COVER FEATURE
COVER FEATURE DISCRETIONARY FUND MANAGERS Why use a Discretionary Fund Manager? A Discretionary Fund Manager (DFM) should become an extension of the advisor’s practice. They become the advisor’s investment team, giving him access to specialist investment skills, which should improve their clients’ investment outcomes. YEAR 2015 2016 2017 2018 2019 ALSI Market Return 5.13% 2.63% 20.95% -8.53% 12.05% Miss Top Trading Day 1.96% -0.34% 18.55% -11.81% 9.76% Miss Top 5 Trading Days -7.89% -9.34% 11.60% -21.37% 2.50% Miss Top 10 Trading Days -16.65% -18.00% 4.52% -29.24% -4.68% Miss Top 20 Trading Days -28.47% -30.61% -5.94% -39.60% -15.43% or fund changes simultaneously across all advisors through their ability to bulk switch, whereas a Category I advisor would need to meet with each client and get their signed consent to make these changes. Although advisors with a Category II licence can legally provide these services, many are smaller firms without the necessary skills to provide the full range of services. In these instances, they often appoint a DFM in a sub-advisory role. MIC offers a range of services ranging from manager research, portfolio construction, attribution, performance monitoring, portfolio optimisation, asset allocation, reporting and execution, allowing other Category II licence holders to enhance their value to clients. In a market that is preparing itself for the Retail Distribution Review (RDR) regulatory framework, MIC’s tailored DFM capability applies to both Category I and II financial service providers. Please expand on this. Category I advisors often partner with a DFM to help them with portfolio construction, manager or fund selection and the efficiencies that a Category II licence brings. For example, a DFM can apply asset allocation Without a plan or goal, it is difficult to measure how successful or unsuccessful you have been. What changes would you like to see happen in the industry over the next five years? I would like to see the industry becoming more professional and transparent in terms of both fees and skills. I am encouraged by the suggested licensing requirements for different categories of licences that we saw under the latest RDR proposals. What are the latest developments, trends and innovations in this market that pertain to your business directly? Consolidation and digitisation are two big trends that I believe will continue for the foreseeable future. Compression on fees is another trend that I’m seeing especially in a low-return environment. I also believe that RDR will have a significant effect on advisors and asset managers. EFFECT OF COVID-19 MIC combines traditional and alternative asset classes to meet the specific risk and return objectives of clients. This approach is based on asset classes that are defined by their different responses to changes in economic conditions. The effect and unexpected response in the economy that Covid-19 caused has been unfathomable. Were the predictions in terms of responses to economic fluctuations adequate? We build diversified and resilient portfolios that will consistently deliver on their objectives or outcomes over the relevant time frames, regardless of short-term volatilities or crises. Risk management forms part of the portfolio construction process. We don’t believe that all managers have skills in all asset classes, and so we prefer to select best of breed managers per asset class. We use a combination of active, passive and smart-beta solutions in asset classes where this makes sense. 16 www.bluechipdigital.co.za
BRAVE/5776/MMI/E Momentum Investment Consulting will help you build sustainable investment solutions to help your clients achieve their goals. We provide discretionary fund management services to both Category I and Category II financial services providers and advisory services to Category II financial services providers. Our expertise includes everything from mandate design, asset allocation, strategy optimisation, risk management, fund research and manager selection to customised reporting. For more information contact us at mic@momentum.co.za investment consulting Momentum Investment Consulting is an authorised financial services provider (FSP32726).
