3 - Institutional Cluster Shared Documents/sanlam-instituti… · Guiding principles zCore concept: Strategic coordinator – Family of related businesses – Strong Corporate Governance

SANLAM INVESTMENTS

Johan van der Merwe24 April 2007

a winning pack –our clustera winning pack –our cluster

Today it’s about…

The cluster

Individual businesses


the cluster …

Our core purpose …

to createSouth Africa’s leading

investment management business

Guiding principles

Core concept: Strategic coordinator– Family of related businesses

– Strong Corporate Governance & monitoring

– Focus aggressively on top line leveraging

– Shared activities on “opt in” basis

Do what is needed to enable entrepreneurship to thrive

Outward competitor and client focus rather than internal

Leverage off and influence Sanlam Brand

Actively support to build quality Sanlam distribution channel

What is it?

Our capability to inspire investment businesses to flourish

within an entrepreneurial environment

differentiates it from its competitors

(“Small Business” Culture leveraging off Large Corporate

resource base)

Our source of competitive advantage?

Culture is paramount

Eventually it will be our culture that sets us apart from other firms and helps to make us a magnet for talent

Culture is the values, behaviours and beliefs that distinguish the people of one firm from those in another

Culture is changed through small steps, concrete actions and patience

Cultural capabilities: What really works?

Create a shared, focused, clear strategy

Develop operational excellence; execute flawlessly

Create an adaptive meaningful performance based culture

Build a flexible, fast, flat structure

Focus on:

Talent: Develop and engage high performers

Leadership: Secure committed leaders

Innovation: Ensure that innovation flourishes

Growth: Partnerships; mergers and new ventures

Strategic framework

Element

Clients first

Consistent performance

World class 'manufacturing'

Distinctive propositions

High performance culture

Strong distribution support

Rationale

Bedrock for everything else

= the 'product'

Investment platform critical

Must be clear why us

Impossible to win without

Complex market/'noisy'

Strategic framework

Element

Transformation

Right income mix

Entrepreneurship

Think global

Lean support structures

Leverage cluster skills

Rationale

Relevancy; FSC; flows

Diversification

Growth and innovation

Best benchmark / LT growth

Cost control

Innovation; share of wallet

AIM = Great Brand and Winning Business

Sanlam investment cluster

10Hedge fund of fundsOctane

n/aAlternative investment strategiesHedgehog Capital

12Property asset management and developmentSanlam Properties (SP)

n/aNiche debt and equity financial engineering solutionsSanlam Capital Markets (SCM)

26Asset management for emerging & developing economiesSIM Emerging Markets (SIM-EM) incl. Namibia

97Local and international multi-managersSanlam Multi-Manager International (SMMI)

4Actively managed long only international fundsSIM Global

n/aIreland-domiciled funds for the Sanlam GroupSanlam Asset Management (Ireland) (SAMI)

n/aDerivative, tax and legal-based structured productsSanlam Structured Solutions (SSS)

6Private equity fund of funds managerSanlam Private Equity (SPE)

n/aCustomised employee benefit solutionsSanlam Employee Benefits (SEB)

39Private high net worth client businessSanlam Private Investments (SPI)

53Single and multi-managed unit trustsSanlam Collective Investments (SCI)

243Traditional long only investment managerSanlam Investment Management (SIM)

AUM(R’bn)CapabilityBusiness (31 December 2006)

Compound annual growth 2002-2006 : 46%

Sanlam Investments: Profit before tax (R’m)

0

200

400

600

800

1000

1200

2002 2003 2004 2005 2006

Profits (R’m)

23

6 26

9

43

1

69

8

10

77

0

200

400

600

800

1000

1200

2002 2003 2004 2005 2006

A

B

C

D

E

Investment cluster

Profits 100 scale (R’m)

0

1

2

3

4

5

2002 2003 2004 2005 2006

A

B

C

D

E

Investment cluster

Cost ratio (%)

0.4

0.5

0.6

0.7

0.8

0.9

2002 2003 2004 2005 2006

A B

C D

E Investment cluster

Cluster fund flows (net)

-6.5

1.2

6.4

9.210.4

-10

-8

-6

-4

-2

0

2

4

6

8

10

12

2002 2003 2004 2005 2006

2005 net exclude PIC outflow of R 6bn2006 net exclude PIC outflow of R21.6bn

5%7%4%5%

3%

12%

1%11%

10%

2%

39%(R445m)

3%

SIM SPI SP SMMI

SCI SPE EM SAMI

Global SCM Octane Other

17%

3%

18%

4% 1%

64%(R136m)

