Company Profile
CONTENTS Historical & Generational Context of Wealth 2 Company Background 3 Organogram 5 Our Footprint 7 Our Presence 8 An Award-Winning Advisory 9 Key Board Members 10 Company Culture 13 Approach to Risk 14 Scope of Services 18 Why Clients Partner with Carrick 19 Investment Experience 19 Our Investment Philosophy 20 Our Process for Strategic & Tactical Asset Allocation 21 How we Manage Risk in Our Asset Allocation Process 22 Our Ongoing Portfolio Monitoring Processes 24 Our Experience with Alternative Investments 25 How we Select Managers for a Portfolio 26 Our Manager Selection Process 26 Managers we Track in Our Database 30 Our Manager Selection Strengths 30 Criteria for Terminating Managers 31 Signature of Hope Trust 32 Closing Statement 33
2 Wealth exists within a historical context and understanding the generational momentum is critical to our advisory process. People often see wealth as a largely twodimensional snapshot. Carrick understands the three-dimensional perspective of a broader family group and a historic reality. To enable us to provide a proposal that is considerate of this more complex environment, we research and understand the history of the family we are advising and their wealth. A deeper analysis is critical to enable an advisor to provide thoughtful advice. At the same time, we believe in finding simplicity, but the simplicity we need to find sits at the other end of complexity. We will need to work through the complexity of the family, the wealth, and the desired succession outcomes, prior to arriving at solutions that are simple to present and understand. The higher the continued contribution of family members to their own wealth and sustenance, the lower consumption. The lower the consumption, the higher the ability to invest against the effect of inflation and the higher the ability to grow the assets faster than the dilution that is inevitable with every added generation. To get this right is therefore absolutely critical and must be done at the highest hierarchical level. HISTORICAL & GENERATIONAL CONTEXT OF WEALTH
3 COMPANY BACKGROUND We are an independent, multi-solutioned, financial advisory firm serving established and emerging African entrepreneurs and top executives. We provide our clients with expertise, advice, and access to networks, being their trusted advisor for both their business and private matters. We work alongside our clients as trusted advisors, to help them address some of the key personal and business challenges they face, such as: Regarded as one of the fastest-growing financial services organizations in Africa, since its inception in October 2014, Carrick is placed firmly at the forefront of international wealth-management businesses. We know that entrepreneurs by nature are busy building their next business venture and can sometimes overlook managing what they have already created, which often leads to taking significant uncalculated risks. Will my family be protected, and can my business continue if something happens to me? How will my family be affected if something disruptive happened to my country or my business? How can I strategically grow my business and get access to the international capital markets? Do I have the right succession planning structure in place for the transmission of my wealth? Do I have the right banking partners, asset managers and trustees, and am I paying the correct fees?
4 Our leadership are all African’s, with deep international experience. We know what it means to live on this beautiful continent and the challenges that need to be planned for. Our business is all about relationships and solutions. We work with clients to analyse their current situation, then design and build specialised bespoke structures and international investment solutions to effectively manage our clients and their family’s risk. We understand what it takes to build wealth and what is needed to preserve, protect, and efficiently grow that wealth seamlessly to pave the road for future generations. We believe independence is of paramount importance in an environment that can be complicated and opaque. Our complete independence gives Carrick unrestricted access to the best global players in the market, allowing us to provide completely objective advice, across structures and investments, with no conflict of interest. Our business has grown by building trust and exceeding expectations. Our proven success is supported by end-toend processes focusing on exceptional service and solution-driven strategies. Integrity is at the heart of Carrick. Our group has grown from strength to strength and consists of over 150 employees. Our assets under management are in excess of USD1bn. Our collective knowledge, gained from decades of experience understanding markets, risk, rewards and behaviors, ensures our solutions are on target. We believe that trust is the one thing that can never be bought, regardless of how well constructed a client’s portfolio is. Trust is something that builds over time. Being trustworthy is a core value that is included in our company constitution. As we guide clients towards their financial destiny, we see protection of their wealth as an indication of our success in wealth management. Our clients have spent their lives building their wealth, and we have the utmost respect for those assets. The protection of this wealth is our highest priority, and we make use of only the top technical, legal and investment knowledge to manage and protect our clients’ wealth. Therefore, even our most riskaverse investors feel at ease under the protection we provide. We operate in a highly regulated environment and take our responsibility seriously. We have a fully established and staffed back office, focusing on legal, compliance, administration, and other ancillary support services such as human resource, marketing, IT services and accounting. We have developed our proprietary internal technology platform to drive our entire business and compliance process. We firmly believe that technology and innovation are essential to remain at the cutting edge of our business and to provide our clients with a world class experience.
