Global Investments. Diversifying your wealth

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1 JERSKEMY Global Investments Diversifying your wealth Your Wealth

2 It has been said: The world is a book, and those who do not travel read only a page. The same can be said of investing globally.

3 01 Investing Globally 4 02 How Much Should You Invest Globally? 6 03 Why Consider STANLIB s Global Solutions? 6 Our Global Partners 6 Brandywine Global Investments 6 Columbia Threadneedle Investments 7 Fidelity Worldwide Investments 7 04 STANLIB s Global Portfolio Range 7 05 STANLIB s Global Managed Solutions 8 06 How to Invest Globally 8 Rand Denominated Portfolios 8 Foreign Allowance Portfolios 8 07 Business Rules 9 Rand Denominated Portfolios 9 Foreign Currency Portfolios 10

4 It has been said: The world is a book, and those who do not travel read only a page. The same can be said of investing globally. There is a much larger range of global investment opportunities compared to our domestic set. However, questions about how to invest globally and how much to invest may not always be easy to answer. STANLIB offers a comprehensive range of global solutions across different regions, asset classes and risk profiles that address a variety of your needs. Investing Globally Build a Successful Portfolio With globalisation becoming an increasingly significant factor in both investment markets and our daily lives, investing globally has become an essential part of building a successful portfolio. By taking advantage of global investment opportunities, you can share in the growth of the world s most profitable industries and also benefit from holding investments in other currencies. Diversification Research shows that spreading investments across different countries (asset classes, industries and currencies) is an effective way to produce better riskadjusted returns. Inclusion of global investments is an important part of building a diversified portfolio. Research conducted over a period of 40 years shows that your risk/return ratio improves by 16% if you invest 30% of your assets offshore. This means that a globally diversified portfolio would have produced better risk-adjusted returns. 40 YEAR RISK AND RETURN AS AT 31 DECEMBER Percentage Annuallised Return Annuallised Risk Local Equities Globally Diversified Portfolio (70% Local and 3% Global Equities) Source: I-Net/STANLIB The above graph compares the average annualised return and risk profile of a purely domestic equity portfolio, to that with a 30% offshore exposure. Over a 40 year period, the average annualised returns are very similar, but the average risk of the globally diversified portfolio is much lower than its domestic counterpart. 4

5 Higher Potential Growth There is a much greater range of investment opportunities around the world than in South Africa. According to the International Monetary Fund, South Africa contributes a mere 0.6% to the global GDP (gross domestic product). The JSE comprises about 0.6% of the global stock market index. Thus, by investing globally you gain access to part of the 99.4% of global shares not represented in South Africa. For example, there are no oil producers on the JSE (like Exxon, BP and Chevron), technology hardware producers (such as IBM and Intel), soft drink manufacturers (Coke and Pepsi) or brand-name pharmaceutical companies (Johnson & Johnson, Bristol Myers Squibb, GlaxoSmithKline and Merck). There are many other examples, such as car manufacturers (Toyota, Hyundai, BMW, Volkswagen and Mercedes) or global food manufacturers (Kellogg s and Nestlé). Valuable Currency Protection Unit trusts holding assets denominated in foreign currencies offer protection against volatility in the rand. World Economic Outlook for 2015 Germany 4.95 Canada 4.38 United State of America 3.93 North America 3.93 Mexico 4.05 Colombia 4.05 Latin America 4.00 Switzerland 5.21 United Kingdom 4.29 France 4.28 Middle East & North Africa 4.41 Brazil 3.68 Europe 4.54 Sub-Saharan Africa 4.19 Asia 4.38 Japan 4.69 People s Republic of China 4.93 < Less confident More confident > Australia Question scale for individual questions: No confidence at all Not much confidence Moderate confidence Significant confidence Compatible confidence Source: IMF (International Monetary Fund) February 2015 South Africa 4.30 The phrase Have confidence groups together the responses of Complete confidence and Sgnificant confidence The phrase Do not have confidence groups the responses of No confidence at all and Not much confidence Pakistan 3.57 India

