Graviton Implemented Consulting GRAVITON Our

The Benefits Intermediary participation in the portfolio management process
A well-defined investment committee framework
A documented investment philosophy and process
Clear investment mandates suited to your unique client base
Portfolios that are implemented and continually monitored by investment professionals, and managed incorporating input from the investment committee
Scheduled quarterly meetings where decisions are documented and minuted
Confidence that you are meeting your legal and compliance obligations
Access to SMMI’s market and manager research, a dedicated investment professional and key account manager
Marketing support that differentiates your practice through proprietary investment reporting
Stream-lined investment administration and the ability to implement portfolio changes across your client base in one easy process
Competitive pricing<br>

By design ICF offers intermediaries involvement in multi-management process

Provides platform to share research and views with qualified investment professional

Inclusive process to construct investment portfolios that matches your advice process

Process guided by robust Investment Philosophy & Process, Investment Mandates & Manager Buy List




Essentially, one needs to believe in the advice you give Investment Committee Framework (ICF)<br>

Framework in practice 1. Initial discussions to ensure synergies when committee Establish Investment Philosophy

2. Define Investment Mandate for each portfolio to ensure full spectrum of intermediary’s book is serviced

3. Establish Manager selection process – comprehensive Manager Buy List & process to add manager

4. Establish Portfolio Management process – tactical asset allocation & manager selection approach

5. Compliance monitoring<br>

1. Establish Investment Philosophy Investment Committee believes:

It’s prudent to base portfolio management on good investment principles:

- A long term investment horizon improves likelihood of achieving superior returns
- Skilful managers are selected for the long term
- Maintaining a long term horizon could detract from returns over short term due to markets
- Short term underperformance doesn’t validate a manager switch
- Fundamental changes to a manager’s philosophy, process or team may however
- A well-diversified portfolio should result in smoother return profile
- Over-diversification could reduce the likelihood of achieving long term superior returns
- Emotional decision making could result in a permanent loss of capital
- Trying to time the markets is not value adding
- Short term opportunities may however arise where tactical positions will be taken on mispriced assets<br>

Let’s talk about your advice process? What is your DSP/CSP split of your book?
- DSP: typically tax sensitive, income not always required, non-Reg 28, inside or outside of wrap solutions?
- CSP (Pre-retirement): no income, not tax sensitive, Reg 28
- CSP (Post-retirement): income requirement, not tax sensitive, Reg 28

What risk profiles do you believe your current client base reside in?

What is your promise to your clients?
- To beat or keep up with inflation or is it critical to rather keep up with peers?
- To protect capital in market correction or to keep up with the market?
- Smoother return profile, i.e. lower drawdowns, but possibility of short term underperformance to markets

What portfolio construction methodology do you follow?
- Building block approach
- Split funding approach (outsource AA decision)
- Hybrid approach (combination of above)
This discussion helps to clarify what the different options are and which one you feel most inclined to use<br>

Let’s talk about your advice process? Your preference for Active or Passive & why?

Bias towards or against any manager?

Established asset managers or upcoming talent?

Do you have a list of funds most commonly used?

Are you a majority stakeholder in any fund? [ring fencing triggered if own > 5% of fund]

Is there an all-in-fee (advice, investment & platform fee) that you benchmark against?

What pricing do you have access to?<br>

Graviton’s Investment Philosophy Markets driven by two opposing forces - Fear vs. Greed


Results in mispricing

Graviton exploits short term inefficiencies by:

Selection of skilful managers
Blending of complementary managers
Tactical allocation to managers & asset classes

Rigorous research forms the cornerstone of Graviton’s investment philosophy

Graviton is supported by the strong research capabilities of the SMMI investment team<br>

Investment Professional - Rafiq Taylor Rafiq joined Sanlam Multi Manager International in 2006 after starting
his career at Glacier Financial Solutions. He was appointed in the position
of Investment Analyst and was mentored by Nersan Naidoo, one of the
founding members of the multi management methodology at SMMI.
While having manager research responsibilities, he started managing portfolios
under the supervision of Andrew Rumbelow (CIO) in 2009. He is currently the
portfolio manager for the implemented consulting proposition and manages the
Graviton Collective Investment Schemes.
 
Rafiq grew up in Cape Town and studied at the University of Cape Town. He is an avid
sportsman and enjoys running, playing cricket and touch rugby.

Qualifications - B.Com (Economics), B.Com (Hons) Financial Analysis & Portfolio Management, studying towards CFA designation<br>

Investment Professional – Marize vd Merwe Marize joined Graviton as Retail Investment Specialist in September 2012. She has 6 years’ experience in the financial services industry and started her career at Jacques Malan Consultants & Actuaries in their investment consulting department. In 2008 Marize joined the Glacier Research team as investment analyst where her primary responsibility was research on the entire unit trust universe. She was later appointed as a senior investment analyst where she was responsible for Glacier’s investment consulting offering.

