By Christo Luüs, Chairman, SAIFM

christoIn this edition, the principles regarding effective risk data aggregation flowing from a consultative paper by the Basel Committee on Banking Supervision is briefly explained. There are 14 principles that must be complied with. However, not many clear metrics are offered to measure compliance against.

Still on the topic of the Basel Committee, it is argued that equity-like risks are brought to bonds under certain circumstances as a result of the Basel III requirement that bondholders share in the losses of a bank in times of stress.

The use of technology to facilitate the rapid convergence of wealth and capital markets is discussed while the application of technology to facilitate multi-channel engagement with clients is explained. It is argued that the correct use of technology provides the ability to scale and enhance customer relationships.

The adequacy of savings in retirement and the reasons why we don’t save enough is assessed i.e. it is due to certain behavioural characteristics. The tendency to sabotage our savings programme can only be countered if we use our own behavioural biases to our advantage.

In an analysis of long-term investment performance, the return and volatility characteristics of five South African asset classes namely equities, bonds, cash, gold and property were used to construct an efficient frontier, showing the minimum risk that could have been achieved at various returns by asset class diversification.

An overview of the collaboration initiatives between the Chinese and South African exchanges is provided. This is a trend that will continue to the benefit of financial market practitioners in both countries.

It is important for taxpayers to realise what their duties are with regard to arrangements that must under the tax law be reported to prevent becoming guilty of impermissible tax avoidance. These duties are explained in some detail.

Thank you to all our contributors who made this edition of the magazine so stimulating.