Sanlam Corporate Investments and the Sanlam Umbrella Fund take pride in ensuring that our investment solutions remain relevant and appropriate for clients. To this end Sanlam Corporate Investments have recently concluded a review of our institutional retirement fund portfolios, which incorporated rigorous analysis and debate within the various investment teams within the Sanlam Group. The outcome of this review resulted in various portfolio changes, such as updates to:
- Strategic asset allocations
- Index benchmarks
- Investment management fees
- Other minor changes
These changes are explained further below.
- Strategic asset allocations (SAA)
The benchmarks for our multi-asset class portfolios employing a strategic asset allocation portfolio construction are reviewed every few years to ensure their continued appropriateness. Given the desire to maintain consistent long-term benchmarks, we do not envisage that benchmarks will change too often as updates will only be made if there are material changes to our long-term asset allocation views. These may include inter alia revisions to asset class assumptions, or changes to governing regulations.
In particular, two key changes to governing legislation during 2022 has led to us reviewing our portfolio and benchmark allocations with the intention of optimizing our portfolios over their target horizons. These changes were:
- The harmonization of the offshore exposure limits for retirement funds from a previous limit of 30% offshore (ex-Africa) and 40% in total (including the 10% Africa allowance), to a single offshore limit of 45%.
- The amendments to Regulation 28, which become effective in January 2023, and include provisions related to infrastructure investments and revised exposure limits for alternative asset classes such as private equity and hedge funds.
The updated strategic asset allocations to each asset class, are shown in the tables below.
Moderate – Aggressive: SMM 70, Sanlam Lifestage Accumulation Portfolio, Satrix Enhanced Balanced Tracker
| Asset Class | Current | New |
|---|---|---|
| SA Equities | 46% | 40% |
| SA Bonds | 11% | 11% |
| SA ILB | 7% | 5% |
| SA Property | 6% | 4% |
| SA Cash | 2% | 2% |
| Total South Africa | 72% | 62% |
| International Equities | 24% | 32% |
| International Bonds | 2% | 2% |
| International Property | 2% | 4% |
| Total International | 28% | 38% |
| Total Equity | 70% | 72% |
Aggressive: Sanlam The Most Aggressive portfolio
| Asset Class | Current | 1 February 2023 |
|---|---|---|
| SA Equities | 51% | 45% |
| SA Property | 11% | 5% |
| SA Alternatives (hedge funds) | 10% | 10% |
| South Africa (Local) | 72% | 60% |
| International Equities | 24% | 30% |
| International Property | 4% | 10% |
| International | 28% | 40% |
Moderate: SMM 50
| Asset Class | Current | 1 November 2023 |
|---|---|---|
| SA Equities | 34% | 30% |
| SA Bonds | 17% | 19% |
| SA ILB | 11% | 10% |
| SA Property | 5% | 4% |
| SA Cash | 8% | 6% |
| South Africa (Local) | 75% | 69% |
| International Equities | 21% | 25% |
| International Bonds | 2% | 3% |
| International Property | 2% | 3% |
| International Infrastructure | 0% | 0% |
| International | 25% | 31% |
Cautious: SMM 30
| Asset Class | Current | 1 February 2023 |
|---|---|---|
| SA Equities | 16% | 15% |
| SA Bonds | 25% | 30% |
| SA ILB | 16% | 14% |
| SA Property | 4% | 2% |
| SA Cash | 16% | 13% |
| South Africa (Local) | 77% | 74% |
| International Equities | 19% | 20% |
| International Bonds | 3% | 3% |
| International Property | 1% | 3% |
| International Infrastructure | 0% | 0% |
| International | 23% | 26% |
The changes to the portfolio strategic asset allocations for the Sanlam Investments Multi Manager portfolios have been implemented effective 1 November 2022, with portfolio adjustments being implemented over November 2022, December 2022 and January 2023 to align fully to the new benchmarks as at 1 February 2023. This transition period has been implemented to adequately manage risk and ensure minimal negative impacts to the portfolios. The changes to the Satrix Enhanced Balanced Tracker Fund was implemented effective 1 February 2023.
2. Index benchmark changes
In addition to the asset class changes proposed above, the following asset class index changes will also be implemented.
| Asset Class | Current index | New Index | Comment |
|---|---|---|---|
| SA Equities | 50% SWIX, 50% Capped SWIX | 100% Capped SWIX | This change applies only to the Sanlam Lifestage Accumulation Portfolio, to bring it in line with other portfolios. |
| International Equity | MSCI World Index (Developed Markets) | MSCI All Country World Index | In addition to the MSCI World developed market exposure, this index is more diversified, offering around 10-15% exposure to emerging market economies. |
3. Investment management fees
Currently, the investment fees paid to the underlying managers who manage the offshore assets within the Sanlam Lifestage Accumulation Portfolio are borne out of the Policy Fee charged to clients by Sanlam. Given that many of the appointed offshore managers automatically recover fees from the portfolios they manage, this often results in a complex rebate process by Sanlam to ensure that clients do not pay a higher fee than what is agreed in the policy with Sanlam.
Based on the updated asset allocations we have outlined earlier in this note, we have estimated the total cost of the offshore managers to be approximately 0.13% per annum.
As from 1 April 2023, the underlying manager fees in respect of all offshore assets for the Sanlam Lifestage Accumulation Portfolio will be net priced within the portfolio. i.e. fees will continue to be recovered/deducted by the underlying managers from the assets they manage and will therefore be over and above the Policy fee.
To ensure that this impact is not absorbed by policyholders, the standard fee scale will be reduced by 0.13% per annum at each of the fee scale tiers. A fee discount of 0.025% is being applied at the R100m to R300m asset level, implying that clients who have in excess of R100m invested in the Sanlam Lifestage Accumulation Portfolio will effectively receive a fee reduction.
The final standard fee scale is shown below and becomes effective on 1 April 2023.
| From | To | Current | New |
|---|---|---|---|
| R 0 | R 50,000,000 | 1.000% | 0.870% |
| R 50,000,000 | R 100,000,000 | 0.900% | 0.770% |
| R 100,000,000 | R 300,000,000 | 0.775% | 0.620% |
| R 300,000,000 | R 500,000,000 | 0.700% | 0.570% |
| R 500,000,000 | and above | 0.650% | 0.520% |
4. Portfolio name
The name of the portfolio will change from the Sanlam Lifestage Accumulation Portfolio to the Sanlam Accumulation Portfolio with effect from 1 April 2023.