STANLIB's Risk Profile Funds

STANLIB’s Risk
Profile Funds
the art and science of investing

STANLIB’s Risk Profiled Funds provide a managed
solution for conservative to aggressive investors.
How to maximize your wealth
In the investment world, the quote “eat well, sleep well” refers to the trade off made between risk and return. The more risk one is able to stomach, the
higher the potential return and thus the possibility of eating well. However, with risk there often exists great uncertainty and volatility, thus the possibility
of sleepless nights. We all know the roller coaster ride of volatile equity returns too well! Look at the differences (volatility) in return from one year to
another as per the graph below. Also note that most crashes were followed by two or three strong years.
SA All Share Index return (%) 1960 to 2010
1996
1995
1988 2010
1984 2007 2004
2002 2000 1983 2003 2001
1998 1997 1974 1994 1991
1976 1992 1973 1967 1982 2009 2005 1999
1975 1990 1971 1966 1978 2006 1989 1993
2008 1969 1987 1965 1964 1977 1985 1986 1979
1970 1960 1981 1961 1963 1962 1980 1968 1972
-30 to -20 -20 to -10 -10 to 0 0 to 10 10 to 20 20 to 30 30 to 40 40 to 50 Over 50
Source: STANLIB
Conversely, one can invest conservatively which means sleeping well, but the return will probably be lower which translates into not eating as well. If you
have been saving for the last 10 years into the money market, you would in fact not have saved anything, once you have paid your taxes, and you have
taken inflation into account.
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 10 yr Avg.
Cash Return 10.6 11.5 12.8 8.2 7.5 7.9 10.1 12.4 8.9 6.9 9.7
After tax return (Assume rate of 40%) 6.4 6.9 7.7 4.9 4.5 4.7 6 7.4 5.3 4.1 6.2
Inflation (CPI) 6.6 9.3 6.8 4.3 3.9 4.6 6.5 11.5 7.2 4.3 6.5
Real Return -0.2 -2.4 0.9 0.6 0.6 0.1 -0.5 -4.1 -1.9 -0.2 -0.7
Source: STANLIB
So, how do you balance “eat well and sleep well”?
The key decision you should make is how much risk you need to take and are comfortable taking. Consider the following:
• Your appetite or attitude to risk – All things being equal, most people prefer lower risk to higher risk and most are risk averse.
• Your need for risk - Your need for risk is assessed by examining the extent of any gap between the lifestyle you wish to lead and your expected financial
resources available to meet that lifestyle.The required investment risk of the portfolio, most consistent with achievement of your lifestyle objectives,
may not match the portfolio indicated by your risk profile score. If your need for risk suggests a more risky portfolio this raises an uncomfortable
dilemma – do you “eat well or sleep well?” Neither, more risk (with uncertain outcomes) nor a lower expected lifestyle is particularly attractive.
Without adequate discussion around these decisions, when growth assets are performing well the tendency is for most people to opt for higher risk than
their risk profile indicates they would be comfortable with, rather than pare back lifestyle expectations. However, when the inevitable downturns occur
these people often lose discipline and abandon sound financial strategies. Their short term desire for comfort and apparent safety jeopardizes their long
term lifestyle aspirations.
Asset allocation – the art of balancing Risk and Return
What does asset allocation mean? It is an investment strategy that aims to balance risk and reward by apportioning your portfolio’s assets according to your:
• Investment goals
• Risk tolerance
• Investment horizon
The choice of an appropriate asset allocation is the most important decision you have to make. It is a choice about the investment risk you are prepared to
take. It is the decision as to how to apportion your investments between:
• Defensive assets i.e. cash and fixed interest; and
• Growth assets i.e. shares and listed property

