Ecsponents national roadshow November 2018 In 2010 2 (Originally - - PowerPoint PPT Presentation

Welcome to Ecsponent’s national roadshow

November 2018

In 2010…

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and for Ecsponent…

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(Originally E-data)

2011 - 2017

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Terence Gregory Ecsponent Limited CEO November 2018

Seeing around corners

Business as usual in unusual times

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Short and medium term debt facilities providing high gross profit and

• liquidity. Meet needs of:

▪ SME credit ▪ Enterprise development ▪ Specialist procurement and logistics

Credit

Capital raising through investment products. Advisory services providing life insurance, retirement funding and short-term investment products. Longer term capital growth

• bjectives.

Listed and private equity investments in high- growth areas, with high IP and barriers to entry,

• ffering

high yields.

Investment Services Equity Holdings

Business as usual in unusual times

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2015 2014 2016 2017 2018

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Business as usual in unusual times

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Resulted in exponential growth

Focus Consistency Seeing opportunity in the face of fear Relentless stewardship of investors’ funds and trust

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Fast forward to 2018

Global economy is recovering Trump and trade wars More corporate scandals Credit policies are improving but still excluding some Only 12% companies part of the Fortune 500 in 1995 still exist

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Beyond 2018

What we expect

Local

• Rising interest rates
• Political policy uncertainty
• Poor market performance
• Effects of poor administration

Global and local

• Civil and political unrest,

terrorism

• Trump, UN funding cut etc.
• US/China fallout
• Global interest rates rising
• Potential market crash
• Growing youth unemployment
• Growth of sharing economy

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Beyond 2018 - opportunities

Trends influencing our

• perations and investments

▪ Africa’s infrastructure development

• Exploding population,

urbanisation

• China’s new silk road
• Food security under

threat

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Beyond 2018 -

• pportunities

Trends influencing our operations and investments ▪ Renewable energy

• Improved technology
• Global scramble for materials

(lithium, copper, cobalt, nickel, graphite

• Increased emphasis on climate

change

• South Africa losing in Africa’s energy

race

• Especially in delivering clean

energy solutions

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Beyond 2018 - opportunities

Trends influencing our operations and investments ▪ Fourth industrial revolution

• Fintech
• AI
• VR, gaming and entertainment

First industrial revolution Second industrial revolution Third industrial revolution Fourth industrial revolution

Mechanisation

• f the textile

industry – 18th century The assembly line – 20th century Software revolution Artificial intelligence and the data explosion

Beyond 2018 - opportunities

Trends influencing

• ur operations and

investments ▪ Growing wellness movement

• Doctor Google

and self medication

• Biotechnology,

personalised medicine

• Wearables

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Beyond 2018 - opportunities

Trends influencing our operations and investments ▪ Tax reforms ▪ Currency wars

• Cryptocurrency and blockchain

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How we adapt and help investors to secure and generate wealth

More of the same… ▪ Remaining agile and responsive ▪ Investing for the short and long term ▪ Hedging and diversification ▪ Seeking sensible growth not just for the sake of it ▪ Capital growth

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How we adapt and help investors to secure and generate wealth

More of the same… ▪ Expanding vanilla product range

• Focus on costs and performance
• Small, efficient fund managers
• Personalised service, backed by technology not just

technology ▪ More tax-effective structures

• Bond
• 12J

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Conclusion

Despite uncertainty, volatility and fear, investors are never out of options. We will: ▪ continue to build on this success ▪ remain a learning organisation ▪ learn from the past…

• Progress happens on the fringes, not in headlines.
• The best innovations don’t make money, it is the ability to

commercialise it that does.

• The world will remain unstable and the rate of change will

continue to accelerate at a dizzying speed.

The best way to predict the future is to invent it.

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ecsponent.com

Thank you

Gray Swan Financial Services (Pty) Ltd (Reg No: 2010/009813/07) is an authorised Financial Services Provider (FSP No: 42290).

NOVEMBER 2018 13

“OUT THE BOX THINKING…”

CEO : DUNCAN THERON

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THINKING OUT OF THE BOX

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BLACKSWANS

SOURCE: http://www.visualcapitalist.com/

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OUR NAME : GRAYSWAN

20 40 60 80 100 120 140 160 100 200 300 400 500 600 700 800 900 1000 Variable Days

> R20 billion > 90 years 10% profits

• ffices

assets under advice

• f investment

experience to our charitable trust Gauteng & Western Cape

GRAYSWAN IN NUMBERS

THE PAST IS NOT THE FUTURE

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BIG DOES NOT MEAN SAFE!

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LEHMAN BROTHERS

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ANCHORING EFFECT How many pairs of animals into the ARC …?

