Sanlam Limited · JSE:SLM
Sanlam — Investor Presentation (2015)
22 slides from Sanlam's investor presentation, 2015
Slide 1: Institutional Challenges Opportunities
Z Challenges Opportunities Institutional
Slide 2: The changing role of the asset owner
The changing role of the asset owner Better frameworks for better results Bart Heenk, MD Avida International
Slide 3: Agenda
Agenda • Pension deficits cause: increased longevity, rapidly reducing workforce effect: reduced pension affordability remedy: risk transfer, risk reduction • Better governance • Build or buy? • Framework for good governance • An example 3
Slide 4: Rapidly reducing workforce
Rapidly reducing workforce 4
Slide 5: Rapidly reducing workforce
Rapidly reducing workforce 5
Slide 6: Rapidly reducing workforce
Rapidly reducing workforce 6
Slide 7: Rapidly reducing workforce
Rapidly reducing workforce Source: European Commission 7
Slide 8: Rapidly increasing longevity
Rapidly increasing longevity Source: 8
Slide 9: Reduced affordability
Reduced affordability • State pensions will become increasingly unaffordable • Tax incentives are being reduced • Lower relief in accumulation phase (UK: LTA, AA) • Increased taxation in pay-out phase (NL) • Workplace pensions are putting strain on companies’ finances • Regular contributions • Defic
Slide 10: Pension deficits are real
Pension deficits are real Source: Bank of England 10
Slide 11: Risk transfer and reduction
Risk transfer and reduction • Risk transfer: • DB to DC • Insurance buy-ins and buy-outs • Full to conditional indexation • Risk reduction: • Final salary to career average • RPI to CPI • Reduced equity markets exposure • Better risk management • Better governance 11
Slide 12: Pension management more complex
Pension management more complex • Better risk management and search for yield • Increased complexity • Requires expertise and time • Boards of Trustees have neither • So, how to deal with these challenges? 12
Slide 13: Better governance
Better governance • Trustee Boards spend lots of time on markets, products, managers • This makes no business sense • Most Boards delegate decision making to experts: • Investment Committees • Investment consultants • Fiduciary managers • However, be aware of potential problems with all these 13
Slide 14: Why is governance so important?
Why is governance so important? • Little confidence in financial institutions • Role of the asset owner has changed • Requires hard evidence and better communication • Conflicts of interest, vested interests • Transparency to expose these • Independence to push transparency • Expertise to understand
Slide 15: Good governance is crucial
Good governance is crucial • Investment Committees with one or more external experts • Ensure quality of decision making remains high 15
Slide 16: Good governance is crucial
Good governance is crucial • Investment consultants • Few are market practitioners • Ensure they come off the fence 16
Slide 17: Good governance is crucial
Good governance is crucial • Fiduciary managers • Ensure they work in your interest • Performance fees help, but are no panacea 17
Slide 18: Build or buy?
Build or buy? • Complexity requires expertise at fiduciary, managerial and operational levels • In-house or external? • It depends… • Considerations include: cost, resources, oversight 18
Slide 19: Build or buy – diverging views
Build or buy – diverging views • Canada & Scandinavia (large institutions): more in-house decision taking • NL (small and large): outsourcing via Fiduciary Management, with external expertise for oversight • UK: combination of in-house (large) and outsourcing (small) • More and more cooperation • Co
Slide 20: Framework for good governance
Framework for good governance The AIGS © is a practical management tool, enabling pension funds to: • maintain permanent oversight to the investment team and providers, • get the best out of their investment teams and providers, • pro-actively identify (potentially expensive) problems, • identify ga
Slide 21: Recent case study
Recent case study • Governance review UK pension fund - several serious problems: • Performance measurement by asset manager • Performance benchmarks set by asset manager • Key procurement contracts last negotiated 4 to 8 years ago • Investment management costs under-reported by factor 2 • Board spe
Slide 22: thank you
thank you®