sala wealth summit 2012 - jarred glansbeek
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CEO, RISCURA: The Security of Wealth in Emerging MarketsTRANSCRIPT
The Security of Wealth in Emerging Markets���Strategies to ensure wealth preservation
P R E S E N T A T I O N B Y
Jarred Glansbeek
CEO, RisCura
W E A L T H S U M M I T
Managing Wealth in South Africa !"#$%#&'()*+$,-(,-./"'-(#&0*1,2*&,
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Daniël Kriel has been CEO of Sanlam Private Investments (SPI) since 1 March 2005. Prior to Sanlam, Daniël worked with ABSA Consultants and Actuaries for several years, where he developed South Africa’s first retirement and risk cover plan for blue-collar workers. While at ABSA, he also headed the first empowerment initiative in the employee benefits industry. Daniël joined the Sanlam Group in 1998, and was responsible for marketing, institutional sales and retail distribution at SIM before being appointed as CEO of Sanlam Private Investments in 2005. He is an exco member of Sanlam Investments, and serves on a number of boards of both local and international group companies. Under Daniël’s leadership Sanlam Private Investments has become one of the leading private client investment managers and stock-brokers in South Africa, and grown an expanding international footprint. SPI manages and administers some R60 billion and is widely regarded as being at the forefront of renewal in the private client industry. It is also one of the fastest growing companies in the Sanlam stable. Daniël holds a BA (Law) from Stellenbosch University and an LLB from RAU.
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Jarred Glansbeek456.9=>A83
Jarred Glansbeek is the founder and CEO of RisCura. RisCura is a global, independent financial analytics provider and investment consultant. RisCura services institutional investors with over $200billion in assets under management, as well as a significant number of asset management, hedge fund and private equity firms. The RisCura Group, in addition to investment consulting, has divisions that are leading providers of independent valuation, risk and performance analysis services to investors. Jarred established RisCura in 1999 to fill the financial industry’s need for a liability aware, independent risk-based consultant. Prior to this he was a director at the FirstRand Group. In the1990s he pioneered and implemented liability-driven investing while being part of a team managing new product development, derivatives, structured products and quantitative pension fund solutions at the FirstRand asset management units. Today, RisCura offers a comprehensive suite of services that meet these needs through its five autonomous and distinct business units - RisCura Analytics, RisCura Consulting, RisCura Fundamentals, RisCura Fund Service and RisCura Transition. Jarred is regarded a thought leader in the pension fund industry and is a pioneer of liability-driven investment processes. Jarred is a regular speaker at conferences and events around the world.
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Silvana BottegaGHIJKLM!"#"
is proudly supported by:
!
www.sa-la.org [email protected] +27 (0) 791787867
Jarred Glansbeek
March 2012
Security of Wealth in Emerging Markets
! Distinction between capital and income
! When to buy and when to sell: Value / Risk contradiction
! Markets - overview
! What can be done to secure ‘wealth’
Agenda
5
Distinction between capital and income
Why is asset allocation important?
7
Study shows that 93.6% of final performance of pension funds determined by their investment policy and asset allocation. Range of performance added by manager
selection – 6%. Both are important but asset allocation key! *
* Study published in 1986 in Financial Analysts Journal. Study based on 91 large ccorporate pension funds from 1974-1983.
Asset class - 30 year performance
8
Pension Payments
9
Annual Pension
Time
Bond performance
Bond performance
ALBI Index and ALBI Yield Since 1986
Bond performance
Insurance company A* R1000,000 to buy annuity for life, male pensioner aged 65
1. Current 6972 11.6 3.7
2. 6 months ago 7307 (5.2%) 11.9 4.1
3. 12 months ago 6967 (-0.1%) 10.3 4.1
Monthly Income Interest % Real %
* Quote available on request
Goals: Pension cost
! If you are worried about income and interest rates dropping ! Buy bonds….not cash
! Careful on inflation
! If you are worried about capital values dropping ! Buy cash
! Careful on asset price inflation
! Selling when everyone else is selling is not a great idea! Its probably too late…
Principles
14
When to buy and sell?