Qualifications:
- Bcomm (Hons) Financial Risk Management, University of Stellenbosch
- Postgraduate Diploma in Fin Planning (cum laude), University of Stellenbosch
- CFP® professional member<br>

Supported by strong Team * All portfolio managers are involved in qualitative manager research process<br>

The Differentiating Factor? The SMMI investment team aim to distinguish between SKILL rather than LUCK

A structured, disciplined & independent process where:

Manager research effort is qualitatively led
Focuses on identifying manager skill which most often lies in superior investment philosophy, investment process, people and strong organisational structure
‘True’ skill is more likely to result in persistent outperformance
Qualitative process is supported by quantitative process
Quantitative effort is merely to test investment thesis
Quantitative tools (incl. proprietary tools) allow for analysis of historical performance and portfolio holdings of manager to ascertain thesis for manager skill
Seeks to analyse market conditions that are tail- or headwind to manager’s particular style
Combining qualitative & quantitative research is critical as some managers find it difficult to translate what are conceptually good ideas into their actual portfolios
Aim is to identify manager’s ‘Native Beta’<br>

Search for a manager’s ‘Native Beta’ is what differentiates SMMI

Search for alpha is normally focused on relative performance (to stated benchmark)
SMMI believes understanding real drivers of investment performance is essential
Actively managed fund designed to offer combination of market (beta) & active (alpha) return
When interacting with manager strong emphasis placed on insights gained regarding manager’s philosophy
Continued interactions with manager to quantify ‘Real’ beta – a manager’s true investment style
Believe skilful managers are able to identify in advance how they expect to achieve value-add
Subsequent performance attribution confirms whether or not superior performance generated from those areas identified in advance – skill vs. luck
Once ‘Native’ or ‘Real’ Beta identified can one only assess if ‘true’ alpha (skill) really exists The Differentiating Factor?<br>

Strong Manager Research Process<br>

Strong Manager Research Process It’s a well-defined, independent process that consists of four components:

1. Screening
To assist analysts to identify where to focus research effort
Proprietary developed tool ranks managers periodically on performance & flow data
Managers that rank different (positive/negative) to expectations are highlighted and subject to further review

2. Detailed Research
On managers identified through screening process, on client request or through team discussions
To develop and test thesis regarding existence and persistence of skill within a specific manager’s capability
Analyst interacts with key individuals, both investment professional and business focused, to develop a view on manager’s skill within a given capability
Findings documented in manager research document which is presented to investment team for consideration
If consideration is to add capability to SMMI Manager buy List a Due Diligence is required<br>

Strong Manager Research Process 3. Due Diligence
Role of DD is to ensure an objective view of specific capability is developed
Acknowledge that biases can lead to inappropriate conclusion on particular manager

The following aspects in a clearly defined process assist to control potential biases:
Request manager to complete SMMI Request For Information (RFI)
Three analysts individually review RFI
Observations discussed in preparation for Due Diligence to identify aspects that require further clarification
Due Diligence meeting with key members of business (CEO, CIO, Strategist, Head of Equities, Fixed Interest and/or
Absolute Return, Portfolio Manager)
Critical that all analysts actively engage with key members to ensure full understanding of business, investment
philosophy and process
Post DD meeting to ensure all aspects of business, investment philosophy and process are understood
Identify ‘Key’ factors and where appropriate reschedule 2nd DD meeting to specifically test ‘Key’ factors
Complete SMMI qualitative questionnaire and manager qualitative report<br>

Strong Manager Research Process 4. Manager Buy List
To clearly identify those capabilities where team believes manager possess skill
Analyst presents completed research to broader investment team
Acts as quality control to ensure analyst’s thesis on manager is supported by evidence presented in research
Analyst obliged to provide view on capability in question
A ‘Devil’s Advocacy’ view is also articulated
Rigorous debate and discussion within investment team on research presented
If team is of opinion work is incomplete, analysts required to undertake further work and re-present
Team can either support analysts view (buy or +/- watch) presented or not
If no clear consensus a blind vote will be taken
Majority vote is required to support analysts view
Votes of senior members carry greater weight than junior members
Only Buy List Managers eligible for portfolio inclusion<br>

Managing Risk is Critical Various filters ensure proper risk management at every level of the investment process:
Selection of skilful managers
- Strong investment team supported by proven research process allows for the identification of ‘True skill’ which is more likely to result in persistent outperformance
Blending of complementary managers
- An in depth understanding of a manager’s investment style creates the ability to construct a well-diversified portfolio where manager strategies are different, yet complementary which in turn should result in a smoother return profile
Strong emphasis to quantify risk when constructing portfolios
- Aim to achieve higher return for same level of risk. A comprehensive risk management tool with dedicated quant analyst ensures a clear understanding of portfolio risk. Risk budgets are clearly articulated and spend in most optimal way
Tactical allocation to managers & asset classes
- A dedicated strategist in the investment team ensures a proper understanding of the prevailing macro environment. A strong view on the market may result in tactical shifts between managers/asset classes given an in depth understanding of the market conditions that are tail- or headwind to a manager’s particular style or a particular asset class
Active approach
- Reliable process ensures research and portfolios remain relevant. Active does not necessarily imply regular switches. Skilful managers are selected for the long term. Short term underperformance doesn’t validate a switch, but fundamental changes may<br>

