1. Overview of CIS Industry
December 2013

2. Industry overview International data Hedge funds Consumer behaviour
Agenda
Industry overview International data Hedge funds Consumer behaviour

3. Overview of local CIS Industry by Leon Campher, CEO of ASISA
Agenda
Overview of local CIS Industry by Leon Campher, CEO of ASISA

4. CIS Overview
(Rand Denominated Portfolios)
R1.499tr – Total Net Assets R25bn – Flows - 4th Quarter R177bn – Flows - Calendar Portfolios - 31 December 2013

5. CIS Statistics December 2010 CIS Overview
(Rand Denominated Portfolios)
CIS Statistics
December 2010

6. CIS Statistics December 2010 Net Quarterly Flows
(Rand Denominated Portfolios)
CIS Statistics
December 2010

7. CIS Statistics December 2010 Net Annual Flows – SA Funds
(Excluding Real Estate)
CIS Statistics
December 2010

8. CIS Statistics December 2010 Portfolio Allocation - SA Funds
MA = Multi Asset, IB = Interest Bearing, FI = Fixed Interest

9. CIS Statistics December 2010 Portfolio Allocation - SA Funds
(Excluding Money Market Portfolios)
December 2009
December 2013
CIS Statistics
December 2010
MA = Multi Asset, IB = Interest Bearing, FI = Fixed Interest

10. Net Annual Inflows
(Rand denominated funds)
SA – Multi Asset High Equity - R46.15bn SA - Multi Asset – Low Equity - R40.1bn SA – Interest Bearing – Short Term - R23.1bn SA – Multi Asset - Income - R18.6bn SA Interest Bearing – Money Market – R14.7bn

11. Net Annual Outflows
(Rand denominated funds)
SA – Equity – Large Cap - (R987m) SA – Equity – Resources - (R802m) Regional – Multi Asset – Flexible - (R235m) SA – Equity – Financial - (R31m)

12. Largest CIS Managers STANLIB ALLAN GRAY CORONATION INVESTEC OLD MUTUAL
(All funds)
STANLIB
ALLAN GRAY
CORONATION
INVESTEC
OLD MUTUAL
NEDGROUP
ABSA
SANLAM
PRUDENTIAL
MOMENTUM
77.2% of CIS Assets

13. Largest CIS Managers ALLAN GRAY CORONATION INVESTEC STANLIB OLD MUTUAL
(Excluding Money Market Funds)
ALLAN GRAY
CORONATION
INVESTEC
STANLIB
OLD MUTUAL
NEDGROUP
SANLAM
PRUDENTIAL
MOMENTUM
79.7% of CIS Assets

14. Largest funds Allan Gray Balanced Fund R83 453 Absa Money Market Fund
(Rand millions)
Allan Gray Balanced Fund
R83 453
Absa Money Market Fund
R54 791
Coronation Balance Plus Fund
R51 100
Allan Gray Equity Fund
R36 993
Investec Opportunity Fund
R35 566
Allan Gray Stable Fund
R32 928
Standard Bank Money Market Fund
R32 079
Foord Balanced Fund
R31 594
Standard Bank Corporate Money Market Fund
R30 602
Coronation Balanced Defensive Fund
R27 923

15. CIS Statistics December 2010 Sector Performances
(One year to 31 December 2013)
CIS Statistics
December 2010
Source: Profile Media

16. CIS Statistics December 2010 Sector Performances
(Five years to 31 December 2013 – annualized)
CIS Statistics
December 2010
Source: Profile Media

17. CIS Statistics December 2010 Sector Performances
(Ten years to 31 December annualized)
CIS Statistics
December 2010
Source: Profile Media

18. Indices (Rands - 12 months ending 31 December 2013)
Source: Inet Bridge

19. Indices (Rands - 5 years ending 31 December 2013) 21.3% 19.9% 19.0%
Source: Inet Bridge

20. Agenda
International data

21. International Data
(30 September 2013)
Int. SA Total Assets - $28.8tr Equity Funds - $12.3tr 42.7% 25% Bond Funds $7.1tr 27.4% 18% Balanced Funds - $3.5tr 12.2% 38% Money Market Funds – $4.7tr 16.3% 19% Other Funds – $1.2tr 4.2% Source: International Investment Funds Association

22. Agenda
Overview of Hedge Fund Industry by Robert Foster, convenor of the ASISA Hedge Fund Standing Committee

23. Overview of SA Hedge Fund Industry
AUM : R46.4 billion (December 2013) Included in survey: 55 active single manager Cat IIA licensed managers (excluding FoHF managers); 107 different mandated funds 27 of current ASISA members have Cat IIA licenses or Cat IIA licensed affiliated companies – managing more than 47% of the AUM 10 largest single manager teams all manage >R2 billion in hedge fund products; in aggregate manage 70% of total industry assets 15 largest single manager teams manage 82% of the AUM 20 largest single manager teams manage 89% of the AUM

24. Integrated part of industry
Company
Total Company AUM (in R billion)
Total Hedge Fund AUM (in R billion)
Manager A 36
6,291
Manager B 10
4,325
Manager C
400+
3,644
Manager D
300+
3,154
Manager E 3
3,147
Manager F
60+
3,322
Manager G
2,096
Manager H
2,262
Manager I
Manager J 2
1,629
Size of AUM managed by largest 10 managers
R 32.2
% of total industry assets managed by largest 10 managers
69.90%
Source: Novare Investments