SIM SP SMMI

SCI TASC SPI

2002 = R236m profit 2006 = R1 229m profit

Business is now well diversified

Results highlights: Transformation (Dec. 06)

Progress on most EE targets and on track to make 2008 FSC targets

2236Total

4359Other

15%2440-50%39Junior Management

10%1230%26Middle Management

4%220%-25%12Senior Management

4%1325%17Executive

Target ‘08Dec 06Target ‘08Dec 06

Black Women %Black Employees %


Individual businesses

Sanlam InvestmentManagement

SIM business model has evolved

DivisionIn Life

company

Asset Managementby InvestmentBank (Gensec)

Integrated Insurancebased Asset Manager

(inc. Private EquityProperty etc.)

Multi specialistBoutique Asset

Manager

10yrsago

7yrsago

5yrsago

Today

Current Business Model

Multi specialist business

Fundamentally driven investment process

Big platform with “small team” decision making (e.g. MPG)

Team based culture

Performance ethic supported by individual and team based incentivisation

Solutions driven via innovation

Advantages of current business Model

Size: Allows investment into various research projects, a largerteam and systems

Cultivation of a research culture

Investment into state of the art Decision Support Systems

Strong, diversified and very experienced team

Progress on Strategic Initiatives

Major focus on building a world class investment process and

establishing a stable highly experienced investment team.

Transitioned house into focussed specialised teams leading to

more independent decision making.

Increased focus on SIM’s retail offering, including fund line-

up, distribution support and marketing.

Increased marketing and improved PR of SIM as an

investment brand.

Continuous focus on Transformation and development.

Performance: Domestic LMW 12 month rolling rankings

2

11

2.75

0

3

6

9

12

15

Dec 99 Dec 00 Dec 01 Dec 02 Dec 03 Dec 04 Dec 05 Dec 06

SIM Unique Count Upper Quartile 12 month average

Dec 2006

Source : S&P Fund Services; Lump sum, NAV to NAV excl. initial fees, Income reinvested on ex-div date, total growth rate for periods 1 year and shorter

Performance: Retail Funds Highlights (31 December 2006)

1/6 and 27th overall (543 funds)

3/644.5137.28

13

Growth Fund


1/71/7 and 1st overall (389 funds)


48.4040.1246.2738.37

1235

Small Cap Fund

3/184/184/15

6.538.4413.02

125

Bond Fund

6/243/20

30.4622.53

35

Balanced Fund

%Years

37.56

31.92

38.5443.37

45.3232.71

Category ranking (and overall ranking where applicable)

Annualised returns Fund

1

1

23

35



Value Fund

4/24

2/17

2/71/7 and 16th overall (389 funds)

Pan Europe Fund

Property Fund

Industrial Fund

Strategic priorities (1)

Continued improvement of the investment performance

Focused attention on growing the third party book

Establish SIM’s equity capability in the market and growing the equity book

Continued improvement of SIM’s PR and building of the SIM investment brand

Further diversification of income and products

Increasing market share in Alternative Products space

New alpha products to enhance current institutional offering and increase margins

Strategic priorities (2)

Establishing a “traditional” international asset management capability

Continued focus on EE and transformation

Building a true performance and ownership culture

Sanlam CollectiveInvestments

Achievements

In line with group strategy - diversified into related areas:– Institutional business solutions– White Label partnerships– Third Party administration– Employee benefit administration– Transactional capabilities– Specialized CIS products

Enhanced operational efficiency– On-line transactions– Straight through processing– Electronic - statements

0

10000

20000

30000

40000

50000

60000

2002 2003 2004 2005 2006

Retail Institutional White Labels

Growth: Assets under management

R’m

Strategy and challenges

Implement transactional facility (debit card linked to Money Market Fund)

Expand White Label relationships (I.e. offshore)

Future prove admin systems

Opportunities identifiedEntry level marketEmerging markets Employee benefit admin

Develop other new CISCA based income streams

Sanlam PrivateInvestments

SPI achievements over last 2 years

Embedded new winning culture

Key appointments made

Launched Sanlam iTrade

Established first credit product

Link-up with Pictet Bank

Attracted R5bn new business in 2006

Grew profits by 47% in 2006 and 75% in 2005

… established SPI as serious business

Slide 34

K1 Data vanaf James Diergaardt se spreadsheetKarina da Paixao, 2004/10/20

Challenge

Building capacity

Building positive brand awareness in target market

Co-operation and cross-selling within Group

Shortage of black skills in industry

Major breakthrough in HNW black market

Possible exchange controls abolishment

Slide 35


Strategy

Offering more comprehensive services and products

Lifting profile in selected regions and target markets

Developing our offshore capacity

Covering fixed costs with annuity income

Attracting, developing and training right people

… becoming leading private client investment manager and stockbroker in SA

Slide 36


Sanlam Properties

Achievements last couple of years (1)

