Destiny Investment 2013: a year in review

10 Mar 2014

How did the economy & the Destiny Portfolios fair

A Year of Mixed Emotions 

One of the more significant events that took place in 2013 for South Africa was the passing away of the country’s icon, former president Nelson Rolihlahla Mandela. However, there was largely no market reaction with the share market and rand remaining mostly steady.

In the words of Trevor Manuel, the minister in the presidency, “South Africans have no choice but to bridge the chasm of mistrust that has developed between government, labour and business, if Nelson Mandela’s legacy of inclusive economic transformation is to continue”.

A highlight of the economy was the returns from the local equity market which hit several new record highs. While the FTSE/JSE All-Share Index and the BEASSA All Bond Index ended the year on a positive note, returning 3.0% and 1.1% in December, both asset classes experienced net outflows for the month, as foreigners pulled more money out of the country.

Destiny Performance

Active vs Passive asset management has become a widely debated subject in the investment community. At a panel discussion hosted by GIB Employee Benefits, Chief Investment Officers from Coronation, Dibanisa and Momentum Manager of Managers (MoM) participated in a spirited debate. Passion and conviction was shown from both the active and passive points of view.

GIB believes that there is place for both and therefore combines, or blends the best from both.

By blending active and passive management in an innovative matrix, GIB has been able to use traditional investment market leaders but has still managed to reduce costs and increase efficiency by using active management in a cost effective way via a satellite approach.

Whilst it is important to consider returns on how they perform against the Consumer Price Index (CPI), as this is the standard upon which we can measure a member’s potential to retire financially secure, it is as important to gauge against various other benchmarks such as composites and peer groups.

The stock market in which most of a retirement fund’s assets are invested is volatile. Returns can vary year to year from negative to as much as 30% growth in a year when sentiment and the concomitant optimism is in full flow. For this reason, it is not sufficient for a manager or a fund to argue that it only managed to beat CPI by a pre-agreed percentage in a year when the stock market grew by 30%. If the market were to contract the following year, it would be virtually impossible for the fund to outstrip CPI and therefore, one must also compare against portfolios with similar mandates as well as composite benchmarks.

Taking the above into consideration, we are delighted to report that all Destiny portfolios enjoyed another year of outstanding returns when comparing to all benchmarks.

Whilst the portfolios completed the year in the top 5% of similar portfolios in the country, they continued to outstrip the even more challenging composite benchmarks that have been set over both the one year and three year reporting periods. 

 

2013 ²

Benchmark

3-years ²(annualised)

Benchmark

Moderate Portfolio

24.56%

18.49%

17.24%

15.59%

Conservative Portfolio

22.55%

16.54%

16.31%

14.28%

Defensive Portfolio

16.61%

12.44%

13.16%

11.71%

Money Market Portfolio

6.23%

5.18%

6.51%

5.48%

Market Enhanced Portfolio

24.01% ¹

19.89%

n/a

n/a

¹ This portfolio commenced in May 2013 and therefore the full year return is modelled.

² All returns are gross of asset managers and GIB asset based fees.

Changes to the Destiny Portfolio Range

After a great deal of groundwork, the Market Enhanced Portfolio was launched by the Destiny Investment Committee and the Board of Trustees at the GIB panel discussion.

In creating this portfolio, the specialists wanted to include the bulk of the asset managers that had served Destiny so well for the past couple of years, but also to make a few key changes whilst setting the trend for the other portfolios going forward.

Allan Gray, which was considered to be a conservative manager through philosophy and circumstance, would be removed for the inclusion of an early stage manager, Fairtree. Additionally, it was felt that listed property would soon become an attractive sector once again and, due to the strategy of blending active with passive managers, it was felt that investing in the index would reap rewards in the medium to long term. To this end, a 5% exposure was agreed upon.

Lastly, it was decided that the offshore target allocation would be 20% vs the 12.5% - 17.5% in the other equity linked portfolios. Due to the high costs charged by equity managers and particularly the preferred offshore manager, Orbis, it was decided to mix offshore 7.5% / 12.5% between Active and Passive managers.

The Market Enhanced Portfolio can be used by members via the personal choice range or as an opt-out of the Trustee Choice LifeStage Model.

In December 2013, in line with the addition of property to the Market Enhanced Portfolio, a 5% investment with Dibanisa’s Property Tracker was made in the Moderate, Conservative and Defensive Portfolios.

The Destiny Investment Committee

The investment committee was established to combine the intellectual capital of various stakeholders in order to provide the Trustees with independent qualitative and quantitative investment research. This research ensures the decisions that are made are done so only after extensive debate and deliberation.

The committee includes GIB investment specialists and external, independent investment analysts. Additionally, participating employers are invited to attend and to provide input which results in an objective, member centric investment process.

Three full committee meetings and at least 3 house meetings are held annually. Hereunder is the full list of investment forums held in 2013. 

Meeting Date

Meeting Type

No. of Attendees

20 February 2013

House meeting

5

26 March 2013

Full meeting

8

18 April 2013

Destiny portfolio launch & industry panel discussion

80

8 June 2013

Full meeting

10

25 July 2013

House meeting

6

1 October 2013

House meeting

6

24 October 2013

Full meeting

11

11 November 2013

House meeting

6

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