On the money Making
On the money Making waves this quarter Dealing with disruption Mazars launches financial services entity to offer skills on demand Global audit and advisory firm Mazars has launched a practice to offer skills and consulting services to businesses in the financial sector. Mazars Financial Services Africa is geared towards assisting companies to meet the challenges of an evolving market. Headed by Riaan Eksteen and George Ellis, industry veterans with 20 years’ financial services experience each, Mazars Financial Services Africa will offer senior professional skills on-demand to financial services companies. Mazars Co-CEO Anoop Ninan explains that financial services companies are changing the way they operate. “Business has progressed from longrange planning and static workforce requirements to quick implementation of projects and a dynamic, agile workforce.” This is particularly true for South African financial services companies who need to manage digital disruption. According to the Digital Vortex 2019 study, financial services is one of the five industries that are most vulnerable to digital disruption. This means that companies in this sector need to respond rapidly to change and work quickly to implement new ideas. “Projects undertaken by businesses in the financial services sector typically require specific skills for their duration. While companies recognise that they need to have the right skills for each project, finding people with the required expertise isn’t easy,” Ninan comments. He adds that skills shortages and the war for talent are more than buzzwords. “They are very real and many companies in the financial sector are finding it difficult to hire the right professionals when and where they need them,” Ninan says. Appetite for investment Kingson Fund Two gets a boost Kingson Fund Two, a dynamic High-Growth Tech and Black-Owned SME Fund, launched in the first quarter of 2019 at R 400 million (c. million), has been revised to 0 million. The reason behind increasing this up to 0 million is due to the enthusiastic investment appetite and committed capital from international investors. Recognising the importance of connecting South African startups to international markets and creating a viable venture capital ecosystem in South Africa, Kingson has been building investor networks into the US, and as a result, has garnered US investment support for its Fund Two. Kingson also pleased announced that to anchor its Fund Two, Stat Zero and its investors has committed a multi million-dollar (USD) investment into South Africa to enable Africa to become a global hub for tech innovation. Stat Zero is a digital investment platform aimed at aligning global entrepreneurship, government and venture capital to broaden opportunity and transform communities and global economies. "We are committed to bringing together innovation and emerging technology, with impact, to enact global change", says Marquis Cabrera, CEO and Co-Founder of Stat Zero. "Our investment into Kingson's Fund Two reinforces this mission to evoke change for the better on a significant scale, which will help increase South Africa’s GDP by enabling global market access to Silicon Valley, California and U.S. markets and capital to grow and scale SMMEs in South Africa." Preservation and diversification Laurium Income Prescient Fund yielding 8.43% gross of fees as at 30 September 2019 Fixed Income investments play a vital role as a source of income, for capital preservation, total return and diversification benefits. Having traditionally been a more equity-focused house, with the hire of Jean-Pierre Du Plessis in January this year, Laurium Capital launched the Laurium Income Prescient Fund (“The Fund”) on 1 March 2019. The Fund has a primary target of generating inflation +3% returns, and a secondary objective of avoiding drawdowns over a rolling three-month period. This fund is for investors who want to obtain real returns, but with low volatility. It is focused on compounding real returns over time while minimising the potential for drawdowns. The largest determinate of returns will be derived from generating yield in the portfolio. There are several drivers which can be used to actively generate returns – duration, credit, inflation-linked bonds, preference shares, property and international assets and currency. The fund is currently yielding 8.43% with a duration of 0.31 years. Credit spreads continue to be tight versus where they have been historically, and as such, Laurium has positioned the fund conservatively with 1.43 years of credit duration but has been taking advantage of the higher spreads in SA credit offshore. For more information visit www.lauriumcapital.com
INVESTMENT OUTLOOK Local assets still tops SA offering better value The global macroeconomic environment is treacherous at the moment. The shift to populism and the resultant risks have brought politics front and centre. This is inherently unpredictable. Extreme monetary policy action has de-emphasised the standard cycle. In this world, it is prudent to focus more on valuation (price) and to hold macro views lightly, while focusing on building well-diversified portfolios. As part of our investment process, we develop a set of evolving themes that take the macroeconomic environment into consideration. The theme that influenced our latest portfolio construction is that the US will underperform and, as such, our portfolios are underweight US equities. This is based off very high profits, high valuations and a strong US dollar, making it difficult for things to improve. Globally, we expect a low-return world, which will force money to search for yield in an environment of ultra-low global interest rates. This has the potential to support SA assets, which are offering better value. In terms of SA, we maintain our "winds of change" theme. This theme recognises that things are by no means easy, but at the margin we expect improvement – with lower interest rates and faster economic growth. The risk to this is that government does not act decisively on the parastatals, particularly Eskom. If government does not take swift corrective action, we will be downgraded to junk status. Our expected returns across SA assets have generally been revised up, while global bonds have once again deteriorated and are now expensive. On a relative basis, the investment case is pushing harder towards SA and away from global assets. SA assets have de-rated; in other words, they’ve become cheaper and are now offering better value. To this end, we have increased our longer-term expected returns for SA equity and property and have maintained our outlook for SA bonds. Peter Brooke, Head of MacroSolutions at Old Mutual Investment Group WHY YOUR INVESTMENT CHOICES MATTER. Our investors want their investments to do well and do good. That’s why we incorporate environmental, social and governance factors into all our investment and ownership decisions. And why we have committed over R122bn of our clients’ capital to sustainable investments that generate longterm returns, while solving some of society’s biggest challenges. Invest for a future that matters. Read more at oldmutualinvest.com 18 000 children receiving quality education. 1 300 teachers employed. INVESTMENT GROUP DO GREAT THINGS EVERY DAY 119872L The following entities are licensed Financial Services Providers (FSPs) within Old Mutual Investment Group (Pty) Ltd Holdings approved by the Financial Sector Conduct Authority (www.fsca.co.za) to provide advisory and/or intermediary services in terms of the Financial Advisory and Intermediary Services Act 37 of 2002. These entities are wholly owned subsidiaries of Old Mutual Investment Group Holdings (Pty) Ltd and are members of the Old Mutual Investment Group. Old Mutual Investment Group (Pty) Ltd (Reg No 1993/003023/07), FSP No:604. | Old Mutual Alternative Investments (Pty) Ltd (Reg No 2013/113833/07), FSP No:45255. | African Infrastructure Investment Managers (Pty) Ltd (Reg No 2005/028675/07), FSP No:4307. | Futuregrowth Asset Management (Pty) Ltd (Reg No 1996/18222/07), FSP No:520. Figures as at 31 December 2018 unless otherwise stated. Sources: Old Mutual Alternative Investments; African Infrastructure Investment Managers (AIIM); Old Mutual Specialised Finance; Futuregrowth Asset Management.
