1. Overview of CIS Industry
December 2012

2. Agenda
International view CIS industry overview Performance figures Index data FCIS Hedge funds Cost of caution

3. IIFA statistics
CIS Statistics
December 2010

4. IIFA statistics
(Assets under management)
CIS Statistics
December 2010

5. Agenda
International view CIS industry overview Performance figures Index data FCIS Hedge funds Cost of caution

6. Assets for CIS industry
(All Rand denominated funds)
R1.23tr – Previous methodology - Double counting removed from FoF’s only R1.20tr – All double counting removed - FoF’s - Hybrid funds

7. CIS Statistics December 2010 Assets for CIS industry
(All Rand denominated funds) (Previous methodology)
CIS Statistics
December 2010

8. CIS Statistics December 2010 Assets for CIS industry
(All Rand denominated funds) (All double counting removed)
CIS Statistics
December 2010

9. CIS Statistics December 2010 Net quarterly flows
(All Rand denominated funds)
CIS Statistics
December 2010

10. CIS Statistics December 2010 Net annual flows by sector
(Excluding Worldwide and Foreign sectors)
CIS Statistics
December 2010

11. CIS Statistics December 2010 Domestic funds asset split December 2007
(Excl. Worldwide and Foreign sectors) (Previous methodology)
December 2007
December 2012
CIS Statistics
December 2010

12. CIS Statistics December 2010 Domestic funds asset split December 2007
(Excl. Worldwide, Foreign and Money Market sectors) (Previous methodology)
December 2007
December 2012
CIS Statistics
December 2010

13. Net annual inflows
(Sector winners)
• Domestic – AA - Prudential Variable Equity (R39.7bn) • Domestic - Fixed Interest - Varied Specialist (R27.6bn) • Domestic – AA - Prudential Low Equity (R25.4bn) • Domestic - Fixed Interest - Income (R11.9bn)

14. Net annual outflows
(Sector losers)
• Domestic - Fixed Interest - Money Market (-R9.3bn) • Domestic - Equity – Value (-R1.0bn) • Domestic - Equity – Growth (-R934m) • Domestic - Equity – Financial (-R240m)

15. Largest CIS Managers
(All funds)
Stanlib Allan Gray Investec Old Mutual Coronation Sanlam Absa NedGroup Investments Prudential Momentum
79.5% of the assets of the
CIS industry

16. Largest CIS Managers
(Excluding Money Market funds)
Allan Gray Investec Coronation Stanlib Old Mutual Sanlam NedGroup Investments Prudential Momentum Absa
79.7% of the assets of the
CIS industry

17. Largest funds Allan Gray Balanced Fund R61 653 Absa Money Market Fund
(Values in Rand million)
Allan Gray Balanced Fund
R61 653
Absa Money Market Fund
R57 849
Standard Bank Money Market Fund
R35 676
Allan Gray Equity Fund
R32 382
Investec Opportunity Fund
R29 636
Allan Gray Stable Fund
R28 976
Coronation Balanced Plus Fund
R28 258
Standard Bank Corporate Money Market Fund
R27 489
Investec Money Market Fund
R21 564
Stanlib Income Fund
R20 680

18. Agenda
International view CIS industry overview Performance figures Index data FCIS Hedge funds Cost of caution

19. CIS Statistics December 2010 Sector performances
(One year to 31 December 2012)
CIS Statistics
December 2010
Source: Profile Media

20. CIS Statistics December 2010 Sector performances
(Three years to 31 December 2012) (annualized performance)
CIS Statistics
December 2010
Source: Profile Media

21. CIS Statistics December 2010 Sector performances
(Five years to 31 December 2012) (annualized performance)
CIS Statistics
December 2010
Source: Profile Media

22. CIS Statistics December 2010 Sector performances
(Ten years to 31 December 2012) (annualized performance)
CIS Statistics
December 2010
Source: Profile Media

23. CIS Statistics December 2010 Sector performances
(Twenty years to 31 December 2012) (annualized performance)
CIS Statistics
December 2010
Source: Profile Media

24. Agenda
International view CIS industry overview Performance figures Index data FCIS Hedge funds Cost of caution

25. Indices performances
(In Rand for the 12 months ending 31 December 2012)
26.7%
21.9%
20.9%
Source: Inet Bridge

26. Indices performances (In Rand for the 5 years ending 31 December 2012)
56.8%
34.8%
12.1%
Source: Inet Bridge

27. Indices performances
(JSE All Share (price) index – 12 months ending 31 December 2012)
31/12/2012
39 250
22.7%
31/12/2011
31 986
Source: Inet Bridge

