By Courtney van der Walt
In this powerful exposé of a R320bn ripoff, straight-shooting financial insider Sean Peche says despite massive underperformance, SA’s Big Three Balanced Fund unit trusts are harvesting billions every year from clients via management and ‘performance’ fees. The mushrooming of these funds into R100bn giants is driven by marketing and profits, and has nothing to do with returns to savers – which have been pathetic. The fiercely independent founder of UK-based Ranmore Funds says it’s high time South African savers accepted their best protection against market volatility is not through abdicating to guaranteed losers like these big Balance Funds – but by taking responsibility, adopting a long-term approach and keeping a close eye on costs. Peche, who is based in London, is delivering a keynote address at the 4th BizNews Conference to be held at Champagne Sports Resort in the Drakensberg at the end of the month.
On SA’s Big Three Balanced Fund unit trusts harvesting billions from clients
While a few community members voiced their outrage, others were more concerned with knowing what the solution would be for clients seeking assistance with financial investment.
Brian Ferreira said; “Corporate greed has no bounds.”
Phillip David Dexter said; “Really. They only realised this now?”
JK said; “Very true. Question though. Are the investments in these funds so high because of RA limits? As a result, it possibly wouldn’t be an option for most of those funds to be invested elsewhere, except perhaps a smaller balanced fund (s78 I think)”
“People are better off studying accounting and statistics and managing their own funds.”
Several community members spoke of the growing distrust in South Africa’s financial investment institutions and left comments suggesting their own investment recommendations.
Tristan Whitehead said; “Most active fund managers can’t beat the SP500. You may as well just dollar cost average into the SP500 with a low cost fund which removes the carry these guys charge (for minimal upside). If you want to talk about Buffet quotes, this is one that he’s famous about: In 2008 he bet $1m against fund managers to beat the SP500. In 2017 one fund manager gave up and agreed that Buffet had won.”
Mark Alcock said; “All fees should be pre-adjusted according to performance returns and pre-negotiated attractively for the benefit of satisfying investors. Moreover, especially to protect and provide added realistic value for investors and to encourage the novice. In the quest for the golden rule I.e. to achieve profits in a win-win relationship with the emphasis on achieving mutual gains. Loyalty bonuses should also be reviewed, inasmuch , not only rewarding for longevity but also compensation for recovering losses.”
KillingItForYears said; “Young people are better off studying accounting and statistics and managing their own funds.”
A mixed response to Peche’s advice
While Peche received a lot of praise for exposing the truth, many community members questioned the legitimacy of investing with a financial institution with such little gains in return.
Peter Kemp said; “The statement “next time you meet your advisor, ask them why a few simple global equity funds“ just attracts another set of fees to the “advisor” of traditionally between 1.5% & 3% regardless of performance. Seems the financial sector thrives on giving advice / performance whether it be good, bad or indifferent.”
Harry Roper said; “Do your own investing. It’s much more satisfying to lose your own money than to have someone do it for you. The main problem is that there is a conflict of interest between the investor and the investment advisor/fund manager in that the investor is trying to make money and the advisor/fund manager are trying to make money out of the investor. The goals are clearly different. So don’t complain if you get fleeced.”
Daniel Bones said; “Although I like Peche’s way of thinking, he has a poor track record. He keeps saying “The next 10 years will be different ”. Of course that’s what someone would say who hasn’t beaten his benchmark over the last 10 years.”
Hilton Tarrant said; “This is absolutely excellent (and ought to be read by everyone with retirement savings).”
Andrew Barton said; “I suspect comparing their marketing and sales budgets vs remuneration for analysts/fund managers could clearly demonstrate priorities…. As Donny Gordon said years ago “buy my shares, not my products’”
Patric van Blerk said; “Coalitions. Forget it. A bunch of disorderly, very greedy loudmouths in the main. Yes of course there are many passionate South Africans who will do what little they can to rectify things – but they are powerless – and leaderless. Muttering at their vanishing dinner tables.”
What are your thoughts on Sean Peche exposing SA’s Balanced Funds ripoff? Share your views below.
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- Sean Peche slams Naspers/Prosus management, a voice for South African savers
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