5 Carrick is an independent financial services provider specializing in financial planning, integrated wealth management and investment solutions. By building trust and exceeding expectations, we’ve become Southern Africa’s leading independent financial service provider. (Licenced and regulated in South Africa) CLICK HERE TO VISIT THE WEBSITE Carrick Wealth ORGANOGRAM CARRICK GROUP OF COMPANIES CARRICK FINANCIAL SERVICES WEALTH MANAGEMENT CARRICK INTERNATIONAL CARRICK WEALTH CARRICK CONSULT AFRICA ZIMBABWE BOTSWANA CARRICK INTERNATIONAL PROPERTY CARRICK WEALTH CARRICK INVESTMENT SERVICES CARRICK GLOBAL WEALTH LIMITED CARRICK PARTNERS CARRICK CATALYST CARRICK ATHENA MALAWI KENYA ZAMBIA CARRICK FX LNKD INVESTMENT MANAGERS SOUTH AFRICA CAPE TOWN (HQ) MAURITIUS UNITED KINGDOM JOHANNESBURG DURBAN PRETORIA GARDEN ROUTE
6 Carrick Consult provides independent professional services to assist clients with personalized fiduciary and financial solutions. We assist HNW (High-net-worth) clients, families, and businesses with comprehensive strategies to optimize their financial portfolios and protect their assets. The Carrick Investment Committee conducts full due diligence on all partners and products to ensure that they meet Carrick’s high standards of transparency, track record, consistency, and reputation. While Carrick forges beneficial partnerships with industry leaders in the fiduciary and financial services field, we also always maintain our full independence for our clients to benefit from the best objective and professional advice. Carrick Partners assist existing advisors and financial advisory firms in growing their advisory practice via Carrick’s global wealth management offering, inclusive of financial planning, asset management, property, foreign exchange, and fiduciary services. In addition, Carrick Partners offers enhanced operational support in the form of dedicated compliance, human resources, marketing, and administrative functions. The Carrick Partners solution has been established to increase revenue and assets under management whilst reducing risk and complexity. Carrick Athena is a community of like-minded women who are taking charge of their financial future by talking openly and freely about their relationship with money. We know that women think differently about money. So do our Private Wealth Managers. Our women-led team understands that building trust is what matters most if you want a relationship to thrive. (Licenced and regulated in South Africa) (Licenced and regulated in South Africa) (Licenced and regulated in South Africa) CLICK HERE TO VISIT THE WEBSITE CLICK HERE TO VISIT THE WEBSITE CLICK HERE TO VISIT THE WEBSITE Carrick Consult Carrick Partners Carrick Athena Carrick International Property offers independent professional services to assist clients who wish to diversify their investment portfolios into property. We assist HNW (High-net-worth) clients and families invest in property across secure, high-growth and developed property market jurisdictions. (Licenced and regulated in South Africa & Mauritius) CLICK HERE TO VISIT THE WEBSITE Carrick International Property INTERNATIONAL PROPERTY
7 Our alliance program, Carrick Catalyst, is designed to pair our skills, experience, and solutions with those of select specialist providers who are leaders in their fields, to better serve clients. We offer the full spectrum of wealth management solutions and financial services for UK citizens as well as domiciled persons, with a focus on assisting clients with financial strategy inclusive of financial planning, asset management, foreign exchange, fiduciary services, and tax liabilities. (Licenced and regulated in Mauritius) (Licenced and regulated in the United Kingdom) CLICK HERE TO VISIT THE WEBSITE CLICK HERE TO VISIT THE WEBSITE Carrick Catalyst Carrick Global LNKD Investment Managers is an approved category II investment manager, focused on the delivery of personalized investment management services. (Licenced and regulated in South Africa) CLICK HERE TO VISIT THE WEBSITE LNKD Investment Managers OUR FOOTPRINT Carrick is headquartered in Cape Town and all subsidiaries are fully licensed and regulated by the appropriate regulatory bodies within their jurisdictions. We have regulatory approval to operate in South Africa, Zambia, Malawi, Zimbabwe, Mauritius and the UK. We have opened 11 fully operational advisory offices in Johannesburg, Cape Town, Durban, Garden Route, Pretoria, Harare, Gaborone, Lilongwe, Lusaka, Mauritius, and London. We have pending applications in Kenya and Botswana and plans to further expand across both East and West Africa, including Namibia.
OUR PRESENCE
8 South Africa Botswana Zimbabwe Zambia Malawi Mozambique Namibia Angola Tanzania Uganda Ethiopia Kenya Egypt Nigeria Ghana Senegal Morocco Algeria United Kingdom Mauritius
9 AN AWARD-WINNING ADVISORY Our efforts have been recognised by the industry and we are proud to have won numerous awards, across various categories: 2016 2017 2018 2019 2020 2020 2021 2022 2019 2019 2018 Excellence in Business Transformation Excellence in Investment Planning Excellence in Client Service Excellence in Marketing and Client Engagement Excellence in Business Strategy Best Adviser Support Team Excellence in Marketing Best Adviser Firm in South Africa Excellence in Investment Planning Excellence in Business Strategy Carrick Wealth ranked No.1 in the Wealthy Executives Archetype Carrick Wealth ranked No.4 in the Top Wealth Manager: Boutique Category Excellence in Advisory Best Practice for Africa Excellence in Advisory Best Practice for Africa Excellence in Client Service for Africa Carrick’s CEO, Craig Featherby, ranked in the Top 100 Carrick Wealth ranked in the Wealthy Executives Archetype Carrick’s CEO, Craig Featherby, ranked in the Top 100
10 KEY BOARD MEMBERS Craig Featherby Founder and Group CEO Anthony Palmer Group Commercial Director Craig believes that building a culture of leadership starts with those at the top – the drivers of the vision. Over a span of fourteen years in the financial services industry, Craig has concentrated on the craft of management, coupled with a passion for the financial services industry. He draws on a career that has taken him to the apex of the international finance industry, as far as the Middle East and Asia, and to some of the top positions in the financial world. Anthony was born in Johannesburg and matriculated from Damelin college in 1991. He is a qualified chartered accountant, holding a B.Comm and B.Comm Accounting, is a Member of the SA Institute of Chartered Accountants, a USA Series 7 and 63 Representative and a UK Securities and Financial Derivatives and Commodities Representative. Born in Zimbabwe, junior-schooled in Melbourne, Australia, and educated at Kwazulu Natal’s Michaelhouse, throughout his journey Craig has carried with him the principles of leadership. From his early days at Ernst & Young and at ABSA Bank Limited, his career has taken him to the Middle East as a Financial Adviser and to the Far East, where he was involved in Wealth Management and Offshore Investments, eventually becoming Regional Manager for Africa (Financial Advisory/Wealth Management) for one of the largest independent offshore financial consultancies. A philanthropist at heart, Craig believes that leadership should be translated into action to uplift the community. In this respect, he is a co-founder of Signature of Hope Trust and a generous donor to various NGOs. Anthony spent eleven years working abroad in structured credit sales and derivative marketing at JP Morgan in London and Deutsche Bank in London and New York. His last position at Deutsche Bank was as managing director and global head of the alternative risk markets group. On returning to South Africa, Anthony started his own business in the finance and venture capital industry. After identifying an opportunity in providing offshore financial planning to South African residents Anthony joined Carrick, at its inception, as a senior adviser and to deliver product development, training and strategic input. Anthony is Chairman of the Carrick Investment Committee where his team work to develop solutions that enhance the company’s current product offerings, delivering bespoke solutions that compliment business offerings. Anthony is also a director of LNKD Investment Managers, our in-house asset manager, and a director of Carrick Consult, our fiduciary business and is actively involved in the groups expansion.
