Issue: September/November 09


Let’s hear the costs of curators

One might have thought that the Financial Services Board, which effectively selects curators appointed by a court, has a ready handle on the fees that curators run up in the course of their work. It might well have this information – as it should, because the curators report to the FSB – but to extract it is another matter. In previous editions, we’ve extensively examined the issue of curators’ fees (TT March-May ’08 and Dec ’07- Feb ’08). To take the discussion further, these questions were more recently put by TT to the FSB:

  • Over the past five years, which companies were placed under curatorship by the FSB?
  • What, in each instance, were the amounts involved (i.e. targeted for recovery and so far recovered by the curators, exclusive of their fees)?
  • Who were the curators in each instance?
  • What fees have so far been earned by these curators, either on a contingency or hourly basis?
  • What has been the outcome of each curatorship (i.e. which companies have been restored to health, which have been put into liquidation and which curatorships are ongoing)?

The questions were first asked by e-mail on June 18. There have since been numerous written and telephonic requests for a response. To date, apart from an oral message from an FSB spokesperson that he was working on it, no answers have yet been received.

IN&M in the clear

How much worse would be the financial problems of Independent News & Media if there were a little outstanding matter of apportioning the surplus improperly used in its SA pension funds. A crescendo of media reports have intimated that, when Tony O’Reilly bought the Argus group (owner of The Star, Cape Times, Daily News and other major English-language metropolitan newspapers) for IN&M, he’d manipulated monies in the fund to help pay for the purchase.

The purchase was in 1994, well before introduction of the surplus-apportionment legislation. Argus oldtimers recall that IN&M took contribution holidays, because there was a surplus in some funds, but allegations of what present legislation describes as “improper use” of the surplus are left unsubstantiated. Still, dark hints of a rip-off hang in the air.

O’Reilly has enough trouble on his hands without this. Denise Theunissen, principal officer of the Argus funds, explains:

  • The Argus Money Purchase Pension Fund and the Argus Provident Fund are defined-contribution funds. They never had any contribution holidays. They also do not have surpluses and never will have because, as DC funds, all investment returns – whether positive or negative – are allocated monthly to member benefits;
  • The old defined-benefit Argus Pension Fund was liquidated by voluntary dissolution in 2001 as no active members remained. Pensioners had elected to outsource their pensions to insurers and bought living annuities. The surplus in the fund at the time, which then became liquidation benefits, was distributed in accordance with an agreement between all parties and was approved by the FSB.

She adds: “Whatever now happens to IN&M has no bearing on the retirement funds, their active members or their former members.”

Sustainability glow

Investec Asset Management comes shining from a Mercer global survey of investment managers in emerging market equities. Focusing its research on 177 managers that invest via 328 strategies in these equities, Mercer identified leading managers who’d taken a more integrated approach towards sustainable or ESG (environment / social / governance) investing in their mainstream products.

Based on responses, IAM was ranked amongst the top 10 for emerging market equities. Similarly based on managers’ answers, IAM (Pan Africa) was ranked amongst the top 10 for ESG.

For investors seeking managers that claim to offer an ESG-integrated mainstream fund, Mercer points out that more than 130 such funds are potentially available. They account for over $200bn in assets under management.

Tax relief

Gould...effort pays off

Gould...effort pays off

When beneficiary funds were introduced into law late last year, to accept benefits for minor dependants on the death of a retirement-fund member, the tax regime was complex. But it’s now been simplified so that it’s the same as for umbrella trusts i.e. taxation of the lump sum before transfer into the fund, and exempt from taxation for annual income and upon termination.

Giselle Gould of Fairheads Benefit Services, who was instrumental in negotiations with the SA Revenue Service, welcomes the change as being to the ultimate benefit of deceased fund members’ dependants.

And help too

Old Mutual Actuaries & Consultants has launched a beneficiary fund benchmarking survey to assist retirement-fund trustees select a service provider most suited to their needs. The survey contains research into such fields as governance, processes, administration and communication.

An interactive scorecard tool enables trustees to specify their requirements, summarised as criteria. Trustees can then prioritise them, and the outcomes are presented in a rated scorecard. They should then be better equipped to make the final decision on the beneficiary funds – at least 13 have so far been registered with the FSB – they want to select.

Better for smaller

The cost of audit fees for smaller pension funds, with an asset value of R6m to R50m, is to be capped. As now, those with an asset value below R6m remain exempt from audit.

It’s a temporary measure, designed to relieve the smaller funds paying as much in audit fees as the larger and to expedite the backlog of funds that haven’t submitted returns as far back as 2006, until next year when the situation will be reviewed. In the long run, understandably, the FSB wants all funds to be audited.

Ronel van Graan of Deloitte says that, by the time of review, the FSB hopes the industry will have been consolidated with smaller funds having moved into umbrella arrangements.

Disclosure doubles

A fund managers’ engagement survey of the UK Investment Management Association has shown a marked increase in the number of managers that now disclose details on their websites of how they voted at shareholder meetings. It’s almost doubled, from 45% two years ago to 81% today.

The Association had developed, with the Institutional Shareholders Committee, a voluntary framework that sets out best practice on voting disclosure. The guidance aims to encourage firms to disclose and, where they decide not to disclose, to explain their reasons.

It’s obviously working, making it unnecessary for government to use its reserve power under the Companies Act to force the disclosure that it believes is key to improved corporate governance.