2. Define Investment Mandate Firm grasp of each fund’s objective
Clearly define and document investment guidelines
Investment guidelines include:
- Risk & return targets
- Investment universe
- Asset allocation limits
- Regulatory constraints

CRITICAL: Portfolio target (benchmark) aligns with investment objective
Does solution range service full spectrum of intermediary’s book?<br>

3. Discuss Manager Selection Process A comprehensive Manager Buy List exists that guide the manager selection process

- There’s sufficient choice across multiple ASISA categories
- Where new themes emerge managers will be added to the Buy List to allow access to particular theme
- Buy List managers are backed by a strong investment case and comprehensive research report
- Buy list Managers are believed to have strong competency in managing money – backed by SMMI & Glacier
Research

Comprehensive research allows for an in depth understanding of a manager’s investment style which has the following benefits:
- Allow for the construction of a well-diversified portfolio with smoother return profile through the cycle
- Ability to capitalise tactically from a change in market conditions given a good understanding of market
conditions that are tail- or headwind to a manager’s particular style
- Decision making based on facts removing emotion from the portfolio management process
- A better understanding of the inherent risk in a portfolio to better manage return expectations<br>

3. To add a manager to Buy List A few important criteria's needs to be considered to identify SKILL vs. LUCK:

1. People (including team’s culture)
- Suitably qualified & experienced investment professionals
- Stable, strong investment team

2. Robust investment philosophy & process
- Should be clearly defined, easy to understand and repeatable
- Understand market conditions & dynamics that is suitable to manager’s strategy

3. Organisational structure of asset manager
- Stable organisation plays significant role to provide environment for manager to deliver alpha
- Allows investment team to focus on money management and not operational, marketing or HR functions

4. Asset Size
- Avoid investing in fund where ownership becomes too substantial – limits efficient implementation
- Limited to R500m and / (or) less than 5% in one specific fund

5. Track Record
- A sufficient investment track record (normally 3yrs or more) to assist with analysis<br>

3. To add a manager to Buy List Practical approach to add a manager to Buy List as prescribed by ICF:

A member may put forward a request for a new fund to be analysed for placement onto Buy List
Firstly, the member provides research showing:
- Fund adheres to minimum asset size
- There is sufficient track record
- Fund has the ability to offer superior long term performance by providing a performance report over full
market cycle
- Manager skill relative to peers on buy list and its respective benchmark by providing a qualitative
summary including investment philosophy & process
Secondly, research reviewed and if committee is in agreement that fund has competitive advantage it will
be added to SMMI’s due diligence process
Thirdly, a manager research report will be presented to SMMI’s investment team where discussion will take
place and a voting process for approval to go onto Buy List
Lastly, comprehensive feedback will be provided in subsequent quarterly investment committee meeting if
not placed onto Buy List<br>

3. Removing a manager from Buy List Practical approach to remove a manager from the Buy List as prescribed by ICF:

Short term underperformance does not validate a manager’s removal from Buy List
Prevailing market conditions might be unsuitable to manager’s strategy as would be expected if one has good understanding of management capability of manager
Fundamental changes may however validate a removal from the Buy List which includes:
- Changes to key investment professionals or team dynamics
- Deviation from manager’s philosophy & process
- Substantial changes to organisational structure of asset management business
- Misrepresentation by manager to investment team
- Unexplained performance deviations compared to understanding of manager’s strategy
A formal due-diligence will be conducted if there’s been fundamental changes and manager research report be presented to GLC/SMMI Investment Committee for final decision to remove manager from Buy List
Conclusive research will be presented to investment committee in next quarterly committee meeting<br>

4. Discuss Portfolio Management Process Manager Buy List and Investment Mandate guides portfolio construction

Firstly, aim to achieve a well-diversified portfolio across the following:
- Asset Classes
- Asset Managers
- Investment Strategies
Meanwhile ensuring portfolio is in line with appropriate benchmark and investor’s objectives

Secondly, investment professional perform an exercise where aim is to achieve highest return for same level of risk with a strong qualitative and quantitative focus:
- Qualitative: a good understanding of underlying manager risk ensures effective portfolio construction
- Quantitative: Risk budgets per Buy List Manager are clearly articulated and spend in most optimal way

Portfolio to be aligned in the quarterly committee meeting ito:
- SMMI’s tactical asset allocation view, committee may not reflect opposing view, NEUTRAL or SIMILAR
- SMMI’s tactical manager allocation, when a Buy List manager falls out of favour in a given market
- If no tactical view, portfolio to be monitored for rebalancing if move too far away from original strategy<br>

5. Compliance ICF monitored by SMMI’s Compliance Officer and forms integral part of process

Sign off by compliance officer is prerequisite for commencement of next Investment Committee meeting

Based on the following information:
- All research & interpretation offered by Investment Committee
- Minutes which includes:
a) Member’s contribution to meeting ito manager selection/changes & quantitative/qualitative reports
b) Tactical allocation changes & rebalances
c) Proposals for additional funds to buy list
d) All view offered & accepted by committee members

CRITICAL – Where FSP1 and fee is earned minutes will ensure compliance with Conflict of Interest regulation
- Investment decisions documented to substantiate committees robust philosophy & process<br>