11 Bryan Austen Group Finance Director Rashay Makan Group Operations Director Bryan is responsible for the overall financial functioning of the Carrick group. He plays a key role in guiding the board with strategic investment decisions and ensuring the security of the company’s assets. Born and raised in Cape Town, he is an entrepreneur at heart and has always had a passion for numbers and financial markets. He has spent the last ten years in the financial services industry heading up finance teams and overseeing operations across the African region. Rashay completed his Bachelor of Business Science Management Studies degree with honours in Finance at the University of Cape Town. He began his career as a Business Development Manager and has been with Carrick since its inception in 2014. His leadership and entrepreneurial qualities saw him founding the Carrick Development Academy and later being promoted to the Head of Strategic Projects for the group. He is currently serving as the Group Operations Director and Chairman of the Group Risk and Bryan completed his Bachelor of Commerce degree majoring in Economics and Finance and has also completed numerous industry-related qualifications from UCT, CISI and the FSCA regulatory examinations. He sits on several of Carrick’s executive committees and currently heads up the Audit and Remuneration Committee. Governance Committee. Rashay’s projects and responsibilities are focused on building Carrick’s African footprint, enhancing technology and client platforms and ensuring efficiency in products and systems. Louis Venter Fiduciary Executive and Managing Director of Carrick Consult Louis holds a BCom (Law) degree from the University of the Free State and a post graduate LLB degree through the University of South Africa. He is an admitted attorney of the High Court of South Africa. Louis was the founding director of Citadel Fiduciary Services which he ran for 8 years before taking up leadership roles in RMB Private clients and Maitland South Africa. Louis has extensive experience in establishing and running family structures for some of Africa’s wealthiest families. Louis has a passion for training and mentoring professionals from both the legal and the financial advisory fields. He is an accredited facilitator and assessor in this field of learning development.
12 Luis Levy Investment Executive of LNKD Investment Managers Luis obtained his B Com degree from the University of Cape Town and is a CFA Charter Holder. He started his financial services career in 1998 at Old Mutual and has gained valuable experience in fund management at several leading financial institutions. During his career he has also managed numerous mandates for retirement funds. Luis joined Efficient Select, the asset management arm of the listed Efficient Group in 2010. He was appointed Managing Director of Efficient Select in 2011, where he was able to successfully grow the fund manager in the retail and institutional markets. In June 2015 he departed to setup StrategiQ Capital and at LNKD is a portfolio manager, Director and member of the Investment Committee. Robert Enslin Investment Executive of LNKD Investment Managers Rob obtained his B Com Honours degree from the University of Stellenbosch and is a CFA Charter Holder. He started his financial services career in 2008 at ValuGro Capital which was rated as the top small asset management company during the same year. Valugro Capital was subsequently purchased by the listed Efficient Group and the asset management arm was renamed Efficient Select in 2011. During his time at ValuGro Capital and Efficient Select, Rob Enslin was the portfolio manager of the Efficient Worldwide Flexible Fund which was the recipient of two Raging Bull Awards in 2011 and 2012 as the top performing fund (risk adjusted) in its category over a rolling 5-year period. In 2015, Rob was appointed as Head of Private Clients. In 2016, he departed to join StrategiQ Capital. At LNKD Rob is a portfolio manager, key individual, investment committee member and Director.
13 COMPANY CULTURE We champion respect, integrity, humility, professionalism, mentorship, character development and empowerment, and we seek out those who display the qualities we admire. Our capacity for moral judgment and leadership principles matters to us. The kind of trust that our clients have placed in us is something we cannot measure, and we value this trust above anything else. At Carrick, we have tried to create an environment that places our core values above personal agendas, both in our business and in the financial industry. We believe that stories of success come and go, but integrity lasts forever. When it comes to matters where business is concerned, transparency is non-negotiable. At Carrick, we have embraced the value of transparency as a means to grow ourselves and to strengthen client loyalty. We believe that transparency is a way for us to increase our productivity, boost employee morale, and strengthen company culture. It further allows us to improve decision-making in the business. We have found that our capacity for transparency can lead us to better clarity (with both clients and employees) and essentially makes us more efficient. As we aspire to having transparency as a core value, we believe that our employees will follow suit. In turn, we will be able to offer more than our clients expect. The digital world we live in means that our clients are fully informed and knowledgeable where their investments are concerned. We are a happy and proud company. We stand on the belief that none of us is as great as all of us. Growing and cultivating a leadership culture throughout the business is a key focus. For us this means that we need to lead by example. We lead our clients, employees, and ourselves. As we encourage this working culture, we strive to nurture a company of captains.