The volatility value contradiction
16
0,00%
0,50%
1,00%
1,50%
2,00%
2,50%
3,00%
3,50%
0 200 400 600 800 1000 1200 1400 1600 1800
5/9/2000 5/9/2001 5/9/2002 5/9/2003 5/9/2004 5/9/2005 5/9/2006 5/9/2007 5/9/2008 5/9/2009 5/9/2010 5/9/2011
90 DAY VOLATILITY
MSCI Global Index 90 Day Vola?lity
The volatility value contradiction
17
0,00%
0,50%
1,00%
1,50%
2,00%
2,50%
3,00%
3,50%
0 200 400 600 800 1000 1200 1400 1600 1800
5/9/2000 5/9/2001 5/9/2002 5/9/2003 5/9/2004 5/9/2005 5/9/2006 5/9/2007 5/9/2008 5/9/2009 5/9/2010 5/9/2011
90 DAY VOLATILITY
MSCI Global Index 90 Day Vola?lity
0
50
100
150
200
250
300
350
Jan 99
May 9
9
Sep 99
Jan 00
May 0
0
Sep 00
Jan 01
May 0
1
Sep 01
Jan 02
May 0
2
Sep 02
Jan 03
May 0
3
Sep 03
Jan 04
May 0
4
Sep 04
Jan 05
May 0
5
Sep 05
Jan 06
May 0
6
Sep 06
Jan 07
May 0
7
Sep 07
Jan 08
May 0
8
Sep 08
Jan 09
May 0
9
Sep 09
Jan 10
May 1
0
Sep 10
Jan 11
May 1
1
Sep 11
Jan 12
VIX
Buy cheap…sell expensive
18
0,00%
0,50%
1,00%
1,50%
2,00%
2,50%
3,00%
3,50%
0 200 400 600 800 1000 1200 1400 1600 1800
5/9/2000 5/9/2001 5/9/2002 5/9/2003 5/9/2004 5/9/2005 5/9/2006 5/9/2007 5/9/2008 5/9/2009 5/9/2010 5/9/2011
90 DAY VOLATILITY
MSCI Global Index 90 Day Vola?lity
-‐
5,00
10,00
15,00
20,00
25,00
30,00
35,00
40,00
45,00
0
200
400
600
800
1000
1200
1400
1600
1800
1/4/2000 1/4/2001 1/4/2002 1/4/2003 1/4/2004 1/4/2005 1/4/2006 1/4/2007 1/4/2008 1/4/2009 1/4/2010 1/4/2011 1/4/2012
MSCI GLOBAL PE
MSCI Global Index MSCI Global PE
Markets
20
All Share - Monthly
FTSE/JSE Africa All Share
Monthly 1995/06/30 – 2012/02/24
21
ALSI vs. Earnings
ALSI Index
Daily 1995/06/30 – 2012/02/24
0
100
200
300
400
500
600
700
800
900
1000
Jun 9
5
May 9
6
Apr 9
7
Mar 9
8
Feb 9
9
Jan 0
0
Dec 0
0
Nov 0
1
Oct 0
2
Sep 0
3
Aug 0
4
Jul 0
5
Jun 0
6
May 0
7
Apr 0
8
Mar 0
9
Feb 1
0
Jan 1
1
Dec 1
1
Price*EY Price
Source: I-NET
SA Equity (ALSI) – Yields
-
5.00
10.00
15.00
20.00
25.00
30.00
Jan 6
0
Oct 6
1
Jul 6
3
Apr 6
5
Jan 6
7
Oct 6
8
Jul 7
0
Apr 7
2
Jan 7
4
Oct 7
5
Jul 7
7
Apr 7
9
Jan 8
1
Oct 8
2
Jul 8
4
Apr 8
6
Jan 8
8
Oct 8
9
Jul 9
1
Apr 9
3
Jan 9
5
Oct 9
6
Jul 9
8
Apr 0
0
Jan 0
2
Oct 0
3
Jul 0
5
Apr 0
7
Jan 0
9
Oct 1
0
Jul 1
2
Apr 1
4
EY
DY
EY Forecast
23
Prime Overdraft Rate
Prime Overdraft Rate
Monthly 1969/12/31 – 2012/02/24
24
SA Listed Property Valuation
SA Listed Property - R186
Effective date: 2004/07/31 – 2012/02/24
-3
-2
-1
0
1
2
3
Jun 0
4
Dec 0
4
Jun 0
5
Dec 0
5
Jun 0
6
Dec 0
6
Jun 0
7
Dec 0
7
Jun 0
8
Dec 0
8
Jun 0
9
Dec 0
9
Jun 1
0
Dec 1
0
Jun 1
1
Dec 1
1
%
25
Rand Dollar Exchange rate
Source: I-NET
0
2
4
6
8
10
