THROW­ING DOWN THE GAUNT­LET

Finweek English Edition - - FEEDBACK - Fran­cois Meyer Ed­i­tor Marc Ash­ton re­sponds:

Eish! Could my view of the col­lec­tive in­vest­ment in­dus­try be so dif­fer­ent that I feel obliged to give my opin­ion on a re­lated topic ap­pear­ing in a let­ter and ar­ti­cle in the same is­sue of Fin­week?

In sup­port of John Simp­son’s view (Feed­back, 28 March), I would like to take on Pi­eter Koeke­moer of Corona­tion re­gard­ing his state­ment that the col­lec­tive in­vest­ment in­dus­try is com­pletely trans­par­ent and I quote (Col­lec­tive In­sight sup­ple­ment):

“Die kollek­tiewe be­leg­gings in­dus­trie is heel­temal deur­sigtig. Die eerbe­wyse kan slegs uitgedeel word om­dat alle fondse hulle prestasie reko­rds vir open­bare on­der­soek beskik­baar stel. Geen an­der be­leg­ging­sop­sie kan op ‘ n na-koste grond­slag so mak­lik beo­ordeel word nie.”

Loosely trans­lated as: “The col­lec­tive in­vest­ment in­dus­try is com­pletely trans­par­ent. This praise can only be handed out be­cause all funds make their per­for­mances pub­licly avail­able. No other in­vest­ment op­tion can be an­a­lysed with such ease on an af­ter cost ba­sis.” In my view the only way to get to trans­parency is to pub­lish the cal­cu­lated in­dus­try re­turns and then to pub­lish the real achieved re­turns on an en­try-level in­vest­ment at the in­sti­tu­tion and at a Linked In­vest­ment Provider (LISP). With a sys­tem like that, there will be nowhere to hide. I would like to chal­lenge Mr Koeke­moer to pro­vide proof of their fund’s re­turns on an en­try-level in­vest­ment af­ter all costs – prefer­ably where they have in­vested own funds through the to­tal cost chain – at a LISP or LISPS.

I’m pre­pared to is­sue the same chal­lenge as John Simp­son to Mr Koeke­moer: prove your facts (be­fore and af­ter cost re­turns on ac­tual in­vest­ments over one, three and f ive years) and I will make a do­na­tion of R1 500 to any child’s ed­u­ca­tion or school fund of your choice.

In­vestor & Fi­nan­cial Plan­ner I have for­warded on your let­ter to Corona­tion for re­sponse but in the in­terim I have two com­ments. First, I think that you touch on an ex­cel­lent point when you talk about an “en­try-level ” in­vest­ment; if an in­vestor is com­par­ing per­for­mance f ig­ures, they should al­ways be look­ing at whether the fees they are see­ing re­fer to in­sti­tu­tional or re­tail f ig­ures as this will have a sig­nif­i­cant im­pact on per­for­mance in the long run. In­sti­tu­tions ne­go­ti­ate for bet­ter fees and re­tail in­vestors should be pre­pared to drive a hard bargain as well.

My con­cern around your com­ment about com­par­ing on a 1-, 3- and 5-year ba­sis is that the dif­fer­ence in the over­all in­vest­ment per­for­mance will not be as ob­vi­ous to a re­tail in­vestor on such a short time span. Rather the in­vest­ment should be con­sid­ered over f ive or ten years as well as the length of time the fund has been in busi­ness.

We will await feed­back from Corona­tion and will keep you posted.

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