In our first episode of the year Shane Tremeer, our CEO, gives a rundown of the strategies that worked well for our business in 2021 and how this resulted in strong performance for investors. In doing so he unpacks the three pillars of business – investment management, operations and distribution – and touches on our plans for 2022.
Hello and welcome to the first Denker Capital podcast of 2022. My name’s Nigel Barnes and today is the 27th of January. I’m very pleased to welcome Shane Tremeer, the chief executive of Denker Capital.
For the benefit of our listeners, Shane has had a long and illustrious career within the Sanlam group and joined Denker Capital formally, as permanent CEO, in mid-2021. You’re now an equity shareholder in the business Shane, which is great. Today we’re going to spend a few minutes looking back at 2021 and then looking forward to the year ahead – at some of the objectives for the business. Shane, if you look at asset management firms, in terms of their composition, they tend to be split into three areas – the operational functionality of the business; the investment manufacture of the business; and distribution. Let’s look at each of those parts. Could you give us a rundown on how things panned out in 2021 and an update of where the business is now?
Thank you, Nigel. Good topic! Before I get into those – one of the crucial things to mention is that the pandemic hit many businesses hard, ourselves included, and we were very proactive early on when we made a strategic decision to cut the cost base. Over the last two years, we’ve managed to cut 35% out of the cost base, which has really laid a solid foundation for us to move forward on and we are starting to see the benefits thereof now. So first and foremost, considering what happened in the market, it was important for businesses to align their costs with their revenue streams – and we did that.
The other thing we did, which is more to your point, was to look at what we think people want from Denker – which is obviously investment performance. So we separated our investment management function from operations and distribution and allowed our experienced and well-known portfolio managers to focus solely on managing money. I’ll speak a little to that because I think the fruits are already starting to show. We had a fantastic year performance-wise, across our range, and it’s also allowed people to grow in their respective roles in operations and distribution.
Our operations team is headed up by Nomawanda Mpiyane and she’s done a great job there.
On the investment side Claude van Cuyck runs local equity, Kokkie Kooyman runs global financials, Jacobus Oosthuizen runs global equity and Madalet Sessions runs our multi-asset capability (our balanced and stable funds). It’s very pleasing to note that for the year of 2021, looking at performance* (because I think that this is key to any business like ourselves): The Denker SCI Equity Fund returned 31%; the Denker SCI Balanced Fund returned 26%; the Denker Global Financial Fund did 28% in US dollar terms; the Denker Global Equity Fund did 20% in US dollar terms; and our more conservative fund, the Denker SCI Stable Fund (in the multi-asset low equity space) returned 12% against its benchmark of 9%. These figures are well ahead of the funds’ respective benchmarks. So, across the board, I’m very pleased with the returns we’ve delivered for our clients.
Another change, which I think has contributed to this performance, is that we’ve shared our research capability (which previously was set up in hubs – global equity analysts, local equity analysts, etc.). Now our various research capabilities are used by all of the various strategies. I think this has led to a far more inclusive culture in the business and we are very pleased with the results – it also prevents duplication of work and allows us to play to our strengths.
Thanks Shane. So that’s covered the operational updates and the strong performance from the investment team. What can you add about distribution?
Probably one of the most key parts of running an asset management business is distribution. I’ve got a background in distribution, as do you, and I think it’s a key component. Access to distribution is ultimately a key differentiator. Many small managers, like ourselves, underinvest in this capability. We’ve made a strategic decision to roll out and invest in distribution. One of the first things we did, and quite innovatively I would say, is struck up a strategic partnership with Janus Henderson Investors. We’ve got exclusivity to market their funds in the South African market. Janus Henderson is a massive global asset manager – I think they’re managing in excess of USD450bn, primarily out of the US and the UK. This has given us really good exposure and association benefits. Secondly, which you’re very aware of Nigel, we’re appointing some business development managers (you’ve made your first appointment now). Our objective is really to get back into the face of decision makers and allocators in the market. We’ve got a good story to tell and we are very excited to do that.
Fantastic, Shane. So operationally and from a financial perspective, a lot of work has been done: The business is in great shape; a greater share of resources in the investment team; some fantastic performance came out of last year; and we have a renewed focus on distribution, probably for the first time for Denker Capital, with a stronger investment in the distribution capability of the business; and this partnership with Janus Henderson. So it seems like it was a pretty solid year Shane. Looking forward – any plans for 2022 or anything specific you’d like to add?
Besides wanting more of the same from the investment team obviously, I believe we’ve got a solid base and processes in place. We are continuing to invest in the business, so we’ve bulked up with another senior analyst joining the local equity team soon. I really do see a focus, outside of maintaining and hopefully improving the investment situation and the returns that we we’ve managed to deliver there, on continued investment into distribution. It’s not just about distribution as a sales function – it’s about building the relationships with the key decision makers and the advisor market. Adding to this, which I’ve been very pleased with, is the reception we’ve gotten from the podcasts and from our social media presence – which is run by our Head of Marketing, Caylin Conradie. We really reached far more potential investors as well as advisors and decision makers than we have previously before. So, I think that investment into a more externally driven business is quite key to our success.
Another component is product development – any ideas there?
We are working on a number of interesting and exciting products. We have a local small cap capability in the business, which is probably not nearly as well-known as it should be and quite difficult to match actually. We launched a small cap hedge fund (S-Alt SC Qualified Hedge Fund +) two years ago, which has done extremely well. There’s a lot of interest for derivatives of this (and I don’t mean futures and options), as well as one or two other potential products that we are fairly far down the line in developing.
Hopefully this has given listeners a sharp overview of Denker Capital – how things have gone over the course of last year and a few comments on our plans for 2022. Thanks, Shane. I appreciate you taking the time and all the best for the months to come.
