Edition: Sept - Nov 2013


Fee complexities

The purchase by Amazon chief Jeff Bezos of the Washington Post calls to mind a comment by Ben Bradlee, its esteemed former editor, when asked to describe the Post’s editorial policy. “I guess,” replied Bradlee, “that we’re a little bit opposed to everything”.

I guess that this has pretty much become the mantra of TT too.

National Treasury has masterfully dissected retirement-fund costs. But there’s a notable omission. It’s the failure similarly to identify the ever-increasing costs to comply with ever-mounting regulation.

Funds and service providers are being hit hard. Systems expenses aside, the number of staffers employed exclusively to ensure compliance is a multiple of the number that prevailed even five years ago.

Neither the industry nor Treasury can ignore them.

Treasury is hot in its enthusiasm for passive investment. To its support comes a UK poll of 1 000 staff at investment professionals whose day jobs involve promotion of active management.

The survey found that two-thirds of them hold sizeable amounts of their personal savings in passive funds. Money talks louder then mouths.

But passives aren’t necessarily as cheap and simple as they’re cracked up. For one thing, there are so many around that it takes an active decision to select the most appropriate.

For another, look what happened when Wall Street was faced with severe market turbulence. Citigroup was amongst the largest retailers of exchange-traded funds that suspended cash redemptions.

That this sort of thing hasn’t happened in SA doesn’t mean that it never will as the popularity of passives rapidly increases.

Eliot Spitzer, who resigned in disgrace as governor of New York, is standing for election as the city’s comproller. Pundits predict he’ll win.

Why would this scourge of corporate misdemeanour, as erstwhile state attorney-general, seek such ostensibly obscure office? To take a lead in stakeholder activism, that’s why. The comptroller manages $140bn of pension-fund assets.

If Spitzer hasn’t set the finest example in everything he’s done, between consenting adults in a bedroom, this is an area where he well might, between those less consenting in his neighbourhood. The fire in his belly, this time, could set off worldwide sparks given the centre from which he hopes to operate.

On the subject of stakeholder activism, so much a focus of responsible investment, from which models should the lead be taken for good governance?

Southern Africa pension funds are expected to go one way, to help shape society for the better, while occupants of power echelons in Pretoria and Harare carry on regardless.

When various insurers where asked whether they’d pay out against directors’ liability-indemnity policies on claims for damages following Competition Commission fines, there were general denials. When it was put in the 1960s to London “socialite” Mandy Rice-Davies that Lord Astor denied having been “entertained” by her, she famously responded: “He would, wouldn’t he?”

Not that insurers and “socialites” have much in common, except for the screwing.