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The official Financial Markets Journal of SAIFM
Home May 2016

May 2016

SAIFM inaugural Investment Summit: Forces shaping the investment landscape over the next decade

Following hot on the heels of our highly acclaimed 2nd Regulatory Summit, SAIFM is proud to introduce our Investment Summit. This summit offers a unique opportunity for financial market practitioners and advisers to ponder the realities of a new investment landscape and how to not only survive, but to thrive. The focus of the summit will be interaction among peers with plenty of opportunity for audience participation that will ensure lively debate on issues affecting the financial market and advisers’ profession.

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By Christo Luüs, Chairman, SAIFM We are proud to announce [...]

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Shareholder primacy

Since the 2007/2008 global financial crisis and its aftermath, the doctrine of shareholder primacy has come under increasing scrutiny, even criticism. Shareholder primacy embraces a shareholder-centric view of corporate governance that emphasises the maximising of shareholder value while only derivatively considering the interests of other stakeholders such as society, the local community, consumers and employees …

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Sovereign risk rating downgrade – Implications

A ratings downgrade to speculative grade by at least two of the major credit ratings agencies within the next twelve to eighteen months seems highly probable. Political issues as well as the commodity slump and struggling developing country environment do not augur well for the economy or the markets even though the bond market seems to indicate that a downgrade had already been discounted …

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Life beyond alpha and beta products

It is time the investment industry also tries to improve safety (risk) and focus less on speed (i.e. return). Already some are looking at ways to pay fund managers to reduce risk, not pay them to try and beat benchmarks with higher risk. We also need to stop spending the majority of our resources on marketing campaigns and chasing performance/skill based on highly unreliable historic returns …

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South Africa remains an attractive investment

Investors generally, but South African investors in particular, should not lose sight of the fact that South Africa remains a highly attractive—and sound—investment destination …

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Co-operation for clearing OTC derivatives

The FSB has entered into an MoU regarding the recognition and supervision of central counterparties with the ESMA. This will enable local central counterparties to provide clearing services to clearing members or trading venues established in the European Union. The draft regulations under the Financial Markets Act regarding the qualifying criteria and compliance obligations of central counterparties must still be finalised …

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Project assisting needy students

A tripartite agreement between Imara Holdings, SAIFM and Unisa has been signed to enable 240 financial students over the next three years to write the SAIFM Registered Persons Examination. This initiative is intended to benefit financial disadvantaged learners from South Africa and Sub-Saharan Africa to obtain the necessary accreditation …

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Addressing the threat of cyber-crime in the digital era

The cybercrime industry is evolving. It’s now characterised by sophisticated, multi-level attacks, carefully coordinated to achieve a specific aim – usually the theft of data or money. And the stakes are getting higher: As more and more of an organisation’s value now resides in the data and the digital assets that it owns, breaches can become catastrophic …

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Whose loss is it anyway?

If a party breaches a legal duty owed exclusively to a company, which results in a loss to that company, only that company may sue in respect of that loss – as opposed to a shareholder who is merely invested in the company. Consequently, the shareholder cannot rely on a breach of a legal duty owed to the company in order to recover from a drop in the value of his shares …

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Two shares making the JSE bear market

Given that the South African economy has been limping along for at least three years, the strong stock market has confounded analysts. It seems there is a disconnect between the JSE and the real economy, or is there really one? Our analysis demonstrates that the JSE has, in fact, performed equally poorly during that time, not even keeping pace with inflation, but this has been concealed by the extraordinary performance of just two counters: Naspers and SABMiller …

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Don’t chop and change

The powerful emotions of greed and fear mean that it is simply human nature to chase the best investment returns. As a result, investors often fall into the trap of disinvesting from an underperforming fund to invest in one that outperformed over the same period. However, studies abound on the folly of such an investment strategy…

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Performance fees – value for money?

Investment management fees in general and performance fee structures in particular have attracted a lot of attention in recent times. This is unsurprising given the myriad reform proposals across the savings industry and a lower return market environment. The debate should be welcomed by all who have an interest in ensuring good value for money in South Africa’s long-term savings industry …

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Value of trusts not diminished by tax proposals

While much has been made of the proposals contained in the first interim report of the Davis Tax Committee on estate duty, particularly those related to trusts, as well as in this year’s Budget Speech, these structures remain viable and useful instruments …

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Ratings downgrade: already priced into market

South Africa ejection from the World Government Bond Index (WGBI) would represent possibly the most dramatic outcome of a ratings downgrade and should be South Africa’s biggest cause for concern. For this reason, while the views of each of the agencies matters, the central concern is what the collective impact on South Africa’s status would be and whether the country’s bonds stay in the WGB …

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Capital Gains Tax will have devastating effect

The inclusion rate of capital gains has been increased from 33.3% to 40% for individuals, and from 66.6% to 80% for trusts and companies. For high-net-worth South Africans, CGT implications are of particular importance as asset prices have increased rather substantially since October 2001 when it was introduced …

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How to become wealthier

Historically money has worked the hardest in equities. Over the long-term, equities have outperformed all other investments everywhere in the world. What does the smart money do? It invests consistently in global share markets through its ups and downs, knowing that the markets ultimately spend more time rising than they spend falling …

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Spending habits

Whenever there is an opportunity to splurge – be it the festive season, the start of the school year or Easter – retailers bombard consumers with specials and shoppers scramble to fill their trolleys to the brim with discounted spoils …

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Converting loans into equity

SARS has issued a draft Interpretation Note in terms of which the reduction of debt through the issue of shares may not trigger adverse tax consequences provided the issuing of shares is not a sham transaction intended to disguise a waiver of debt …

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Bourse-driven financial inclusion

If the consumer is indeed king, as marketers passionately trumpet, then the recent flurry of stock exchange license bids at the Financial Services Board, both conditionally approved and pending, serve as coronation ceremonies for the South African investor whose seal of royalty is embodied in choice …

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The balancing act of financial planning

To ensure that your capital lasts your lifetime, it is important to manage the two risks of volatility in the short term and inflation in the long term, in order to achieve your goals and objectives …

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Blockchain exuberance a risk

Stories about digital currencies in general, and Bitcoin in particular, are still filling newsfeeds. However the industry is now more focused on the underlying technology of the blockchain and the concept of the shared ledger …

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On the road to implementing T+3 settlement cycle

On 11 July this year the JSE will complete its move to a shorter settlement cycle, when all trades conducted on the exchange will be settled on T+3 …

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Why are gold shares so volatile?

Gold shares have been a popular form of investment for those bullish on the gold price, given their sometimes significant level of gearing. But investors should also be aware that the gearing works in reverse when the gold price falls and share prices will decline at a higher rate...

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More regulatory intervention for insurers?

In February 2016 a second draft of the Insurance Bill was tabled. It is intended to be the framework legislation consolidating the Short-Term and Long-Term Insurance Acts. The Bill creates a Solvency Assessment Management (SAM) regime to monitor the finances of insurers and incentivise insurance providers that adopt more sophisticated risk monitoring and risk management tools …