14 APPROACH TO RISK The company’s approach to risk and Corporate Governance is in line with its core values. The Board of Directors is committed to maintaining a high standard of corporate governance within the Company as it recognizes that an effective corporate framework is fundamental to conducting business that is fair, transparent, ethical and done in a responsible manner. The Board, which is unitary, is responsible for setting out the overall strategy of the company, supervise the business of the company and its affairs and ensures that the Company always meets its legal and regulatory requirements. It ensures that good corporate governance policies and practices are implemented within the Company. In the exercise of its duties, the board acts in good faith, with due diligence and care, and in the best interests of the Company, our clients, and our shareholders. The Company’s Shareholders and Directors have continued to strive for a corporate governance structure which is lean, simple and straightforward by aligning all levels of the organization with a view to achieving its defined strategic goals and objectives. This is greatly enhanced through board-related activities and meetings together with the effective use of sub-committees where appropriate. The current corporate structure framework of the Company is as follows: Board of Directors Company Secretary Management & Employees Shareholders Audit Committee Risk & Governance/ Compliance Committee Investment Committee Remuneration Committee Nomination Committee
15 Group Audit Committee Committees of the Group Group Risk & Governance Committee Mandated with responsibility for matters relating to financial reporting and internal financial controls; and in particular reviewing: the integrity of the financial statements; the effectiveness of internal financial control systems. the effectiveness of the Carrick Group’s internal audit and the external auditor; and The Company fulfils its Corporate Governance responsibilities through the committees of the Group. Given the size of the Carrick Group of companies, it was decided to have all Committees at the Group level rather than at company level so as to eliminate risk of duplication and oversight. Composition of Committees are provided here below: Mandated with responsibility for: the oversight of risk related matters and the principal risks impacting the Carrick Group and each individual subsidiary; internal control systems (other than internal financial control systems); and the oversight of risks relating to: – financial crime; – cyber-crime and information security – anti-bribery and corruption; – anti-money laundering; and – countering the financing of terrorism risk governance; Annual reviews of risk management plans and internal controls, as well as the provision of training to the Company’s employees ensures that the Company stays up to date. The Carrick Group Board Committees are made up of directors from the various entities within the Carrick Group. Each individual entity will report into the Board.
16 Group Investment Committee Group Remuneration Committee Mandated with responsibility for the oversight of the Carrick Group’s investment strategy, methodology and performance. Mandated with responsibility for matters relating to remuneration, in particular: the principles, parameters and governance framework of the Carrick Group’s remuneration policy (as applicable to all Carrick Group employees); and the remuneration of executive directors, other senior executives (such as the Group Chief Executive Officer, Group Executive Directors, Group Company Secretary and Group General Managers), non-executive directors, Regulated Employees (being those employees whose remuneration is subject to regulatory minimum requirements) and other employees. Group Nomination Committee Mandated with the responsibility for leading the process for Board appointments and review, and for identifying and nominating candidates for appointment to the Board.
17 Due to the nature of its activities, the Company has an insignificant adverse impact on the environment. The Company promotes and strongly adheres to fair policies in recruitment and promotion. The Company is highly committed towards its employees and provides regular internal and external training for the employee’s professional development. The Company is responsible for providing and maintaining, so far as is reasonably practicable and in compliance with the applicable laws, safe and healthy working conditions. ENVIRONMENT SOCIAL ISSUES HEALTH & SAFETY Environment, Health & Safety and Social Issues
18 SCOPE OF SERVICES Investments Family Business Structuring Total Wealth Strategy Governance Planning & Structuring PRIVATE WEALTH STRUCTURING CORPORATE Private Equity Ownership Planning Life Insurance Strategic Asset Allocation Family Strategy Asset Protection Investment Controlling Profitable Business Growth Holding Companies Consolidated Reporting Education Internationalization Individual Development Capital Gains Optimization Liquid Investments Leadership & Succession Generational Wealth Transfer Traditional Investing Crisis Management Multi-tax & Residencies Institutional Investing Family Conflict Risk Management Impact Investing Family Alignment & Sustainability Residency/Citizenship Cash Pooling & Deployment Real Estate Wealth Sustainability Health Services
19 WHY CLIENTS PARTNER WITH CARRICK You will receive dedicated focus from your Private Wealth Manager who will understand you and your financial priorities. We are completely independent, have vast international experience, and understand what it takes to manage wealth in an evolving and complicated world. Luis Levy has been in the asset management world since 1998 and Rob Enslin since 2008. Both have won awards for managing international flexible funds. Anthony Palmer has been operating in global financial markets since 2000 in banking, investment management and financial advisory roles. Craig Featherby has been in the financial advisory world since 2004 and has helped clients manage their investment portfolios across Africa, the Middle East and the Far East. With Carrick you won’t be just another account. The partnership formed will be personal, professional and private. INVESTMENT EXPERIENCE The investment backgrounds and investment experience of the Carrick Group are vast and diverse. Our leadership have operated through significant market crashes starting with the Russian crisis in 1998 as well as various interest rate regimes and market cycles. We have seen fortunes lost and fortunes made and apply the valuable lessons learned in our investment philosophy. This combined skill set is the foundation of our investment experience and has helped Carrick and its clients successfully navigate a myriad of market conditions through the application of tried and tested investment principles.