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SA CORPORATES ARE WORLD LEADERS BUT …

South Africa produces best investment returns over 100 years: global survey

Source: biznews.co.za

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THE PAST IS NOT THE FUTURE

LAST 10 YEARS P.A. (ZAR) 10 YEAR FORECAST P.A. (ZAR) LOCAL EQUITY 12,5% 8 - 12% GLOBAL EQUITY 14,8% 8 - 12% LOCAL PROPERTY 13,5% 9 - 12% LOCAL BONDS 8,6% 8 - 9% GLOBAL BONDS 8,6% 4 - 5% CASH 6,8% 6 - 7% INFLATION 5,2% 4 - 6%

Source: Coronation – Latest Update 30 September 2018

THE PAST IS NOT THE FUTURE

OLD VERSUS NEW THINKING

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THE WORLD HAS CHANGED…

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HOW TO FIND THE SHORT TERM WINNERS?

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Kingston Jamaica (2.8 million people). 3 gold medals at 3 consecutive Olympics for a total of 9 gold medals over the course of his Olympic career.

Source: The Goldmine effect

FOOLED BY RANDOMNESS

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“No. It’s not the YAM potato.”

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WHAT YOU SEE IS NOT WHAT YOU GET?

> R20 billion > 90 years 10% profits

• ffices

assets under advice

• f investment

experience to our charitable trust Gauteng & Western Cape

GRAYSWAN IN NUMBERS

SHORT TERM THINKING …

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US 10 YEAR MINUS 2 YEAR : NOT IN RECESSION YET BUT …

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US RATES STILL LOW – STILL ROOM FOR INCREASES

Source : Prescient

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BEAR AND BULL MARKETS

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GLOBAL EQUITY MARKETS…….TECH DRIVING THE MARKET

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CUMULATIVE NEGATIVE REAL EQUITY RETURNS

US MARKETS – WHAT HAPPENS AFTER A FALL?

*Source: Morgan Housel

VALUE VS GROWTH?

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REST OF WORLD HAS STRUGGLED

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SA EQUITY MARKETS

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SA EQUITY MARKETS

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SA INVESTMENT SUMMIT: 25 – 27 OCTOBER 2018

Sandton Convention Centre 1000 delegates 2/3 audience was South African

R290 Billion

in fixed investment spending, mot from

SA Companies

Sector focus included agro-processing, mining, energy, manufacturing, communication, transport and water.

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GOVERNMENT BONDS

6,0 6,5 7,0 7,5 8,0 8,5 9,0 9,5 10,0 10,5 11,0

2003/06/20 2003/11/20 2004/04/20 2004/09/20 2005/02/20 2005/07/20 2005/12/20 2006/05/20 2006/10/20 2007/03/20 2007/08/20 2008/01/20 2008/06/20 2008/11/20 2009/04/20 2009/09/20 2010/02/20 2010/07/20 2010/12/20 2011/05/20 2011/10/20 2012/03/20 2012/08/20 2013/01/20 2013/06/20 2013/11/20 2014/04/20 2014/09/20 2015/02/20 2015/07/20 2015/12/20 2016/05/20 2016/10/20 2017/03/20 2017/08/20 2018/01/20 2018/06/20

SA 10 Year Government Bond Yield % SA 10 Year Government Bond Yield

Buying Opportunity R186 > 9.2

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USDZAR : HEDGING STRATEGIES

11,0 11,5 12,0 12,5 13,0 13,5 14,0 14,5 15,0 15,5 16,0

2017/07/03 2017/07/24 2017/08/14 2017/09/04 2017/09/25 2017/10/16 2017/11/06 2017/11/27 2017/12/18 2018/01/08 2018/01/29 2018/02/19 2018/03/12 2018/04/02 2018/04/23 2018/05/14 2018/06/04 2018/06/25 2018/07/16 2018/08/06 2018/08/27 2018/09/17 2018/10/08 2018/10/29 2018/11/19 2018/12/10 2018/12/31

USDZAR Exchange Rate USDZAR Rate Bought Put 15.04 Sold Put 13.05

Bought Put 15.04 Sold Put 13.05

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ZAR IS OVERSOLD, SHOULD RECOVER

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USDZAR : MINIMISE THE TIMING

> R20 billion > 90 years 10% profits

• ffices

assets under advice

• f investment

experience to our charitable trust Gauteng & Western Cape

GRAYSWAN IN NUMBERS

THINKING OUTSIDE THE BOX …

HOW TO FIND THE LONG DISTANCE WINNERS?

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Bekoji Ethopia (17000 people). 10 Olympic gold medals, 32 World Championships and have set 10 world records.

Source – The Goldmine Effect

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PRIMARY RESEARCH

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STRUCTURAL MEGA TRENDS

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STRUCTURAL MEGA TRENDS

Total US Household Net Worth as % of GDP (1952-2017)

✓ Asset prices have grown much faster than GDP since the early 1980s and, in the long run, one cannot outgrow the

• ther.

✓ Every single time US wealth has deviated meaningfully from 370% of US GDP, it has regressed to the mean, and US wealth is now 500% of US GDP.