6 How Much Should You Invest Globally? Depending on your risk profile, part of your portfolio should be diversified globally in order to reduce its overall risk. How much you should invest globally will depend on your unique situation. Many factors including your risk profile, investment objective and the expected time horizon need to be considered when making an investment decision. Optimal Mix for Domestic and Global Funds The optimal mix for offshore exposure is dependent on your particular risk profile. The diagram below sets out the optimal combinations of domestic and offshore exposure based on the maximum potential return for a given level of risk. The optimal mix of assets for the different risk profiles are based on a balanced global portfolio of 60% equities, 25% bonds, 10% property and 5% cash. RISK PROFILE Conservative Domestic 94% Global 6% Moderately Conservative Domestic 84% Global 16% Moderate Domestic 79% Global 21% Why Consider STANLIB s Global Solutions? It is our view that each investment area requires different skills and approaches and hence we create small teams, each with a dedicated focus. This allows us to appoint talented and passionate people with the specific skills to deliver the best potential outcome for our clients, backed by our rigorous process. We follow the same philosophy in our approach to offshore investing but where necessary, we complement our in-house skills by partnering with experienced offshore asset managers who share the same valuation-driven approach. Our Global Partners Brandywine Global Investment Management, LLC We have partnered with Brandywine Global Investments, a boutique fixed interest asset manager, to manage our global fixed interest portfolios. Founded in 1986, Brandywine Global Investment Management manages US$550 billion in assets (as at 31 December 2014). Their mission, to seek value not yet recognised by others, is the core principle behind their work and is reflected in their culture, strategy and day-to-day decision-making process. Brandywine applies a top-down, value-driven process when structuring global income portfolios. Real (inflationadjusted) yield is their primary measure of value. Currency valuation is next in importance, as the real yield must be captured in US dollars. They focus on appreciating, undervalued currencies and overvalued currencies that can be hedged. Inflation trends, political risks, monetary trends, and business cycle and liquidity measures are also considered. Brandywine typically concentrate investments in 8-16 countries that appear to offer the best total return potential. Moderately Aggressive Domestic 67% Global 33% Aggressive Domestic 60% Global 40% Source: STANLIB It is essential that you understand fully what your objective is to determine how much of your investable assets should be exposed to global markets. You need to determine this with your financial adviser and also determine your risk appetite which will guide you on how much global exposure you should have. 6

7 Columbia Threadneedle Investments In managing our global portfolios we have partnered with Columbia Threadneedle Investments, which is the global brand name of the Columbia and Threadneedle group of companies. You can benefit from global investment perspectives which harness the resources, experience and scale of one of the world s largest asset management groups. Columbia Threadneedle has 2000 professionals, located across 18 countries, responsible for more than US$500 billion in assets (as 31 December 2014). They manage 115 funds rated 4-5 stars by Morningstar, which are available in a range of markets throughout the world. Columbia Threadneedle s global investment framework generates richer insights and shared ideas across their team. Fidelity Worldwide Investments We have partnered with Fidelity Worldwide Investments to manage our offshore cash portfolios. Fidelity International and its subsidiaries manage assets worth US$285 billion (as at 31 March 2015). The cornerstone of Fidelity s investment approach is research. As well as studying financial results, analysts and fund managers visit companies, meet their managers and talk to suppliers, customers and distributors, giving the investment team a clear 360 view of each company they invest in. STANLIB Asset Management Limited STANLIB is a leading asset management company in Africa, with assets under management and administration of R579billion* (USD37 billion) with over retail and institutional clients across the African continent (as at December 2015). We have a physical presence in ten African countries and are able to leverage from a wider Standard Bank Group Africa footprint. The Property Fund aims to maximise investors returns by investing in global property companies and property related securities listed on exchanges in both developed and emerging markets STANLIB s Global Portfolio Range BUILDING BLOCK PORTFOLIOS MANAGED FUNDS Managed by Fidelity Worldwide Investments Managed by Brandywine Global Investments Managed by Columbia Threadneedle Investments Managed by STANLIB Asset Management Limited Managed by Columbia Threadneedle Investments CASH BONDS EQUITY PROPERTY ASSET ALLOCATION FOREIGN ALLOWANCE STANLIB Euro Cash Fund STANLIB Sterling Cash Fund STANLIB US Dollar Cash Fund STANLIB Global Bond Fund Equity Fund STANLIB European Equity Fund Emerging Markets Fund Property Fund Balanced Fund Balanced Cautious Fund ASSET SWAP (Rand Denominated) CASH BONDS EQUITY PROPERTY ASSET ALLOCATION STANLIB Euro Currency FOF STANLIB US Dollar Cash FOF Bond Feeder Fund Equity Feeder Fund Property Feeder Fund Balanced Cautious Feeder Fund Balanced Feeder Fund 7

