobs have been created by the

underlying issuers?

• How much local content is utilised in the

design and development of the projects?

• What is the equity holding by BBBEE and/or

the local community in the projects?

Manager track recordIn a low-return environment, impact investments

can offer a good alternative to traditional invest-

ments in a diversified portfolio. Kalam insists

one must choose an experienced investment

manager, who has the skills to both assess the

risks and correctly price them.

“Investing in unlisted assets is complex, due to

the additional layers of work that require highly

specialised skills. We recommend that investors

who choose alternative assets as part of their

portfolio mix always invest with partners who

have a proven track record in managing invest-

ments in this asset class. Appropriate questions

include: what is your demonstrable track record

in managing complex alternative assets and

impact mandates? What is the size of the invest-

ment team, and what are the relevant skills of

the various team members?

Kalam reminds that the risk and return assess-

ment on a listed asset versus an unlisted asset

is almost the same. “The only difference is that

a higher liquidity premium would be added for

an unlisted asset, which could result in a higher

required rate of return over the life of the invest-

ment. Importantly, one needs to ascertain the

expected rate of return for the fund and if the

underlying investments are risky, for exam-

ple, for debt funding, what is the probability of

default?”

While it is not the role of ordinary pensioners

to be directly responsible for national develop-

ment, except through the normal capital invest-

ment process, pension funds can contribute to

development by partnering or co-investing with

development financial institutions (DFIs).

“Institutional investors can choose how to

deploy their money and the type of projects they

wish to invest in, thereby responsibly targeting

an appropriate risk-adjusted return to compen-

sate for the related risk. An important considera-

tion is what percentage of the fund is allocated

to DFIs and SOEs.”

She cautions that investors often wrongly think

that if an asset is more liquid it is less risky. “If

you were invested in African Bank shares or

bonds before 2014, you would know that liquid-

ity does not eliminate business risk, and it is

only beneficial when you can exit an investment

before it sinks. Hence the importance of ascer-

taining the minimum and maximum liquidity lim-

its of the fund, how liquidity is managed, and how

this impacts the deal pipeline.

Future Growth’s Angelique Kalam, Manager: Sustainable Investment Practices

Institute of Retirement Funds Africa Advertising supplement to the Mail & Guardian October 2 to 8 2020 7

Staying the course – together

AF2

06

44

Alexander Forbes Financial Services (Pty) Ltd is a licensed fi nancial services provider (FSP 1177 and registration number 1969/018487/07).

Uncertain times call for a steady partnerWe can’t eliminate risks from market shocks but we can manage them.

As we weather the Covid-19 storm together, Alexander Forbes is helping you and your members navigate uncharted territory:

Our strong focus on risk management strikes the right balance in taking advantage of growth opportunities while protecting against market downturns.

Our advice helps your members make better decisions about their retirement fund savings, including loss of earnings or retrenchment.

Our integrated consulting is based on outcomes, best advice and holistic needs. We’ve heightened our operational excellence now and into the future.

You can count on us, through the good times and the bad.

Enos Ngutshane, IRFA President, assures the public that he is geared to steer

members and the sector through this volatile period, which includes impend-

ing legislation to address prescribed assets, low returns and strong calls for

societal upliftment and development.

He elaborates: “As a sector, we need to consult, engage and share knowledge for

the benefit of members and pensioners. We also need to educate the public on how to

achieve better retirement outcomes. I believe the industry is often misunderstood, and

if we work together as bodies to achieve a unified understanding we will make a real

social and economic difference.”

Talks are already underway with, among others, BATSETA, a non-profit organisation

focusing on the interests of principal officers, trustees and fund fiduciaries, as well

as the Financial Planning Institute, National Treasury, the Financial Services Conduct

Authority and the Chartered Financial Analyst Institute. Ngutshane says IRFA is well

positioned to lead this dialogue and is working towards achieving a meeting of minds

among stakeholders, while fostering sound relationships with regulators and opinion

makers. The focus will be to consult, engage and share knowledge.

IRFA Vice-President Anthony Williams concurs: “One of the prime challenges is to put

members and pensioners at ease. So incoming legislation needs to be communicated

and explained in a manner that informs and defuses panic. The sector must maintain

stability while investment markets are in flux, to be able to continue to improve the lives

of members and pensioners and ensure that assets are well guarded. IRFA will continue

to play a prominent role. We will focus on strengthening the bonds between all role

players in the sector, both in South Africa and North of our borders, as we transform the

African retirement world into a retirement village.”

Explaining the continental retirement landscape, Ngutshane adds: “IRFA can

certainly facilitate the discourse on retirement outcomes. We are currently networking

and benchmarking with industry colleagues from neighbouring states and hope to

contribute to social security, while a recent Pensions SA benchmarking study yielded

invaluable insights into how the African retirement sector perceives the role of industry

bodies such as IRFA, as well as the required support services. Advocacy and lobbying

top the list of education and knowledge transfer between all countries.”