20 OUR INVESTMENT PHILOSOPHY The single most important consideration in ensuring that an investment strategy aligns to a client’s long-term return and risk objectives is determined by an appropriate strategic asset allocation framework. This belief is well supported in academic literature including research conducted by Brinson, Hood and Beebower in 1986 and 1991; and other empirical work completed by Ibbotson and Kaplan in 2000, whereby 90 percentage of the variability of a portfolio’s return over time can be explained by asset allocation policy. We therefore place significant emphasis on this principle of investing. We believe that financial markets are inefficient, implying that certain asset prices do not accurately reflect their true value. We consider this inefficiency to be more pronounced in listed equity and private markets. The market’s inefficiency allows for active management, whereby a skilful manager can exploit this inefficiency, earning above market average returns (alpha). We however consider there to be only a handful of active managers with proven track-records of achieving alpha, with studies suggesting that a high percentage of active managers underperform broad market indices over the long-term. Statistically, passive strategies outperform most active managers after costs over the long-term. Therefore, our default allocation is to a passive equivalent asset class. Only when there is compelling evidence to allocate to an active manager will we do so. Factors influencing this decision include asset class types, competing fee structures, market cycles and style premia considerations. Considering principles two and three collectively, we are therefore agnostic to active versus passive investing. Rather, we consider ourselves as active asset allocators (blending active and passive strategies), focused on providing clients with consistent real returns whilst seeking to preserve their capital over the long-term. Financial markets are dynamic, evolving across different economic and financial market cycles. At different points in a cycle, certain managers will outperform their peers which is often explained by differences in investment philosophies, geographic and sector preferences, and varying top-down macroeconomic outlooks. By following a multi-manager approach, we are not limited by a single investment managers ability through an investment cycle. We leverage off multiple specialist investment professionals utilising their skill and knowledge where it can add value. Ultimately, we believe that this improved flexibility together with our independence achieves more consistent riskadjusted returns for our clients. Our philosophy guiding the management of our client’s wealth is built on four key investment principles. Strategic asset allocation remains the single most important consideration in constructing an optimal portfolio Markets are inefficient at times, allowing for active management (alpha) For all other times, passive strategies are more suitable (beta) Multi-management optimally blends the best skills and styles of more than one fund manager because we believe that no single-fund manager can consistently outperform in all market and economic environments
21 We place greater emphasis on strategic asset allocation (SAA) over tactical asset allocation (TAA). Tactical asset allocation considerations are applied for risk management purposes based collective top-down asset allocation and bottom-up valuation considerations, with deviation thresholds set in relation to longer-term strategic asset allocation views. We employ mean-variance optimisation (MVO) principles in determining an appropriate strategic asset allocation framework that aligns to a client’s overall investment objective. The goal of mean-variance optimisation is to maximise an investment’s reward based on various levels of risk. Risk is expressed as variance; and reward, expressed as return. Mean-variance optimisation analysis allows us to identify an optimal asset allocation strategy and simulate the probability of loss and long-term wealth creation. Our mean-variance optimisation approach considers twelve asset building blocks, broadly classified under the categories of growth, defensive and uncorrelated asset classes. Each of the twelve asset building blocks are linked to an investable market index. We set our mean-variance optimisation to run 2,000 simulations over a rolling 20-year timeframe, solving for correlations between asset classes that achieve the highest return for a given level of risk. Our approach is to initially adopt an unconstrained asset weighting output. We analyse the output and thereafter include asset class weighting constraints to a second round of mean-variance optimisation. At this second round, consideration to asset class diversification and clients’ unique requirements (e.g., limited emerging market exposure) are considered by capping minimum and maximum exposure to each of the twelve asset building blocks. We review this strategic asset allocation process on an annual basis. Strategic Asset Allocation (SAA) OUR PROCESS FOR STRATEGIC & TACTICAL ASSET ALLOCATION Our strategic asset allocation view is considered as a “neutral” allocation view. Tactical asset allocation adjustments to SAA weightings are formally set on a quarterly basis, with defined minimum and maximum over-and-under-weight tolerations. These decisions are driven by global macro topdown views in conjunction with bottom-up asset class valuations. In extreme circumstances, we will review tactical asset views intra-quarter. Higher conviction in our tactical asset allocation views apply where top-down views are consistent with bottomup views. Asset, Geographic & Sector Preferences Intrinsic Value of Asset Classes Tactical Asset Allocation (TAA) TACTICAL ASSET ALLOCATION (TAA) CONVICTION MACRO-ECONOMIC TOP-DOWN QUANTITATIVE & QUALITATIVE ANALYSIS BOTTOM-UP
22 We define risk as not achieving the long-term return objectives as set out in a client’s investment policy statement (IPS). At an asset allocation level, risk is primarily managed through tactical asset allocation decisions. Diversification considerations are also incorporated within our risk management framework, including geographic, sector, style premia and underlying manager exposures. However, this is considered at a portfolio construction level. We provide further details of this process within the “Portfolio Construction” question. Tactical asset allocation decisions incorporate both top-down macro-economic views and bottom-up asset class valuations. Minimum and maximum tactical asset allocation weights are defined in relation to long-term strategic asset allocation views. Higher conviction tactical asset allocation views are established if there is consensus between the top-down and bottom-up view. Top-Down macro-economic views are formulated on a quarterly basis at investment committee house view meetings. Key areas of consideration include: – Inflation & interest rate outlooks – Economic growth outlooks – Business activity indicators including manufacturing and services PMI data, retail sales – Business & consumer confidence – Geopolitical risks Bottom-up asset class valuations are analysed monthly at investment committee meetings. In circumstances of extreme price action or significant events impacting top-down views, tactical asset allocation views are adjusted intra-quarter. In all other instances, tactical asset adjustments are reviewed quarterly and applied to underlying portfolio mandates. All mandates are monitored daily, and portfolio weights are compared to tactical asset allocation views. Predetermined tolerance thresholds are set. In instances whereby a threshold limit is triggered, the portfolio is reviewed at our weekly portfolio meeting and appropriately rebalanced to tactical asset allocation weights. HOW WE MANAGE RISK IN OUR ASSET ALLOCATION PROCESS Portfolios are constructed according to a building block approach. We therefore seek to identify managers within predefined asset classes and in accordance with our tactical asset allocation views. The primary objective is to construct a portfolio with optimal risk-return attributes. Our default allocation is always to a passive equivalent building block. Where there is evidence of a proven track record of alpha generation, we will then consider an active manager alternative. This results in our portfolios typically holding a 50:50 active passive management split. We conduct research on active management strategies with the objective of identifying managers with proven trackrecords of achieving alpha over their internally defined benchmarks (as defined by our twelve asset building blocks). This approved active manager watchlist is actively maintained by our research team. Within our portfolio construction process, each of the twelve-asset class building blocks are carefully built out, blending active managers from our approved watchlist with complementary passive alternatives. OUR APPROACH TO PORTFOLIO CONSTRUCTION
