Dr Manas Baphela of Argon
The retirement industry has evolved, streamlined and become more regulated over the last couple of decades and the changes which have been proposed and implemented through the much publicised and talked-about retirement reform potentially provide a win-win situation for both the industry and the investors, according to Dr Manas Bapela, chief investment officer at Argon Asset Management.
Bapela said that the consolidation that will happen as a result of the reform would be beneficial to the industry and customers.
“The most important benefits of the retirement reform will be the economies of scale which will be realised, the expected higher governance budget and the elimination of the high costs of managing governance issues for small employer funds. Umbrella funds will hopefully in part ensure that these benefits through the realised economies of scale.
“Already, the retirement industry has moved from having approximately 18 000 funds in the 1980s to approximately 3 000 funds today, those being largely industry funds, or multi-employer funds. The number of members accounted for in the system is currently sitting at about 15 million. The value of the assets currently being managed is R4-trillion, with the split at approximately 40% for the Government Employee Pension Fund, 50% for the rest of the privately administered funds and the rest being underwritten funds or those funds that are in the insurance space,” said Bapela.
Another benefit of the retirement reforms, which Bapela pointed out, is the implementation of treating customers fairly (TCF) by the Financial Services Board.
“We all know that globally there’s a move towards fair treatment of customers. TCF provides the global guidelines for financial services firms in how they should conduct their relations with their clients.
“The reforms are looking to protect the customer and get the system working better, but importantly there’s an opportunity to put the client at the centre again. This is something that we at Argon have made a big effort towards implementing across the 44 institutional clients on whose behalf we manage assets. The current rand value of these assets collectively at the end of June 2016 is in excess of R32-billion,” said Bapela.
He said Argon Asset Management is now one of the most successful independent owner-managed asset management firms in South Africa. The firm has been recognised both in South Africa and internationally for excellence in the investment management space.