Property IndustryInstrumental in establishing the Property Sector Transformation CharterSP launched the black-owned and controlled Vusani Property Investments Fund with assets valued at R0.5 billion

ClientsEstablished MICC and Vukile on the JSE with assets valued at R0.9 billion and R2.0 billion respectivelyEmpowered Vukile by introducing a BEE shareholder into Vukile through Clidet 598 (Pty) Ltd (Clidet) which owns 25% (R0.5 billion) of VukileSanlam property portfolio out-performs the IPD 3 year benchmark return

Achievements last couple of years (2)

ShareholdersEmpowered its property transacting capability through the establishment of Khulela a black-owned and controlled companyOwn balance sheet property developments to the value of R0.4 billionEnsured an annualised growth since 2002 in after tax profit exceeding 35%

Challenges facing Sanlam Properties

New challenges due to a transforming property sector & the Property Sector Transformation Charter

Establish Khulela as the leading independent black-owned property company in South Africa in order to ensure access to new opportunities which would otherwise not be available

Further enhance and restructure Sanlam’s property asset base and BEE credentials

Strategy going forward

Grow Khulela as the leading independent black-owned property company in South Africa

Enhance property development/investment service offering

Attracting wider skills base & networks for SP through Khulela

Leverage of empowerment and establish appeal to broader property market with unrestricted ability to participate in all sectors of the property market

Restructure all Sanlam’s property holdings

Sanlam PrivateEquity

Major achievements

Established as a separate business in the Cluster in 2003

Johannesburg offices established in 2005

Assets under management reached R6 billion by end 2006

Obtaining R4 billion mandate from Sanlam in 2006 to invest in FSC compliant investments

Excellent team in place

Strategy next 3 to 5 years

Complete transformation from BEE Funder to Private Equity Fund Manager

Successful raising and managing of 4 third party funds in partnership with leading private equity fund managers

total R2,6 billion

Building own track record:

solid direct investments and co-investments

team stability

brand building

Challenges

Sourcing quality and sizable deal flow

specifically infrastructure deals

Attracting and retaining appropriately skilled private equity professionals

Attracting additional third party money

Sanlam StructuredSolutions

Background

Used to form the Structured Products Group in SCM / Gensec Bank

Provided the structuring capability and the deal flow for equityand fixed interest desks

Moved into the institutional cluster as separate business unit:Demonstrate independence to 3rd party clients Move closer to where the decisions are made on the management of Sanlam assets.

From 1 Jan. 2007 Sanlam Solutions team also joined SSS exploit all synergies between 2 teams; one entry point into Sanlam Group for all derivative transactions and structured solutions

Vision, strategic objectives & focus areas

Vision:To be the leader in derivative and structured solutions

Strategic Objectives:Grow profitability to become 1 of the largest players in clusterDevelop innovative new products & solutions across market sectorsGrow external client baseDerivative advice, implementation, risk management and support to the Sanlam Group

Focus Areas:Dynamic hedgingCapital reduction strategies in SanlamNew solutions for marketing to Pension Fund marketALCO

SIM Global

Micropal performance (in US$)

Sanlam Global Financial Fund – as at 31 March 2007

A.G.R.Rank A.G.R. Rank A.G.R. Rank A.G.R.Rank A.G.R.Rank A.G.R.Rank A.G.R.Rank A.G.R.Rank

Coronation Global Financial Fund 25.3 3 -5.7 3 1.6 1 69.5 1 30.5 1 N/A ---- N/A ---- N/A ----

Sanlam Global Financial Fund N/A ---- N/A ---- N/A ---- N/A ---- N/A ---- 35.98 1 20.2 33 3.77 1

Argenta Secteur Euro-Banques -4.53 16 -22.64 26 -10.03 5 59.9 2 21.31 6 11.2 17 36.36 4 3.65 2

Fortis L Eq Finance Europe C N/A ---- -20.77 19 -20.18 25 40.68 14 17.92 19 9.34 23 34.09 6 2.46 3

ABN AMRO Financials EUR B N/A ---- N/A ---- N/A ---- N/A ---- 18.13 17 16.08 7 19.65 34 2.41 4

CLI Framlington Financial N/A ---- -11.75 8 -13.92 12 38.92 18 19.37 10 13.88 8 40.79 3 2.29 5