23 As highlighting in our investment philosophy, we are agnostic to active versus passive management. According to the Efficient Market Hypothesis (EMH), we believe that markets reflect “weak efficiency”. Equally, we do not believe that markets are in a constant state of inefficiency, but rather move through waves of inefficiency, which tend to be amplified during times of major macro-economic and geopolitical events. In accordance with the weak form of the Efficient Market Hypothesis - prices of securities reflect all available public market information but may not reflect new information. Therefore, we place no value in active management that uses technical analysis. We only believe that skilful fundamental analysis can generate alpha over the long-term. Research supports our view that only a handful of skilful active managers achieve alpha over the long-term, with most active managers, ultimately underperforming their passive benchmark equivalent. Success rates of active managers also varies across asset classes. Over a 20-year period, less than 20% active equity managers outperform their passive equivalent benchmark. DO WE RECOMMEND PASSIVE MANAGEMENT? The overall holistic portfolio is then quantitatively analysed against an appropriate benchmark as defined in the investment policy statement (IPS) with the objective of a portfolio output that best meets our client’s long-term riskreturn objective. To achieve this, the process is dynamic and considers the following important criteria: – Historical absolute and relative performance analysis over various measurement periods – Underlying manager performances and risk statistics – Historical risk statistics (e.g., downside capture ratios, maximum & average drawdowns, beta, tracking error) – Risk-return statistics (Sharpe ratio, Information ratio) – Manager exposure weights – Correlation analysis between underlying holdings – Style premia and market capitalisation diversification – Geographic & sector exposures – Look-through underlying security exposures – Scenario analysis These inputs are collectively captured and interpreted by our investment committee in a quantitative portfolio construction report. Morningstar Direct is our primary analytical software used in the portfolio construction process. We also make of Infront and inhouse proprietary tools. Source: Morningstar’s European Active/Passive Barometer – Mid year 2021. Data to the 30 June 2021 | Morningstar Direct to 28 February 2022 Success rates of active versus passive funds in different asset class categories (Europe)
24 A passive strategy is therefore our default allocation across our twelve asset building blocks. Only in instances where there is compelling evidence of long-term alpha generation, will we allocate to an active manager. We believe that this approach, better equips us to “isolate” pure alpha ability, avoiding active managers cross-cancelling each other’s alpha generation. The blending of active and passive strategies also significantly reduces the overall management fees associated with our strategies. We are therefore agnostic to active versus passive investing. Rather, we consider ourselves as active asset allocators (blending active and passive strategies), focused on providing clients with consistent real returns whilst seeking to preserve their capital over the long-term. – Investment meetings are held weekly. – All portfolios are reviewed and discussed by the investment team. – The meeting’s agenda includes performance analysis, portfolio positioning relative to tactical asset allocation views, significant macro-economic data releases impacting tactical asset allocation views, and new manager research and recommendation updates. Weekly Portfolio views are in real-time. The primary software used in this process includes: MorningStar Direct and Infront. Our monitoring process includes: – We monitor managers and the overall portfolio in real-time. – An automated daily report is sent out daily to the investment committee. This report highlights portfolio performance relative to the set benchmark. Daily OUR ONGOING PORTFOLIO MONITORING PROCESSES – We review managers’ performance monthly relative to the standards we have set. – A comprehensive performance & attribution report is analysed by the investment team including: – Absolute & relative performance analysis – Risk and risk-adjusted return statistics – Asset class, sector, style premia, geographic exposures – Performance attribution: contributors and detractors to overall performance – Portfolio positioning relative to tactical asset allocation views Monthly
25 – We undertake a detailed performance and attribution review focused on the relative performance & factors impacting the portfolio. We bring any unresolved questions to the investment manager. – Tactical asset allocation weights are reassessed at our quarterly house view meeting and applied to portfolios with necessary adjustments are implemented to portfolios. At the same time, manager adjustments are also implemented. – All managers are also grouped to our 12-asset class building blocks. – We also run a relative quantitative manager risk-rating score over time across our entire manager universe. The graphical interpretation of this report is used as a leading signal. Quarterly Result: Actively managed investment solution targeting superior risk-adjusted returns. Alternative investments encompass a broad range of investment opportunities in both private (assets not traded on a public exchange) and public markets. Private markets include private equity (investments in private companies), real estate, structured products and private debt. Whilst alternative investments in public markets include hedge funds, structured products, infrastructure, real estate and commodities (precious & base metals, energy and agriculture). As a collective investment team we have gained extensive experience in allocating to both private and public market alternative investments. In private markets we allocate to structured products with defined pay-off profiles, direct property syndications (UK & US) and private debt solutions. We have preferred allocating to private equity funds (Carlyle, Goldman Sachs & KKR) as opposed to single private equity investments. Assessing the risk-reward payoff, credit risk as well as the liquidity of the underlying investments has been the key focus when analysing allocations to this asset class. In our view these assets can add to the diversification of the overall portfolio, often reducing portfolio volatility and improving long-term risk-adjusted investment returns. We are able to provide more information to historic allocations if required. OUR EXPERIENCE WITH ALTERNATIVE INVESTMENTS
26 The manager research process includes both Quantitative & Qualitative criteria: Approved managers require a minimum Qualitative Rating (QR) Position sizing & portfolio inclusions are monitored via the manager’s Risk Rating (RR) Portfolios are constructed according to a building block approach, blending active and passive management. Only managers from our approved manager watchlist which have gone through our extensive manager selection process are eligible for selection. Manager selection within building blocks is primarily focused on: – Correlation dynamics between managers – Risk-adjusted return analysis of a building block relative to a comparable benchmark – Adequate diversification across managers (weightings) – Geographic diversification on a look-through basis – Sector & industry diversification on a look-through basis – Style premia diversification on a look-through basis Each building block is then applied to our tactical asset allocation framework and holistically analysed according to the same criteria listed above. HOW WE SELECT MANAGERS FOR A PORTFOLIO Attributes of our research process include: 1. Identifying; 2. Defining; 3. Rating; and 4. Monitoring managers. QUALITATIVE ANALYSIS QUALITATIVE ANALYSIS QUALITATIVE ASSESSMENT QUALITATIVE ASSESSMENT IDENTIFY DEFINE RATE MONITOR Third party software (MorningStar Direct, Infront, Bloomberg) together with inhouse proprietary models and manager engagements are our primary research inputs.