8 STANLIB s Global Managed Solutions Our Global Managed Solutions are aimed at investors who seek a diversified investment portfolio but want the asset allocation decisions taken on their behalf. They offer simplicity and full-time professional management of investors money. Investors do not need to rebalance their portfolios themselves, as this is done by the fund manager. LONG-TERM STRATEGIC ASSET ALLOCATION Balanced Cautious Fund Property 5% - 20% Equities 20% - 40% Bonds 25% - 55% STANLIB GLOBAL BALANCED CAUTIOUS FUND The Balanced Cautious Fund is managed on a cautious basis. The Portfolio has the lowest weighting in equities (0-30%). It offers the investor a more conservative level of capital growth than would otherwise be expected from a fund with a higher equity component. STANLIB GLOBAL BALANCED FUND The Balanced Fund s assets are managed in order to minimise risk but at the same time expose the investor to assets within geographic regions and sectors that have the most potential. The Portfolio has the second highest equity weighting of the three managed portfolios (40-60%). This gives the Portfolio a higher potential for capital growth than the Balanced Cautious Fund but at a slightly higher risk rating. Cash Balanced Fund Property Equities Bonds Cash 10% - 35% 5% - 20% 45% - 70% 15% - 35% 01% - 20% How to Invest Globally You can either invest in our rand denominated portfolios or invest in our foreign domiciled portfolios which are denominated in foreign currencies. Our rand denominated range of portfolios is an easy and effortless way to diversify offshore. You do not have to apply for foreign allowance clearance and your application does not have to be approved by the South African Reserve Bank. You get all the benefits of investing globally and dealing with a South African institution without having to physically take your money offshore. Voluntary rand denominated investments have no monetary limit in current legislation Monthly debit orders can be used to make use of rand cost averaging Easily accessible, as you do not have to apply for foreign allowance clearance Investing in rand denominated offshore investments offers protection against a depreciation in the rand Foreign Allowance Portfolios On the other hand, if you would like to invest in foreign currency, and be able to use the proceeds of your investment offshore then it is worth investing in our Jersey-based foreign denominated portfolios. STRUCTURE Voluntary Investment MAXIMUM OFFSHORE ALLOCATION R10 million foreign allowance Rand Denominated Portfolios STRUCTURE Voluntary Investment such as a Unit Trust Classic Retirement Annuity/ Preservation Plans Classic Linked Life Annuity MAXIMUM OFFSHORE ALLOCATION Unlimited 25% of total portfolio Unlimited Foreign allowance investments are subject to a R10 million maximum per individual per annum Useful for South African residents who already have money offshore or would like to use their foreign allowance Foreign currency investments makes it easy for you to transact with foreign accounts, as long as those accounts are in your name Investing in portfolios denominated in foreign currency offers protection against a depreciation in the rand 8

9 Business Rules Rand Denominated Portfolios CHARGING STRUCTURE Intermediary Upfront Charge Annual Management Charge Underlying Fund Annual Management Charge Cash Portfolios 0.00%-1.80% 0.50% 0.15% 0.65% Bond Portfolios 0.00%-1.80% 1.00% 0.75% 1.75% Property Portfolios 0.00%-3.00% 1.15% 0.60% 1.75% Managed Portfolios 0.00%-3.00% 1.35% 0.60% 1.95% Equity Portfolios 0.00%-3.00% 1.35% 0.60% 1.95% *Management Company does not charge an initial upfront charge Total Service Charge Note: The intermediary Upfront Charge is negotiable with your financial adviser. The figures in the above table exclude South African VAT of 14%. Maximum Upfront Charge: The upfront charge is deducted from the full investment value and the remaining amount is allocated to the selected investment options. Commission paid to financial advisers is incorporated in the initial charge. Any additional investment will incur an upfront charge. Please refer to the latest fact sheet(s) for more details. Switching: A switch involves selling participatory interests (units) in one portfolio and investing the proceeds inanother portfolio. STANLIB Collective Investments (RF) Limited does not normally charge initial charges twice, other than in instances where the original investment was in a portfolio with lower charges than the portfolio into which the investor is switching. Accordingly, the investor will have to pay in the difference in the initial charges. However, the investor and the financial adviser may agree on a different arrangement to that mentioned above, in which case an initial charge as agreed between the investor and the financial adviser, will be charged on the switch transaction. As costs may change from time to time, please consult with your authorised financial adviser. Net Asset Value (NAV): Prices are calculated on a NAV basis, which is the total value of all assets in the portfolio including any income accrual and less any permissible deductions from the portfolio divided by the number of participatory interests in issue. Permissible deductions include brokerage, MST/UST, auditor s fees, bank charges, trustee/custodian fees, RSC levies and the annual management charge levied by STANLIB Collective Investments (RF) Limited. Annual Service Charge (levied monthly incl. VAT): The annual service charge for the individual portfolios is accrued daily and levied monthly on the market value of the portfolio. Please refer to the latest fact sheet(s) for more details. The annual service charge is normally deducted from the income received by the portfolios. TURNAROUND TIMES New Business Switches Redemptions Minimum Investment Amount Minimum Debit Order Amount * Day means business day 3 days 2 days 3 days R5000 R500 9

