On the money Making waves this quarter Growing demand for DFMs Key to an advisor’s value proposition Although RDR hasn’t yet been formally legislated in South Africa, we have seen tremendous growth in the demand for Discretionary Fund Managers (DFMs) with over 100 DFMs operating in this market. Some offer the full spectrum of services (manager research, asset allocation, portfolio construction, administrative services on multiple platforms, production of monthly fact sheets, portfolio attribution, compliance monitoring, rebalancing and performance reporting) while others offer only some of these. There is a difference between those that use their Category II licences mainly to create efficiencies for their own network of advisors and those who offer services to third-party advice businesses. There is a wide range of discrepancy between DFMs in terms of true independence. At Momentum Investments Consulting (MIC), we usually provide the full range of services for our Category I clients using our outcome-based investment philosophy to construct portfolios that are fully aligned to the advisor’s advice process. The portfolios can cater for each advisor’s preferred funds and LISP platforms-provided that they are on our buy list. Our manager research team is involved in approximately 250 manager interactions every year, something most advisors do not have time for while still giving advice. For advisors with their own Category II licences, we would become the sub-investment advisor and build portfolios using their preferred investment philosophy. Category II advisors can select to use the full range of services or only those services that they are unable to provide themselves. Our Category II licence gives us the flexibility to make changes in both the underlying asset classes and funds across multiple clients simultaneously, freeing up time for advisors regardless of whether they are growing their books or looking to exit the industry. Advisors also partner with an independent DFM to simplify their offering and cater for the increasing compliance burden. DFMs could also assist advisors looking at buying or selling books, or to develop a succession plan. MIC’s assets have more than doubled over the past two years and are now managing assets in excess of R7-bn. We are constantly monitoring the portfolios to ensure that they are robust and built to deliver on the desired outcomes over the longer term, while taking into account any shorter-term market conditions. Our offering consists of various combinations of active, passive and smart-beta solutions. DFMs are becoming key to an advisor’s value proposition to their clients. Study at USB – Africa’s most accredited business school Shaping great leaders through higher learning The University of Stellenbosch Business School was the first business school from an African university to achieve all three major international accreditations – AACSB, EQUIS and AMBA. These accreditations give students an independent and worldbenchmarked view of USB’s programmes. The accreditation bodies ensure that what we teach is research- and practice-based, and that our lecturers continually discover new knowledge and bring these new insights into the classroom. It also means that our programmes are updated all the time to remain relevant and leading-edge. USB’s programmes are underpinned by a global perspective of business knowledge combined with unique African contextualisation. Our programmes are offered in various formats, supported by innovative learning technology, to make them accessible to students from all over South Africa, other African countries and beyond. Our alumni regularly cite collaborative learning with fellow students from different industry backgrounds and geographies as one of the highlights of their learning journeys. USB is part of the 100-year-old Stellenbosch University, an international institution of distinction and the top research university in Africa. USB’s campus is on the hill centrally located in the Tyger Valley business district in Northern Cape Town. Find more information at www.usb.ac.za. Florbela Yates, Head: Investment Consulting at Momentum Investment Consulting
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