27 Manager universes are defined and filtered for: – Minimum track-record of 3 – 5 years (asset class dependent) – Minimum fund size dependent on jurisdiction and universe characteristics; and – Fund structure: all fund-of-funds are removed. The primary objective of this stage of the manager research process is to gain a deep understanding on the investment manager’s organisational and investment capabilities. We seek to identify managers that exhibit the following attributes: – A level of differentiation – A specialised advantage – A repeatable investment process Managers are accessed according to the following 5 criteria: i. Parent: business overview; ownership & corporate structure; investor profile of the fund; regulator & fund domicile. ii. People: investment team; decision-making process; incentive structure; key man risk; operational support. iii. iProcess: philosophy & process; portfolio construction; security selection; sell discipline; research scope/ universe; risk management; ESG considerations. iv. Performance: track record; style classification; positioning; scenario analysis; appropriate benchmark comparison (risk-return analysis). v. Price: fee class & currency details; platform availability; ISIN code details; ESG Fund Rating. After consideration of the above 5 criteria, a Qualitative Rating (QR) is assigned to each fund which is reviewed annually. A proprietary quantitative fund screening tool considers each manager universe according to: – Performance: 1, 3 and 5 years (asset class dependent) – Standard Deviation: 3 and 5 years (asset class dependent) – Sharpe Ratio & Information: 3 and 5 years (asset class dependent) – Average & Maximum Drawdowns: 3 or 5 years (asset class dependent) – Gain/Loss Ratio: 3 or 5 years (asset class dependent) High ranking funds are summarised and further assessed qualitatively. Step 1 | Filter Investment Universe Objectives of Qualitative Research Process Step 2 | Investment Universe Quantitative Screening IDENTIFY DEFINE
28 A score of 0 – 10 is assigned to each of the five “P” criteria and an overall percentage score out of 50 is calculated. A manager’s overall score is then referenced to our ratings table and a final Qualitative Rating (QR) score is assigned to the manager. Minimum outcomes for inclusion to our approved manager list: – A fund rating of B or better – A minimum score of 7 or better for each of the five “P” criteria. Qualitative Rating (QR) 90 – 100% Investment Grade Sub-investment Grade A+ 80 – 89% A 70 – 79% B 60 – 69% C 50 – 59% D 40 – 49% E 30 – 39% F 20 – 29% G 10 – 19% H 0 – 9% I RANGE RATING RANGE Our approved manager list is quantitatively monitored and reviewed quarterly. A risk rating of 1 – 5 is quantitatively assigned to each fund. The risk rating assists in determining how much of a manager we can include in a portfolio. Our proprietary manager quantitative model analyses the following fund attributes to their comparable benchmarks: – 6-month, 1 year, 3 year and 5-year performance relative to benchmarks. – Maximum and average drawdowns, gain/loss ratios. – Risk-return statistics; and – Active share & tracking error. Risk Rating (RR) RATE
29 Monitoring & Attribution Inputs (the “feedback loop”) – Quarterly tactical asset allocation considerations and manager Risk Rating (RR) reviews. – Proprietary attribution & risk reporting (MorningStar, Bloomberg, Infront); – Weekly investment committee meetings. – Semi-annual manager engagements; and – Reporting & recommendations to portfolio adjustments that align to the investment objectives of the solution. THE SELECTION PROCESS Quantitative Analysis Quantitative Assessment Monitoring & Attribution PROCESS: Filter the investment universe according to minimum investment requirements criteria. Thereafter, the defined investment universe is quantitatively screened buy using the following metrics; excess returns, alpha, beta, standard deviation, Sharpe ratio, information ratio, risk/reward, up/down capture ratio, consistency ratios and correlation. RESULT: We rank fund managers, reducing the investible universe into a researchable list of suitable managers. PROCESS: Our manager due diligence process can be divided into two distinct steps: 1. the investment due diligence which identifies best in class managers and; 2. operational due diligence to ensure operational structures are aligned with our requirments. SEEKING MANAGERS WITH: Level of differentiation Specialised advantage Repeatable investment process RESULT: In-depth analysis of investment managers into a small subset of quality managers. PROCESS: We blend top-down macroeconomic views and bottom-up manager analysis to arrive at our investment decisions. RISK MANAGEMENT: Daily/Weekly – We monitor managers, in real-time. Monthly – We review managers’ performance monthly relative to the standards we have set. Quarterly – We undertake detailed performance review focused on the relative performance & factors impacting the portfolio. We bring any unresolved questions to the investment manager. RESULT: Actively managed investment solution targeting superior riskadjusted returns. MONITOR
