Man on ledge

Reichtec November 2016 Newsletter

Unit Trust Fee Classes

Over the course of this year many clients have called or emailed to query notifications they have received relating to changes in Unit Trust fee classes.
For the most part these changes are because of a move to “clean” pricing so I will try to explain what this means:
Originally there was just a single fee class for most unit trusts – you would have bought the same class of units if you had a direct account with the fund manager or if the units were bought via an investment platform.
Where the units were held directly, the fund manager would have been responsible for all admin functions such as sending out statements, tax certificates and processing all buy/sell instructions etc. When invested via a platform however, the platform performs all this admin.
Most fund managers accounted for this by paying a rebate back to the platform who in turn (in most cases) passed this rebate on to the investors in the form of reduced platform fees.
In order to create better transparency about who is actually earning for various services, the fund managers have been creating different fee classes for the funds held via the platforms – these are generally lower than the fees they charge on direct investments and are known as “clean priced” funds as they exclude the admin fee.
The net result is no change to the overall fees charged as the clean prices are simply reduced by the rebate that was previously paid. Unfortunately for every little change in a fund mandate or fee structure you will be notified – even if this has no effect.

December Holidays

Reichtec offices will officially close on 15 December and will re-open on 9 January 2017. I will however not be going away over this period and will have full access to email and internet over this period.
I will endeavor to respond to any queries or requests for transactions but please try to limit these as far as possible.
I would like to take this opportunity to thank all clients for your continued loyalty – this has been a very difficult year both in terms of investment returns which have been lower in line with markets that have struggled, but also personally following the sad passing of Iven in January.
All the best for the festive season and the new year – may 2017 be a prosperous one for all. If you are travelling over this period, please take care.

2016 – Review

2017 has been an eventful one both locally and internationally. I doubt many fortune tellers would have predicted what this year would have in store and there is still a month to go.
Locally we have seen the Rand surprisingly strengthen from a level of almost R17/US$ to be currently trading at R14,20/US$.
I heard a description of the local stock market recently which was most apt – it was described as a rabbit. Lots of hopping around but going nowhere. The reality which has been alluded to previously is that the local economy is struggling currently and companies that earn income internationally have also struggled as the Rand has strengthened. Political uncertainty hasn’t helped, but then again events internationally have also taken their toll.
We have seen charges against the Finance Minister which were then dropped, a President implicated in numerous scandals and the potential of a ratings agency downgrade which could still happen in December or June next year.

Economic growth locally is stagnant but South Africa is not alone in this as world growth is also a lot lower than is needed.

Internationally there have been many surprises this year. Most notably, Britain voted to leave the European Union despite all the “expert” predictions to the contrary. Earlier this month America elected a new President with zero political experience despite many in his own party
being critical of his choice as a candidate.

Both events reflect a growing “anti-establishment” sentiment with many low income earners struggling in the face of globalization which has “exported” many jobs to China and other similar countries.

It certainly is easy to be overwhelmed by all the negative news daily, but if history shows anything it is that the tough times create opportunities for
those who do not panic or run away.

Tough times force businesses to become smarter and better so that they are well positioned to take advantage of any recovery in the economy.

If I had to make a prediction for 2017 I would say that it is “likely” that we will continue to muddle along. Key factors/events to watch will be:

  • The implementation of Brexit
  • Any major policy changes in America
  • ANC elective conference
  • Oil prices
  • Local Ratings (downgrade)?

As usual there are too many potential outcomes which is why we recommend diversified portfolios and not taking big “bets” one way or the other.

“Remember that the stock market is a Manic Depressive” – Warren Buffet

Posted by reich_admin

Leave a Reply