28. Agenda
International view CIS industry overview Performance figures Index data FCIS Hedge funds Cost of caution

29. Assets for FCIS industry
CIS Statistics
December 2010

30. Agenda
International view CIS industry overview Performance figures Index data FCIS Hedge funds Cost of caution

31. What is a Hedge Fund?
It is nothing more than a Fund managing conventional asset classes incorporating gearing, script borrowing, non-naked short selling and long positions for investment purposes Focuses on reducing portfolio risk, capital preservation, low correlation positive returns while meeting or exceeding client expectations - AIMA and ASISA presentation to FSB March 2009

32. Overview of SA Hedge Fund Industry
AUM : R35.8bn (est. as at 31-Dec-2012) 62 Active Single Manager Cat IIA licensed managers (excluding FoHF managers) 106 different Mandated funds with a trend towards segregated mandates 27 of current ASISA members have Cat IIA licenses or Cat IIA licensed affiliated companies –managing more than 60% of the AUM 15 Single Manager teams manage 80% of the AUM - similar trend as with Unit Trusts

33. Overview of SA Hedge Fund Industry
(continued)
Majority of Assets managed in Equity Long/Short strategies – majority of underlying instruments are exchange listed (similar to unit trusts) 50% of Assets managed by managers with at least 7 years of active hedge fund experience Hedge Funds have formerly been recognised as an integral part of the Retirement Fund investment universe in the recently revised Regulation 28. Previously Hedge Funds were included under the heading of “Other Investments”

34. Hedge Fund AUM Growth
Source:  Novare Investments

35. Asset Breakdown by Strategy
Source:  Novare Investments

36. Asset Breakdown by Sub-Strategy
Source:  Novare Investments

37. Investment Vehicle / Structure
Source:  Novare Investments

38. Self Regulatory Environment
Administration / Valuation / Reporting 99.9% of Industry Assets independently valued by independent 3rd party 67% of funds report NAV’s either daily or weekly and 32% report monthly 79% of Mandate compliance is monitored externally or externally and internally Funds managing 84% of AUM use one or more prime brokers 89% of AUM can be liquidated within 30days

39. The move to Product Regulation
National Treasury and the FSB have proposed adding two additional branches / categories of funds under CISCA The first tier “Hedge Fund Light” will be similar to the globally recognised UCITS structure and will impose limits on the investment powers of the managers similar to a Unit Trust The second tier “Restricted Hedge Fund” will be aimed at “professional investors” and have fewer and lower mandate restrictions Both tiers of Funds will have similar administrative, valuation, reporting and legal structure requirements.

40. Proposed Limited Investment Powers
“Hedge Fund Light” Funds : Position size concentration similar to Unit Trusts Maximum Gross exposures 200% Maximum exposure to a single prime broker 40% Bi-Weekly dealing and daily valuations

41. Managing Risks
FSB “Notice on Hedge Fund FSP Disclosures,2008”: Leverage Illiquidity Potentially higher fees Specific risks to a hedge fund strategy

42. Ave Net Equity and Gross Exposure
Source:  Novare Investments

43. Liquidation of Underlying Assets
Source:  Novare Investments

44. Management Fees Charged
Source:  Novare Investments

45. Specific Risks (Fixed Interest Funds)
Source:  Novare Investments

46. Single Managers vs. High Equity
Source:  Hedge News Africa & Morningstar

47. Equity Long/Short vs. General Equity
Source:  Hedge News Africa & Morningstar

48. Market Neutral vs. Low Equity
Source:  Hedge News Africa & Morningstar

49. Multi Strategy vs. CIS Flexible
Source:  Hedge News Africa & Morningstar

50. Fixed Income vs. CIS Bonds
Source:  Hedge News Africa & Morningstar

51. Thanks to
Hedge News Africa Riscura Analytics Novare Investments Capital Exchange Partners

52. Agenda
International view CIS industry overview Performance figures Index data FCIS Hedge funds Cost of caution

53. ALSI vs Prime
Source: Inet Bridge

54. R100 000 investment 3 years 5 years 10 years R147 960 R144 634
(ending 31 December 2012)
3 years
5 years
10 years
General Equity R R R
Prudential Variable Equity R R R
Money Market R R R

55. Thank you