Royal Skan £ Fram Financial N/A ---- N/A ---- -14.15 13 37.71 21 19.02 12 12.5 12 20.43 31 2.25 6

SPI Obiettivo Assicurazio R N/A ---- N/A ---- N/A ---- 20.6 38 15.65 25 12.43 14 22.6 21 2.22 7

Royal Skan £ Fidelity Fin Ser N/A ---- N/A ---- -12.19 9 31.59 35 16.21 22 19.42 3 25.51 15 2.04 8

Dexia Eqs L Europe Finance C N/A ---- N/A ---- -22.79 34 43.78 7 18.51 15 10.5 19 18.2 36 1.92 9

Jupiter Global Financials L € N/A ---- N/A ---- N/A ---- N/A ---- N/A ---- N/A ---- N/A ---- 1.86 10

Parvest Europe Financials C 6.82 13 -21.85 23 -22.21 31 40.99 13 19.7 9 8.06 27 33.59 7 1.74 11

Fidelity Fds Financial Serv A N/A ---- -16.02 10 -10.82 7 32.8 31 18.22 16 19.09 4 28.54 12 1.67 12

Cleome Index Finance&Utilities N/A ---- -20.21 18 -20.05 23 44.16 6 25.15 2 10.78 18 23.65 18 1.61 13

20052004 2006 YTD 07Offshore and International Funds Sector - Finance

2003200220012000

Micropal performance (in US$) - Best Ideas Fund

A.G.R. Rank

PAM (L) Equities Opport. C 33.07 1

Kapitalfonds LK Family Bus 31.78 2

M&G Global Basics Euro A 31.72 3

StarCap Priamos 30.88 4

UniValue Fonds: Global A 30.65 5

Sanlam Global Best Ideas Fund 30.42 6

AIGLI/New Star Global Opps 29.97 7

M&G Global Leaders Euro A 29.93 8

Fortis L OBAM Equity World C 29.8 9

M&G Offshore Global Leaders 29.36 10

Actio Croissance Plus EUR 28.46 11

GLG Performance (Distr) A 28.13 12

AIGLI/M&G Managed Growth 27.88 13

Berenberg FoF - Globalway Fds 27.08 14

Kapitalfonds LK Global Value 26.99 15

Mean/Count 18.05 562

Standard Deviation 4.56

Offshore and International Funds Equity Global

30/03/2007

30/09/2004

Since Inception

Global Financial Fund & Best Ideas Funds vs benchmarks

31 March 2007 (US $)

90

110

130

150

170

190

210

Au

g-0

4

No

v-0

4

Fe

b-0

5

Ma

y-0

5

Au

g-0

5

No

v-0

5

Fe

b-0

6

Ma

y-0

6

Au

g-0

6

No

v-0

6

Fe

b-0

7

GLOBAL BEST IDEAS

MSCI WORLD

60

110

160

210

260

310

360

410

460

Au

g-9

9

Fe

b-0

0

Au

g-0

0

Fe

b-0

1

Au

g-0

1

Fe

b-0

2

Au

g-0

2

Fe

b-0

3

Au

g-0

3

Fe

b-0

4

Au

g-0

4

Fe

b-0

5

Au

g-0

5

Fe

b-0

6

Au

g-0

6

Fe

b-0

7

GLOBAL FINANCIAL

MSCI FINANCIAL

MSCI WORLD

Funds under management

US$ millionUS$ millionUS$ millionUS$ million

47.466.846.7n/aSanlam Global Trust Fund

643.4408.5176.551.2Total Funds under Management

159.60.4n/an/aSanlam Emerging Market Fund

335.0242.055.3n/aSanlam Global Best Ideas Fund

80.065.443.626.7Sanlam Global Financial Fund

21.517.215.510.8Nedbank Financial Fund

n/a16.815.413.7Sanlam Financial Fund

Mar 07Jun 06Jun 05Jun 04

Our objective

Continue outperformance!!