Source : ARP Investments

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OFFSHORE INVESTMENT OPPORTUNITY : CREDIT

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OFFSHORE INVESTMENT OPPORTUNITY : CREDIT

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OFFSHORE INVESTMENT OPPORTUNITY : CREDIT

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LOCAL INVESTMENT OPPORTUNITY : CREDIT

SA Bank Deposit Rate SA Listed Property SA Fixed Rate Bonds SA Inflation Bonds SA Equities

• 5,00%

0,00% 5,00% 10,00% 15,00% 20,00% 0,00% 2,00% 4,00% 6,00% 8,00% 10,00% 12,00% 14,00% 16,00% Annualized Return Annualized Standard Deviation

Local credit manager universe

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LOCAL INVESTMENT OPPORTUNITY : CREDIT

ESG IS AN INVESTMENT OPPORTUNITY

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ESG MATTERS

Source: Old Mutual

META-STUDY OF 190 DIFERENT SOURCES

88% of reviewed sources find that companies with robust sustainability practices demonstrate better operational performance, which ultimately translates into cash flows 80% of the reviewed studies demonstrate that prudent sustainability practices have a positive influence on investment performance

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RESPONSIBLE INVESTING

“Prudent investing should give appropriate consideration to any factor which may materially affect the sustainable long-term performance of a fund’s assets, including factors of an environmental, social and governance character.”

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RUNNING OUT OF FRESH WATER

✓ Between now and 2050, the world must produce more food than it has done in the last 10,000 years put together. ✓ Food production accounts for over 60% of all water consumption globally. ✓ Water scarcity is widely perceived only to be a major problem in North Africa, Australia and the Middle East, but the reality is quite different.

Source : ARP Investments

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HOW TO INVEST IN WATER?

Water related public entities Water ETF’s or passive funds Water investment funds Water rights funds / trusts SRI, Clean Energy & Impact funds Water infrastruture investments Farmland investments

Source : ARP Investments

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YOU MAY NEED A UNIQUELY BETTER PRODUCT?

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LET’S TRY TO FIND A SOLUTION TO YOUR PROBLEM

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WATER FUNDS VS. GLOBAL EQUITIES

Source : ARP Investments

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ESG GLOBAL EQUITY

ROLE OF THE INVESTMENT ADVISOR

“… investment managers may or may not

• utperform their benchmarks, but if the

investment adviser does not understand how best to meet the investor’s requirements, it’s game over. It's actually the investment advisor and not the investment manager who has the greatest impact on

• utcomes and performance.”

ASSET ALLOCATION DRIVES VALUE CREATION OVER THE LONG TERM

Fund Return Strategic Asset Allocation Manager Selection & Stock Selection Tactical Asset Allocation & Hedging & Rebalancing 12% 10% 1.0% 1.0% Determining the optimum strategic asset allocation is crucial for creation value

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WINNING THE LOSERS GAME

1 YEAR 3 YEAR 5 YEAR 8 YEAR 10 YEAR Number of managers in the SA Equity Universe 224 176 136 106 89 % of managers outperforming the ALSI 12.05% 9.09% 11.03% 11.32% 26.97%

• The average equity manager underperforms the market over all the time periods.
• Over 10 Year the average manager underperformed the ALSI by -1.45% p.a (-13.59% cumulatively)
• Therefore constant manager research and analysis must be done to insure optimum manager

selection.

UNDERSTANDING YOUR NEEDS / OBJECTIVES

INCOME PORTFOLI O CAUTIOUS PORTFOLI O MODERAT E PORTFOLI O AGGRESSIVE PORTFOLIO EXECUTIV E PORTFOLI O OFFSHORE PORTFOLIOS

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INVEST DIFFERENTLY

"If you want to have a better performance than the crowd, you must do things differently from the crowd.”

THE ROAD LESS TRAVELLED

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“Two roads diverged in a wood, and I, I took the one less travelled by, And that has made all the difference.”

~ Robert Frost

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we keep the score, you secure the win

EMPOWERING YOU TO INVEST WITH THE BEST

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In theory a "Black Swan" as first described in AD 82 depicted a creature that did not exist. However, in 1790 a Black Swan was discovered and therefore proved the existence of the improbable. Nicholas Taleb used the bird in his book, The Black Swan, to explain that the belief that "all swans are white" is based on the limits of our

• experience. Some occurrences are unpredictable because they deviate

so far beyond what is normally expected. Such experiences are rare but when they occur they have massive consequences. "Black Swan" events are therefore random and unexpected. They are unpredictable unknowns. However, “GraySwans”, as we coined the term, are risks that can be identified and which have unintended consequences on investors’ portfolios and therefore should be managed

• r avoided.

At GraySwan we do not intend to predict the unpredictable. “GraySwans” are risks that have unintended consequences but can be identified and should be managed or avoided. Our superior investment and risk advisory services empower you to do exactly that.

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AFRICA QUO VADIS ($)?

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AFRICA QUO VADIS ($)?

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PERIODS WITH THE LOWEST EQUITY RETURNS

Source : The End of Indexing

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CUMULATIVE NEGATIVE REAL EQUITY RETURNS

Source : The End of Indexing