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Asset Management Exex Urges 'After-Tax' Reporting For South Africa's Investment Industry

by Philip Morton, Investors

17 July 2001

Sam Camilleri, chief executive of Gryphon Asset Management, has spoken out in South Africa in favour of more transparency in the country's investment and asset management industry, particularly when reporting investment performance and the way in which performance tables are presented to investors.

'The industry has never seriously debated or questioned the appropriateness of reporting performance on a pre-tax basis. Investment performance, return on investment and performance tables are all based on gross figures. However, it is the net return on investment which is of real consequence to the investing public,' argued Mr Camilleri.

He added: 'Tax is a "cost" and with capital gains tax, a cost that might forever be increasing. As a result, there is merit in investing in the growing number of asset types that offer competitive after-tax returns.'

According to Mr Camilleri, investment managers are starting to feel the pressure put on them from pension funds world-wide to deliver reports on performances on an after-tax and fee basis. 'We believe the same thing will happen in South Africa,' he said. 'One can expect that after-tax investment performance rankings will differ substantially from the way they are currently being reported in South Africa and in that sense paint a clearer picture about who's outperforming who. They will also give a better indication of which asset class or investment should be considered.'

'We accept that in some cases more calculations will have to be done or that the result will depend on individual circumstances. In the case of the latter, the consumer should take the lead and demand an after-tax figure from investment consultants and advisers,' he continued.

He said it was inevitable that investment managers will have to take the tax implications on their investment advice into account, which can only be a good thing. 'If after-tax reporting is accepted as the norm, the wisdom of many asset consultants will be questioned by fund managers about their advice to trustees of pension funds to move from the traditional balanced fund manager to specialist managers,' he noted.

In summarising his argument, Mr Camilleri said: 'The argument is simply that a balanced fund mandate will enable the investment manager to achieve the maximum flexibility and have the benefit of managing the tax liability of a fund. I suggest that ultimately clients would like to achieve the highest possible "net returns" and to achieve this objective tax management will have to play a bigger role in the life of their investment managers.'

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