12
14
Dec 7
1De
c 72
Dec 7
3De
c 74
Dec 7
5De
c 76
Dec 7
7De
c 78
Dec 7
9De
c 80
Dec 8
1De
c 82
Dec 8
3De
c 84
Dec 8
5De
c 86
Dec 8
7De
c 88
Dec 8
9De
c 90
Dec 9
1De
c 92
Dec 9
3De
c 94
Dec 9
5De
c 96
Dec 9
7De
c 98
Dec 9
9De
c 00
Dec 0
1De
c 02
Dec 0
3De
c 04
Dec 0
5De
c 06
Dec 0
7De
c 08
Dec 0
9De
c 10
Dec 1
1
PPP
ComRand
FinRand
26
MSCI - Monthly
Morgan Stanley World Index US$
Monthly 1969/12/31 – 2012/02/24
27
MSCI vs. Earnings
Morgan Stanley World Index US$
Daily 1995/08/01 – 2012/02/24
0
50
100
150
200
250
300
350
Aug 9
5
Mar 9
6
Oct 9
6
May 9
7
Dec 9
7
Jul 9
8
Feb 9
9
Sep 9
9
Apr 0
0
Nov 0
0
Jun 0
1
Jan 0
2
Aug 0
2
Mar 0
3
Oct 0
3
May 0
4
Dec 0
4
Jul 0
5
Feb 0
6
Sep 0
6
Apr 0
7
Nov 0
7
Jun 0
8
Jan 0
9
Aug 0
9
Mar 1
0
Oct 1
0
May 1
1
Dec 1
1
Price*EY Price
MSCI Equity – Yields
28
1.00
2.50
4.00
5.50
7.00
8.50
10.00
11.50
13.00
14.50
16.00
Jan
70
May
71
Sep
72
Jan
74
May
75
Sep
76
Jan
78
May
79
Sep
80
Jan
82
May
83
Sep
84
Jan
86
May
87
Sep
88
Jan
90
May
91
Sep
92
Jan
94
May
95
Sep
96
Jan
98
May
99
Sep
00
Jan
02
May
03
Sep
04
Jan
06
May
07
Sep
08
Jan
10
May
11
Sep
12
Jan
14
EY
DY
EY Forecast
Datastream Consensus - 1 and 2 Year earnings growth forecast.
MSCI Equity – Yields
29
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
Feb
77
Jun
78
Oct
79
Feb
81
Jun
82
Oct
83
Feb
85
Jun
86
Oct
87
Feb
89
Jun
90
Oct
91
Feb
93
Jun
94
Oct
95
Feb
97
Jun
98
Oct
99
Feb
01
Jun
02
Oct
03
Feb
05
Jun
06
Oct
07
Feb
09
Jun
10
Oct
11
Feb
13
EY/LR EY/LR Forecast
Datastream consensus USGB10 & MSCI EY:1 and 2 year forecast
Developed Countries Yields
30
Developing Countries Yields
31
US vs Emerging markets (USD)
32
80
85
90
95
100
105
110
115
120
125
130
Dec 0
9
Jan
10
Feb
10
Mar
10
Apr 1
0
May
10
Jun
10
Jul 1
0
Aug
10
Sep
10
Oct 1
0
Nov 1
0
Dec 1
0
Jan
11
Feb
11
Mar
11
Apr 1
1
May
11
Jun
11
Jul 1
1
Aug
11
Sep
11
Oct 1
1
Nov 1
1
Dec 1
1
Jan
12
US Outperformance
S&P 500 TR MSCI EM USD
Protecting ‘Wealth’
! Understand income needs vs. capital desires
! Income ! Protect income with fixed interest instruments
! Take (low) risk with interest rate sensitive asset classes
! Equity highest of normal asset classes
! Capital ! Protect capital with cash
! Take (low) risk with capital sensitive asset classes
! Equity highest risk of normal asset classes
! Offshore diversification ! Currency of emerging markets is indicator for risk aversion
! As local gives protection for risk aversion
! Establish ‘price of risk’
! Take risk when risk is cheap
What can we do to protect wealth
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