25. Hedge Fund AUM
Source:  Novare Investments

26. Asset Breakdown by Strategy
Most popular strategy equity long/short representing 60.7% of industry assets
Source:  Novare Investments

27. HEDGUCATION – Long and Short Equity

28. HEDGUCATION MANAGER VIEW: A is a better company than B
IMPLEMENTATION: Hedge fund go long A, short B (same rand value)
IMPLEMENTATION: Long only fund go long A, 0% in B
possible outcomes:
IMPACT ON PERFORMANCE
MANAGER VIEW CORRECT
Hedge fund
Long only
BOTH PRICES UP (A more than B)
0.50%
1.00%
A UP, B DOWN
1.50%
BOTH PRICES DOWN (A less than B)
-0.50%
MANAGER VIEW INCORRECT
BOTH PRICES UP (A less than B)
A DOWN, B UP
-1.50%
BOTH PRICES DOWN (A more than B)
-1.00%

29. Asset Net Flows by Strategy (2013)
Source:  Novare Investments

30. Ten largest hedge funds
Source:  Novare Investments

31. Concentration of assets
Source:  Novare Investments

32. Track record
Source:  Novare Investments

33. Investors into Single Funds
Source:  Novare Investments

34. Investment Structures
Source:  Novare Investments

35. Regulatory Environment
The FAIS Act governs the specialist activity of the Category 11A Licensed Hedge Fund Managers since Highest levels of skill, experience and capital required. 97% of Industry Assets are externally administered by Category FAIS Category 1 Administrators. 89 % of Industry Funds use more than one Prime Broker. Hedge Fund Exposure in Retirement Funds now Regulated (Regulation 28) National Treasury, Industry and the FSB are finalising a new product regulatory framework for Hedge Funds. Two categories of Hedge Funds are proposed under the new product regulation namely Qualified Investor Funds and Retail Investor Funds. Retail Investor Funds will operate in a similar manner to Unit Trusts, under the Collective Investment Schemes Act.

36. Regulatory Environment (cont.)
Administration / Valuation / Reporting Fund valuation for all SA hedge funds done by external third party (82% external administrator only; 17% combination of internal and external administrator) Funds managing 89% of AUM use one or more prime brokers

37. Liquidity of Underlying Assets – Equity long/short funds
Source:  Novare Investments

38. Liquidity of Underlying Assets – Equity market neutral funds
Source:  Novare Investments

39. Liquidity of Underlying Assets – Fixed Income hedge funds
Source:  Novare Investments

40. Management Fees
Source:  Novare Investments

41. Hedge fund calendar year returns
2013
2012
2011
2010
2009
2008
2007
Return
ALSI
21.43%
26.68%
2.57%
18.98%
32.13%
-23.23%
19.19%
ALBI
0.64%
15.99%
8.82%
14.96%
-0.99%
16.97%
4.21%
Hedge Fund Top 10 by AUM
21.03%
19.31%
13.47%
17.43%
24.18%
-0.06%
29.26%
HedgeNews Africa SA Single Manager Composite
12.18%
10.54%
8.79%
9.81%
12.32%
9.03%
14.03%
SA - Multi Asset Med Eq (UT)
14.61%
16.26%
5.24%
12.62%
11.92%
-9.98%
12.22%
Source:  Novare Investments, I-Net Bridge, MoneyMate, HedgeNews Africa

42. Hedge fund return statistics
Ann
5 Year
6 Year
Std Dev
Sharpe
Sortino (5%)
ALSI
19.9%
11.3%
15.1%
17.7%
0.96
0.42
1.64
0.50
ALBI
7.7%
9.2%
6.1%
7.4%
0.44
0.56
0.63
0.97
Hedge Fund Top 10 by AUM
19.0%
15.6%
4.5%
5.7%
3.75
1.74
7.45
3.01
HedgeNews Africa SA Single Manager Composite
10.72%
10.44%
1.4%
1.6%
3.14
18.68
10.53
SA - Multi Asset Med Eq (UT)
12.1%
8.1%
6.6%
7.8%
1.03
0.41
1.79
0.53
Source:  Novare Investments, I-Net Bridge, MoneyMate, HedgeNews Africa

43. Rolling 6 month drawdown
Source:  Novare Investments, I-Net Bridge, MoneyMate

44. Consumer behaviour by Peter Dempsey, Deputy CEO of ASISA
Agenda
Consumer behaviour by Peter Dempsey, Deputy CEO of ASISA

45. Should I listen to Market Commentators
Peter Dempsey

46. Market Commentary
“October. This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February”.
“Pudd’nhead Wilson” – Mark Twain, 1894

47. Consumers
Greed/Buy
Fear/Sell Or
Goals → Plan → Implement
repeat

48. Financial Planning R Utilisation and preservation
Creation and protection
Building and protecting
Net
Worth
Age
100

49. ALSI Total Return
Source: Inet Bridge

50. Last 6 years – R invested

51. Alsi
? ? ?
2014
2020

52. Thank you