Thank you very much.
*Fund returns quoted are annualised and net of retail class returns. Click here for a full summary of performance and the performance disclosures.
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The Denker Global Equity Fund and Denker Global Financial Fund are sub-funds of Sanlam Universal Funds Plc, a company incorporated with limited liability as an open-ended umbrella investment company with variable capital and segregated liability between sub-funds under the laws of Ireland and authorised by the Central Bank. The Manager of these funds is Sanlam Asset Management (Ireland) Limited (Beech House, Beech Hill Road, Dublin 4, Ireland, Tel + 353 1 205 3510, Fax + 353 1 205 3521) which is authorised by the Central Bank of Ireland, as a UCITS Management Company, and an Alternative Investment Fund Manager, and licensed as a Financial Service Provider in terms of Section 8 of the FAIS Act. Sanlam Collective Investments (RF) (Pty) Ltd is the South African Representative Office for these funds. The Sanlam Universal Funds Plc full prospectus, the fund supplement, the minimum disclosure document (MDD) and the KIID are available free of charge from the Manager or at www.sanlam.ie. This is neither an offer to sell, nor a solicitation to buy any securities in any fund managed by us. Any offering is made only pursuant to the relevant offering document, together with the current financial statements of the relevant fund, and the relevant subscription/application forms, all of which must be read in their entirety together with the Sanlam Universal Funds Plc prospectus, the fund supplement the MDD and the KIID. No offer to purchase securities will be made or accepted prior to receipt by the offeree of these documents, and the completion of all appropriate documentation. A schedule of fees and charges and maximum commissions is available on request from the Manager. Deemed authorised and regulated by the Financial Conduct Authority. The nature and extent of consumer protections may differ from those for firms based in the UK. Details of the Temporary Permissions Regime, which allows EEA-based firms to operate in the UK for a limited period while seeking full authorisation, are available on the Financial Conduct Authority’s website. (Notes 1, 3 and 4)
South African funds and global feeder funds
The Manager of the range of Denker Capital South African funds and feeder funds is Sanlam Collective Investments (RF) (Pty) Ltd (SCI), a registered and approved Manager in Collective Investment Schemes in Securities. Sanlam Collective Investments is a registered and approved Manager in terms of the Collective Investment Schemes Control Act. The Manager retains full legal responsibility for third party named portfolio. The Sanlam Group is a full member of the Association for Savings and Investment SA. A schedule of fees and charges and maximum commissions is available from the Manager. Standard Bank of South Africa Ltd is the appointed trustee of the Sanlam Collective Investments schemes. International investments or investments in foreign securities could be accompanied by additional risks such as potential constraints on liquidity and repatriation of funds, macroeconomic risk, political risk, foreign exchange risk, tax risk, settlement risk as well as potential limitations on the availability of market information. A feeder fund is a portfolio that invests in a single portfolio of a collective investment scheme, which levies its own charges and which could result in a higher fee structure for the feeder fund.
Source of performance figures: Morningstar. Returns are annualised and net of fees unless otherwise stated. Annualised returns are returns for a period that are scaled to one year. Collective investment schemes are generally medium- to long-term investments. Please note that past performances are not necessarily an accurate determination of future performances, and that the value of investments / units / unit trusts may go down as well as up. Changes in exchange rates may have an adverse effect on the value, price or income of a product. Collective investments are traded at ruling prices and can engage in borrowing and scrip lending. Collective investments are calculated on a net asset value basis, which is the total market value of all assets in the portfolio including any income accruals and less any deductible expenses such as audit fees, brokerage and service fees. Actual investment performance of the portfolio and the investor will differ depending on the initial fees applicable, the actual investment date, and the date of reinvestment of income as well as dividend withholding tax. Forward pricing is used. Additional information of the proposed investment, including brochures, application forms and annual or quarterly reports, can be obtained from the Manager, free of charge. The Manager does not provide any guarantee either with respect to the capital or the return of a portfolio. The performance of the portfolio depends on the underlying assets and variable market factors. Performance is based on NAV to NAV calculations with income reinvestments done on the ex-div date. The Manager has the right to close any portfolios to new investors to manage them more efficiently in accordance with their mandates. Lump sum investment performances are quoted. The portfolio may invest in other unit trust portfolios which levy their own fees, and may result is a higher fee structure for our portfolio. All the portfolio options presented are approved collective investment schemes in terms of Collective Investment Schemes Control Act, No 45 of 2002 (CISCA). The portfolio management of all the portfolios is outsourced to financial services providers authorized in terms of the Financial Advisory and Intermediary Services Act, 2002.
While CIS in hedge funds differ from CIS in securities (long-only portfolios) the two may appear similar, as both are structured in the same way and are subject to the same regulatory requirements. The ability of a portfolio to repurchase is dependent upon the liquidity of the securities and cash of the portfolio. A manager may, in exceptional circumstances, suspend repurchases for a period, subject to regulatory approval, to await liquidity and the manager must keep the investors informed about these circumstances. Further risks associated with hedge funds include: investment strategies may be inherently risky; leverage usually means higher volatility; short-selling can lead to significant losses; unlisted instruments might be valued incorrectly; fixed income instruments may be low-grade; exchange rates could turn against the fund; other complex investments might be misunderstood; the client may be caught in a liquidity squeeze; the prime broker or custodian may default; regulations could change; past performance might be theoretical; or the manager may be conflicted. The S-ALT SC Qualified Hedge Fund was formerly registered as the S-ALT YN Qualified Hedge Fund. The name change was approved with a change of investment policy, and as such the historic fund performance ceases to exist.