By investing in a diversified portfolio, (including cash, bonds, listed property and equities) the positive performance of some asset classes can help offset
the negative performance of others. This approach reduces the volatility within a portfolio and guarantees that although you won’t be the top performer,
you definitely won’t be the worse. As evident below, it is very difficult to pick the best performing asset class in a year.
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
SA Equity
32.6
Property
20.4
Property
38.7
Property
39.8
SA Equity
47.3
SA Equity
41.2
Property
22.9
Bonds
17
SA Equity
32.1
Property
26.8
Global Equity
30.2
Bonds
16
Balanced
Portfolio
18.4
Balanced
Portfolio
23.1
Property
38.6
Global Equity
31.1
SA Equity
19.2
Cash
11.7
Balanced
Portfolio
21.7
SA Equity
19
Balanced
Portfolio
24.9
Inflation
12.4
Bonds
18.1
SA Equity
25.4
Balanced
Portfolio
35.1
Balanced
Portfolio
28.1
Balanced
Portfolio
15.6
Inflation
9.5
Property
17.4
Balanced
Portfolio
17.8
Bonds
17.8
Cash
11.6
SA Equity
16.1
Bonds
15.3
Global Equity
21.1
Property
15.7
Cash
9.4
Property
-10.1
Cash
9.1
Bonds
15
Cash
10.2
Balanced
Portfolio
1.4
Cash
12.3
Cash
8
Bonds
10.8
Cash
7.4
Inflation
9
Balanced
Portfolio
-10.4
Inflation
6.2
Cash
6.9
Property
7.7
SA Equity
-8.3
Global Equity
1.8
Inflation
3.4
Cash
7.1
Inflation
5.8
Bonds
4.2
Global Equity
-21.7
Global Equity
1.14
Inflation
3.5
Inflation
4.6
Global Equity
-43.5
Inflation
0.33
Global Equity
-4.8
Inflation
3.6
Bonds
5.5
Global Equity
3.8
SA Equity
-23.2
Bonds
-1
Global Equity
-1.58
* Balanced Portfolio: 60% Equities, 20% Bonds, 10% Listed Property and Cash
Source: INET and Morningstar
The STANLIB Risk Profile funds are aligned with these sound investment principles and
offer you a one stop solution.
Fund description
STANLIB’s Risk Profiled Fund of Funds range provide a managed solution for conservative to aggressive investors. The asset allocation is actively managed
within specific strategic asset class bands for each fund. The process in which funds are managed reflects STANLIB’s best investment view based on our
tactical asset allocation calls. These are recommended in the STANLIB Fund Focus document.
Strategic Asset Allocation Bands
STANLIB Conservative
Fund of Funds
STANLIB Moderately
Conservative Fund of Funds
STANLIB Moderate
Fund of Funds
STANLIB Moderately
Aggressive Fund of Funds
STANLIB Aggressive
Fund of Funds
Cash 40%-60% 20%-40% 15%-25% 5%-15% 0%-10%
Bonds 20%-30% 20%-30% 20%-30% 10%-20% 0%-10%
Property 0%-20% 0%-20% 0%-20% 0%-20% 0%-20%
Equities 5%-20% 30%-40% 45%-55% 60%-75% 75%-95%
How does a Risk Profile Fund actually work?
Client’s Money
Your investment is allocated into the various asset classes and underlying investment portfolios, according to your
risk profile, and the tactical asset allocation.
All the diversification is done for you, both asset classes as well as equity funds.
Into one of the five Risk
Profile Funds
Cash 50%
Bonds 20%
Institutional Money Market Fund
Bond Fund
Conservative Fund
Equity 10%
ALSI 40
Value Fund
Growth Fund
Financial Fund*
Resourses Fund
Small Cap Fund
Property 20%
Institutional Property Fund**
* STANLIB Financials Fund has won the Morningstar Award 2010 for Equity - Financial Services
** The STANLIB Property Income Fund was named as the top performer at this year’s prestigious Raging Bull Awards 2010

More about the Fund Manager
Paul Hansen
After completing articles at Alex Aiken and Carter, Paul joined UAL Merchant Bank in1979. He then worked in the US,
mainly with Shearson Lehman Bros and returning to SA in 1992, joined Old Mutual and then RMB Asset Management.
He joined SCMB Asset Management in 1995, and has been with STANLIB since the merger in 2002.
Paul has won 9 Raging Bull awards during his time at SCMB and STANLIB.
Fund Performance
For the latest performance numbers for STANLIB’S Risk Profile Funds, refer to the fund fact sheets on the STANLIB website, or the STANLIB Weekly Focus.
What are the advantages of investing in the STANLIB Risk Profile Funds?
• A tailor-made solution according to your individual risk profile
• Access to a well diversified fund across all four asset classes
• Tactical Asset Allocation done once a quarter on your behalf, after rigorous debate from all the STANLIB investment specialists
• The equity portion of the funds are well diversified across sectors and fund managers
• The costs associated with the fund is low, you are getting all the benefits of a multi-manager fund, for a single manager fund charge
• You do not incur CGT on any switches done within the fund
• Low entry level into the world of investments – minimum investment of only R500 per month required
In closing - what should a smart investor do?
• Align your investment choices with your time horizon and investment objective
• Do not attempt to pick “winners” i.e. shares, properties and fund managers
• Do not attempt to time markets
• Diversify broadly to reduce volatility i.e. have many holdings across all selected asset classes, rather than concentrations within any asset class; and
• Choose an appropriate asset allocation and stick with it. Rebalance as required
• Invest on a regular basis, this allows you to take advantage of what is known as “cost averaging”
• Invest with a reputable company
Disclaimer
Collective Investment Schemes in Securities (CIS) are generally medium to long term investments. An investment in the participations of a collective investment scheme in securities is not the same as a deposit with
a banking institution. The value of participatory interests may go down as well as up and past performance is not necessarily a guide to the future. CIS are traded at ruling prices and can engage in borrowing and scrip
lending. A schedule of fees and charges and maximum commissions is available on request from the company/scheme. Commission and incentives may be paid and if so, would be included in the overall costs. A fund
of funds is a portfolio that invests in portfolios of collective investment schemes, which levy their own charges, which could result in a higher fee structure for these portfolios.
Forward pricing is used. Fluctuations or movements in exchange rates may cause the value of underlying international investments to go up or down.
The manager is a member of the Association for Savings & Investment of South Africa (ASISA)
Trustees: ABSA Bank Ltd. 6th Floor ABSA Towers North (6E1), 180 Commissioner Street, Johannesburg, 2001. Tel 011 350 4000
Compliance number: 3783LN