Sanlam Multi ManagersInternational

Achievements over the past 3 years

Integration of offshore and local business

Acquisition of Coris

Strong organic growth, particularly on the retail side

Growth in staff compliment and experience levels

Investment performance – most mandates ahead of benchmark and also well placed in surveys

Established as second largest multi manager in SA with a global and local presence

AUM almost R100bn

Product range

Comprehensive product range

A variety of investment platforms

From implemented consulting to fully discretionary

From reporting-only to wrap funds

Balanced, specialist and absolute return funds

Global and regional mandates

Fixed and tactical asset allocation

Life stage and umbrella funds

DB and DC funds

A good balance between local, global, retail and wholesale clients

Challenges ahead

Maintaining investment performance

Investing in systems and processes to ensure ongoing scalability

Retaining and growing talent

Growing assets, particularly in the SA wholesale arena, but in all other areas as well

Continuing to listen to our clients and provide innovative products

SIM EmergingMarkets

Background

Integrated as a stand alone Business Unit in the Institutional Cluster on 1Jan, 2006 following ALA acquisition

Primary role set to develop domestic fund management businesses ex RSA

Focussed on extending SIM franchise in the emerging World

Major achievements

All erstwhile ALA Fund management operations successfully integrated into SIM EM

Set up AMC in Kenya complete

Set up AMC in Nigeria complete

Successful business plan developed for India-await execution

Return on Equity in all operations well in excess of internal hurdle rates

Key strategic imperatives 2007-2009

Maximise significant potential in Southern, West & East African markets

Develop and manage Pan Africa focussed funds

Develop SIM in India into a full scale , diversified Investment cluster

Make opportunistic inroads into other key markets in Middle East & South Asia

SIM EM contribution to SIM operating profits to double from current 3%

Create an self sufficient, independent EM hub for optimisation with SIM CT

Octane

Octane update

AUM: $1.3 billion

Performance: Top quartile (since inception)

Clients: Largest SA pension funds

Now focusing on Europe and Asia

New solutions: Octane Signal, Octane Medium Hub,

Zenith, Executive, Union

Cape Town office: 1 February 2007

Octane approach

One product fits all - not optimal

Select more than one advisor

Size impacts performance

Tailor make solutions to client’s liability profile

Strong global & local presence

Aggressive

Low AggressiveRisk (volatility %)

Ret

urn

(%)

Octane Medium Hub

Octane Stable

Octane Liquid A

Octane Diversified

Octane Zenith

Risk/return - solutions

Octane Guaranteed

Octane Signal

Octane Medium

Investment advisers - fund track record

0-3 years31%

3-6 years37%

6-10 years20%

10-15 years10%

15+ years2%

Genesee; ManchesterParker Global; Torrey

Culross; ERAAM;Persimmon; Reliance;

Terrapin

Jupiter; Muirfield

Hedgehog

• The following slides show the broad achievements for 2006/2007 , as well as the very broad targets for 2007 looking ahead

• Both achievement and targets are broken down into Strategic / Operational / Financial

• Strategic Achievements– Set up JV between SIM & NAC for the incubation of fledgling hedge funds– Sourced / Approved Seed capital to build a track record from shareholders– Contracted / JV’d 9 Top tier single strategy funds, secured via various strategic relationships– Maintained positive risk adjusted returns (Nov06-1.84%, Dec06-1.79%, Jan06-1.61%, Feb06-

1.57%, March06-1.87%) with low correlation to the market

• Strategic Targets– To launch additional uncorrelated and less common single strategy funds– Lock-up manager capacity, build relationships– Build solid, uncorrelated track record of abs returns above hurdle– Build & Expand product line, with exclusive access for shareholder client base– Expand marketing drive and build exposure with

larger pension funds– Launch own Prime broker

• Operational Achievements– Set up offices, with full operational infrastructure

– Set up SLA’s with independent vendors to cover

• Fund administration (Independent data services)

• Compliance (Independent Compliance services)

• Risk management (RisCura)

• Auditing / Accounting (PWC / SIM accounting)

• IT and disaster recovery (Clear Channel Business Technologies)

– Move first managers into new HHC Premises

– Launched HH Diversified Fund

• Operational Targets– Ensure stable operational environment

– Strengthen quantitative skills

– Launch additional Multi-strat fund with pure

Incubation “flavor”

– Secure more managers to move into HHC

premises

• Financial Achievements– Secured R600million effective investment in HHC

– Breakeven achieved on income statement after 5 months

• Financial Targets– Strengthen mix of true equity managers in the incubator, reduce simple

rebate manager exposure

– Strengthen income statement and cash flow position with performing managers (greater performance fee success)

– Get to positive cash flow position in next 6 months

– Increase assets under management – NBNB!!

– Control costs • Salaries are the largest cost - (not employ new staff until

additional assets under management)

• Migrate IT to full independent infrastructure

The road aheadThe road ahead

Top priority remains consistent upper quartile LT investment performance across all platforms

Organisational structures in place – new and emerging businesses to be fully bedded down

Solid platform established to serve as springboard for further growth – offshore acquisition of conventional asset manager a possibility

Obsessed with building a winning culture and engender PASSIONATE OWNERSHIP

thank youthank you