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simple answers for R75bn loss
value of pension funds
Vera von Lieres
Business Report, May 13, 2003
Town - Retirement fund investors have seen about R75 billion - or about 12
percent of the roughly R600 billion controlled by the investment industry
- in value eroded since the beginning of last year, a Business Report poll
This excluded the value eroded by the government's pension fund, which was
managed by the Public Investment Commission (PIC), which industry insiders
said would be very difficult to estimate.
It is estimated that the PIC controls about R150 billion.
But, industry commentators pointed out that for many pension fund members
the value erosion would not be a consideration for years to come although
for others who were close to retirement, it was a pressing issue.
The strong message that came across was: there was no simple answer to who
should shoulder the blame for value eroded to date - trustees,
consultants, multimanagers, fund managers and investors themselves were
The Business Report poll covered insurance funds (mostly guaranteed funds)
and money invested by asset managers in market-linked portfolios.
While the total net assets of retirement funds at the end of 2001 were
R835.6 billion, according to the Financial Services Board, information
available for the year-end to December 2002 were not yet available.
Insurance funds, mostly guaranteed funds, look after about R100 billion to
R150 billion and about R450 billion is invested by asset managers in
line with others in the industry, Erich Potgieter, a director at actuaries
and consultants Fifth Quadrant, said: "I would guess - and I
emphasise guess - that the capital write-down to date, since the start of
last year, on the roughly R600 billion controlled by the investment
industry [not the PIC], amounts to about R75 billion."
Average losses of 11.09 percent in the year to March by the country's big
investment managers - according to the latest Alexander Forbes Large
Manager Watch - are concerning for those about to retire.
Tim Cummings, the managing director of Old Mutual Asset Managers, made the
point: "It's not so much about trying to time the market [difficult
over the last few years] but about time in the market - that's what
pension funds are: long-term."
Leon Campher, the executive director of the Investment Management
Association of SA, said: "Inherently, fund managers are not going to
mess up because it's bad for them too.
"The fund management company's income is hit badly when the market
goes down because fees charged are linked to market value."
Asset management companies are paid a percentage of the market value of
the funds under management - varying from around 0.1 percent to about 0.6
How they then pay individual fund managers differs from company to
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