10 Foreign Currency Portfolios CHARGING STRUCTURE Intermediary Upfront Charge Annual Management Charge Underlying Fund Annual Management Charge Cash Portfolios 0.00%-1.00% 0.50% 0.15% 0.65% Bond Portfolios 0.00%-3.00% 1.00% 0.60% 1.60% Property Portfolios 0.00%-3.00% 1.15% 0.60% 1.75% Managed Portfolios 0.00%-3.00% 1.35% 0.60% 1.95% Equity Portfolios 0.00%-3.00% 1.35% 0.60% 1.95% *Management Company does not charge an initial upfront charge Total Service Charge Note: The intermediary Upfront Charge is negotiable with your financial adviser. The figures in the above table exclude South African VAT of 14%. Please note: For further information please see the Investing offshore guide which can be found on Original documentation is required for all new clients. TURNAROUND TIMES New Business Switches Redemptions Minimum Investment Amount Minimum Subequent Investment Amount * Day means business day 2 days 1 days 5 days to receive the proceeds US$2500 US$1000 Important Note: The value of participatory interests (units) in the class funds depends on the value of the underlying assets, which may fluctuate. The value of assets and income on those assets may also be affected by fluctuation in currency rates and, in some markets, exchange control and fiscal regulations. Hence the capital value of the units may fluctuate and is not guaranteed. The purchase of a unit in a currency portfolio or the other portfolios is not the same as placing portfolios on deposit with a bank. The Manager has no obligation to redeem units at the amount of the original investment. The portfolios do not pay dividends. Income is capitalised and can only be realised by selling units. Please note: A copy of the prospectus is available on request or can be found on 10

11 Disclaimer and Statutory Disclosure The price of each unit of a domestic money market portfolio is aimed at a constant value. The total return to the investor is primarily made up of interest received but, may also include any gain or loss made on any particular instrument. In most cases this will merely have the effect of increasing or decreasing the daily yield, but in an extreme case it can have the effect of reducing the capital value of the portfolio. Collective Investment Schemes in Securities (CIS) are generally medium to long term investments. The value of participatory interests may go down as well as up and past performance is not necessarily a guide to the future. An investment in the participations of a CIS in securities is not the same as a deposit with a banking institution. CIS are traded at ruling prices and can engage in borrowing and scrip lending. A schedule of fees and charges and maximum commissions is available on request from STANLIB Collective Investments (RF) Limited (the Manager). Commission and incentives may be paid and if so, would be included in the overall costs. A fund of funds is a portfolio that invests in portfolios of collective investment schemes, which levy their own charges, which could result in a higher fee structure for these portfolios. Forward pricing is used. Fluctuations or movements in exchange rates may cause the value of underlying international investments to go up or down. Liberty is a full member of the Association for Savings and Investments of South Africa. The Manager is a member of the Liberty Group of Companies. The Portfolios of the STANLIB Offshore Unit Trusts scheme, are Feeder Fund Portfolios which only invest in the participatory interests of a single Portfolio of a collective investment scheme. In addition to the annual management charge, other fees are incurred by the trust (trustee, custodian and general expenses). There is no sales tax applicable in Jersey. Commission and incentives may be paid and if so, are included in the overall costs. A schedule of fees and charges and maximum commissions is available on request from STANLIB Fund Managers Jersey Limited, ( the Manager ). The portfolios of STANLIB Offshore Unit Trusts scheme are accumulation portfolios and do not distribute income. Please refer to the prospectus of this scheme for more details, a copy of which is available on request from STANLIB Collective Investments (RF) Limited, ( STANLIB ), the address of which is 17 Melrose Boulevard, Melrose Arch, 2196, South Africa. The registered office of the Manager is Standard Bank House, La Motte Street, St Helier, Jersey, Channel Islands. The Trustees are Capita Trust Company (Jersey) Limited, 12 Castle Street, St. Helier, Jersey, Channel Islands. STANLIB Fund Managers Jersey Limited and Capita Trust Company (Jersey) Limited are regulated by the Jersey Financial Services Commission to conduct Funds Service Business and is a wholly owned subsidiary of Standard Bank Offshore Group Limited, whose registered office is La Motte Street, St Helier, Jersey, JE2 45Z. STANLIB Collective Investments (RF) Limited Reg. No. 1969/003468/06 Compliance number: 3186HX 11

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