Williams says that as IRFA draws together all stakeholders for the ultimate benefit of

the members of funds, its primary role is a cohesive one. Both consider it important to

encourage people to invest in the future and look forward to utilising IRFA’s expertise

and experience.

As Ngutshane concludes: “It is important to contribute, as there is limited knowledge

about the retirement industry.”

IRFA’s focus will be to consult, engage and share

knowledge

Retirement industry in a volatile time

Leaders who bring invaluable expertise and experience to the boardroomEnos Ngutshane is an authority in corporate governance, local government, rail

safety, occupational health and safety, and has worked for Gauteng Government

as Deputy Director General (HOD), Wits Business School as lecturer, and for the

South African Foundation for Public Management as CEO. He was also a trustee

and a chairperson of the PRASA Provident Fund for many years.

His milestone achievements include the establishment of the Public and

Development Management Programme Faculty at Wits University, strategic

business re-engineering, human capital development, large-scale change and

transformation, policy development and implementation, public transport

management, pension fund investments and corporate governance.

Anthony Williams serves as the Vice-President of the IRFA management board.

He is also Chief Executive Officer of the SABC Pension Fund, recognised locally

and internationally for excellence.

Enos Ngutshane, IRFA President (left) and IRFA Vice-President Anthony Williams (right) want pensioners to have peace of mind

On Regulation 28 and the need for investment best practice A particular need appears to exist for clarity as

far as infrastructure investments are concerned

IRFA stakeholders were recently requested to identify topics for its informa-

tion and education services, and the three highest rated relate to sectoral-

and fund-specific governance and investment practices. Information on

investments and investment practices is crucial to trustees who want to make

informed and appropriate investment decisions for the retirement funds they

manage.

Wayne Hiller van Rensburg, IRFA Past President and Executive Officer,

reports:

Regulation 28 to the Pension Funds Act sets the maximum limits for

investing in the various asset classes. Specifically listed are shares on the

Johannesburg Stock Exchange or foreign exchanges, government and

corporate bonds, including bank deposits. Any trustee can tell you that

when deliberating on investment options available to their funds investment

managers and asset consultants, these often include discussions on some of

the lesser-known asset classes such as private equity or commodities.

As IRFA we actively look for opportunities to provide information or lobby where appropriate. One such opportunity has

presented itself in the heated debate around prescribed assets and changes to Regulation 28. In essence, prescribed assets

would mean that any retirement fund would be forced to invest a minimum of its overall assets in a specific asset class. To give

effect to this debate, Regulation 28 would have to be amended and the minimums introduced. In South Africa prescribed assets

were in force until 1989 and a large percentage of a fund’s assets had to be invested in government bonds.

The current discussion on prescribed assets focuses on funding much-needed infrastructure projects. Historically, investments

in infrastructure projects have been catalysts for greater economic growth. An important question is whether forcing retirement

funds to invest in such project are to the benefits of members. At the request of National Treasury, which indicated that there is no

policy decision on changing the regulations governing retirement fund investments on investing on infrastructure, IRFA reached

out to its stakeholders and asked their opinion on whether changes to Regulation 28 should be made to introduce minimum

investments in infrastructure.

They do not favour any form of forced minimum investment in infrastructure, or for that matter in any other asset class. What

the survey revealed is a need for Regulation 28 to take into account changes to the investment market since its last revision was in

2011. A further finding was that providing more clarity on the types of asset classes or investments retirement funds could make,

would be of value to the funds.

A particular need appears to exist for clarity as far as infrastructure investments are concerned. Many funds already have some

form of infrastructure investment, which is often housed under asset classes such as private equity or bonds. Providing clarity on

what is meant by infrastructure investment would give trustees a common reference point from which to work. Further assistance

can be provided by making it clear whether infrastructure is an asset class on its own or should be included in other asset classes

such as private equity or bonds. Once trustees have a better understanding of what infrastructure investing is, they will be able to

make informed decisions on whether this is an asset class they should be including in their funds’ investment portfolios.

Wayne Hiller van Rensburg, IRFA Past President and Executive Officer

Institute of Retirement Funds Africa 8 Advertising supplement to the Mail & Guardian October 2 to 8 2020

Since our establishment in April 2005 as an independent investment manager, we are proud to remain black-owned and managed. Our values are the foundation of our business and encourages every decision we make. With a proven track record and a highly experienced, multi-skilled investment team, we are well positioned to partner with you to achieve your investment goals and objectives.

1st Floor, Colinton House, The Oval, 1 Oakdale Road, Newlands, 7700, Cape Town, South Africa

+27 21 670 6570

info@argonasset.co.za

www.argonassetmanagement.co.za

Argon Asset Management is an authorised Financial Services Provider (FSP 835)

For a glimpse of the future it is use-

ful to understand what led to the

current status quo, says Ruen

Naidu, Head of Macro Strategies

at Argon Asset Management.