30 We follow a rigorous due diligence process with all investments that are approved by our investment committee. The due diligence encompasses a written research document that not only evaluates the underlying investment but also allows for a through due diligence of the product provider. Our manager selection strengths include the following: Senior members of our investment have managed funds on a first-tier basis, i.e. managing single manager unit trust funds. This direct management experience allows us to have a first-hand understanding of the investment structures and the implementation of the investment strategy. The core of our team has been managing assets collectively for over 10 years and we were recipients (at a previous employer) of two raging bull awards for management of a worldwide flexible unit trust, the mandate allowed for complete flexibility in allocating to both local and offshore assets across the risk spectrum. This experience we believe sets us apart from other asset allocators that haven’t managed funds directly. A further strength of our manager selection process is our independence. We do not have any of our own funds, rather allocating to best-in-class investment managers, this firmly positions us to be aligned with our investors at all times. Reducing this conflict (of not allocating to our own funds) ensures our best investment view at all times, working jointly with the family to achieve their optimal investment outcome. As a firm we are also fee sensitive being strong believers in the long-term value of accessing investment opportunities at competitive fees. To this end we make use of passive strategies were opportune, accessing diversified investment securities at cost-effective levels. Given our scale, we are also able to access institutional fee classes and exclusive investment opportunities that are often not accessible. In summary, our manager selection process is premised on a thorough quantitative analysis, screening investment universes for superior investment managers (not only from a performance perspective but rather on a risk-adjusted basis) followed by a qualitative due diligence where we meet the manager and complete a written due diligence. Once we have approved an investment, we have set-up an extensive monitoring framework to continuously evaluate the managers/funds performance – measured relative to their benchmark and internal evaluation metrics. We also undertake regular face to face reviews with the managers and encourage them to provide regular report backs to the investment committee. OUR MANAGER SELECTION STRENGTHS We currently have 85 approved best-in-class managers on our approved watchlist. In instances where we successfully identify a new manager according to our described manager selection process, we will look to remove a similar manager from our approved list that we consider to be of lower quality. This ensures that our approved list remains best in class and is well researched by our investment analysts. The process is dynamic and repeated periodically to ensure that up-coming managers with track-records of at least three years are potentially identified. MANAGERS WE TRACK IN OUR DATABASE
31 All managers are assessed according to the following criteria: – Parent: ownership and institutional structure of the investment manager – People: investment team & key man risk – Process: investment philosophy and process of the investment manager – Performance: relative performance to a comparable benchmark – Price: fee structure of the investment manager Managers are scored according to the above criteria and require a minimum overall score of 35 out 50, with each of the underlying criteria requiring a minimum score of 7 out of 10 to remain included in our portfolios. Our analysts conduct ongoing research of managers. In instances where a manager’s rating falls below the above set thresholds, the analyst covering the manager will present a report to the investment committee, motivating reasons to exclude the manager from portfolios. We also bring any unresolved questions to the investment manager and engage with the firm to better understand our findings. In instances where the investment committee decides to exclude a manager, it is applied across all mandates. More severe events including legal or regulatory actions or ethical lapses, trigger an immediate termination of a manager. CRITERIA FOR TERMINATING MANAGERS
32 A thread of hope, a single smile, a show of respect & an attitude of encouragement goes a very long way to make a difference in a child’s life. Create collective vision and purpose for all NGO’s. To create centralized funding mechanisms for NGO’s. Uphold the core principle of trust, transparency and professionalism. Implement positive, meaningful and sustainable change in South Africa. Lead the way for the creation of an NGO regulatory body. Conduct all activities at a standard which benchmarks NGO activity. OUR VISION OUR MISSION OUR VALUES NPO Registration number: 196-195NPO Public Benefit Organisation Registration number: 930044595 Trust registration number: IT 1351/ 2013 South Africa’s NGO’s face significant challenges in achieving their goals and objectives. The challenges faced are often internally generated and arise from issues such as poor management, lack of transparency for donors and even corruption. Whilst NGO’s battle these challenges, South Africa remains in desperate need for long-term, sustainable solutions to tackle hunger, education, housing and many other poverty related challenges. We firmly believe the challenges facing South Africa cannot be solved by NGO’s acting independently and without clear framework. Solutions need to be aligned towards collaboration to achieve long-term, sustainable solutions. NGO’s need to work together to achieve a common solution with the aim of creating positive change for this country. Our aim is to create mechanisms and implement systems to achieve centralized funding for NGO’s which can allow for more focused collaboration. In order to prevent internally generated NGO challenges such as management, transparency and corruption issues, we will aim to create an independent regulatory NGO body. The body will also be responsible for training, development and upskilling of NGO’s to meet these standards.
33 CLOSING STATEMENT In summary, we feel Carrick is well positioned to provide a highly personalised service to our clients. We are a firm that has the necessary experience and collectively work together as a core team of professionals, delivering a service of the highest quality. This service will be at Family Council level and will encompass legal and fiduciary as well as CIO responsibilities. Our solutions are robust, yet flexible enough to adapt to a changing regulatory environment and the evolving needs of our clients and their families.