“Over four decades we have seen the

coincidence of unprecedented secular eras

— changing demographics, globalisation,

the ‘dollarisation’ of the global economy,

falling interest rates, and new technological

innovations,” says Naidu. “As the baby-

boomer generation entered the workforce,

globalisation trends resulted in the

incorporation of cheap emerging market

labour forces. These, with the preceding

hiking cycle by Fed Chair Paul Volcker,

combined to form a falling trajectory of

infl ation.”

Lower infl ation led to lower interest rates.

“With the global monetary system buttressed

by the dollar fi at currency, debt levels surged.

At the end of the Great Financial Crisis, the

explosion of central bank balance sheets

helped prevent a breakdown of the global

financial system, but resulted in widening

inequality. At the time, fi scal policy moved

in the opposite direction and tightened.” The

South Africa’s transport sector is

an ever-evolving industry, bringing

dynamic mobility to our society as it

supports the movement of goods and people.

In this endeavour market-forces, socioeco-

nomic and political impacts, as well as people-

centred concerns all play a vital role in the sus-

tainability of the sector, says Principal Officer

Joe Letswalo.

“In the current fluid and fast-changing

economic environment, the Transport Sector

Retirement Fund (TSRF) aims to be a constant

factor in their members’ lives, whether they

are still gainfully employed or retired. In

doing so, the fund considers a vast array of

infl uences to deliver not only fi nancial stability

to its members, but also to help transform our

country and the lives of its people.”

Established in 1991, three years ago

it successfully transitioned to the TSRF,

a non-aligned, standalone industry fund

encompassing the broader transport industry.

It principal objective is to provide retirement

savings, as well as additional death, disability,

and funeral benefi ts on a defi ned contribution

basis.

“We are single-minded in our efforts to

fi nd innovative ways to grow our members’

retirement assets, and to provide them with

excellent returns and long-term financial

security,” Letswalo says.

“Our shareholders are our members. Thus,

apart from creating sustainable futures for

them, the Fund is also committed to facilitate

economic transformation in South Africa. In

this regard, our board of trustees considers

infrastructure development as an important

asset class — one which we believe provides

direct benefits to our members, and which

assists to drive economic development,

empowerment and job creation.”

Some investment projects include the

development of good quality, safe and

efficient transport hubs and truck stops

along major freight and logistics routes. For

example, TSRF has a direct investment in the

Highway Junction Truck Stop near Harrismith

The economic policy

response to Covid-19 has

been a combination of fi scal

and monetary expansion

The fund provides fi nancial stability to its members

Transport industry’s retirement fund changing the landscape

Ruen Naidu, Head of Macro Strategies at Argon Asset Management

TSRF receives top honours from IRFAThe overall Gold Standard Award was awarded to the TSRF in 2019 and 2020 for excel-

ling in governance; transformation; stakeholder engagement and education; invest-

ment practice; trustee development; and financial management and reporting. The

Fund was also singled out for Best Practice Awards for its Investment Practices and

Transformation (2019); and for Stakeholder Engagement and Education (2020).

Chaotic secular change is key to current status

economic policy response to Covid-19 has

been a combination of fi scal and monetary

expansion.

“The so-called ‘helicopter-money’

policies have finally arrived in developed

market economies. These make economic

sense in an environment of private sector

deleveraging, but are a slippery slope. While

policymakers try to push risk into the future,

they are bringing forward future returns.

“Historically, deleveraging from such

high debt levels was achieved either by

infl ating the debt or by defl ationary defaults.

The global economy currently sits on the

precipice of chaotic change at the end of a

secular cycle. While it is diffi cult to predict

what the outcome will be, the previous four

decades offer a template of outcomes that

are unlikely to be repeated over the next

secular period.”

in the Free State. This successful joint venture

is the first multi-brand facility of its kind in

Africa, a concept now being expanded to four

more sites near Cape Town, East London,

Colesberg and Musina.

Other infrastructure partnerships include

shopping centres in Soshanguve, Philippi,

Daveyton and Bloemfontein, and two new

mixed-use property developments, near

Sebokeng in the Vaal Triangle and in the

Western Cape, near Simon’s Town.

Letswalo adds: “Spatial development

projects assist with poverty alleviation,

ensuring access to property as an asset

for wealth creation. We believe our impact

investment strategy is setting the tone for

boosting economic growth, maximising

investment returns and ensuring ESG

principles on sustainability are met.”

The investment strategy is for younger

members to invest in more aggressive growth-

oriented portfolios, while older members

nearing retirement invest in more defensive

capital-protecting portfolios.

Assets under the Fund’s management

increased are at just under R8-billion this

year. “We are cautiously pleased with the

Fund’s performance, despite the state of the

global economy, and the impact of Covid-19

on returns, although we are expecting a slight

decrease in yields during this fi nancial year

as a result of the general retraction of our

economy,” concludes Letswalo.

The TSRF is committed to facilitating economic transformation in South Africa, says its Principal Officer Joe Letswalo (below). Truck stops (above) are being built in four provinces after the resounding success of the one built near Harrismith.