Private market investments and the umbrella fund dilemma

For many large employer groups that offer retirement benefits for their employees, investing in umbrella funds is a cornerstone of capital stability and growth. By pooling resources from multiple employers, umbrella funds offer economies of scale, professional governance, and administrative efficiencies that individual corporate funds often cannot achieve. Yet, as Raazia Ganie, Executive Head of Investments at advisory firm NMG Benefits, points out, the decision to invest or disinvest in an umbrella fund requires careful consideration: “Umbrella funds are designed to grow capital efficiently over the long term, and the process of moving between funds for short-term gains can be far more costly than many employers realise.”

Umbrella funds are structured to provide both scale and flexibility, often enabling exposure to a broader range of asset classes than smaller standalone funds. Increasingly, these funds are allocating capital to private market investments like infrastructure projects and private equity, which carry the dual appeal of higher returns and tangible economic impact. As an example, some funds have invested in truck stops along key national routes, which generate real returns, provide services for drivers, and create ongoing employment opportunities in the surrounding communities.

However, the illiquid nature of such assets introduces challenges. Unlike publicly traded equities or bonds, infrastructure and private equity investments cannot be easily sold or transferred, particularly in South Africa, which lacks a developed secondary market for such holdings.

“The problem is not that the investments are bad,” says Ganie. “It is that the mechanics of moving them require careful planning to avoid unnecessary costs and operational risks. When assets in one umbrella fund are sold, and then repurchased in another, they incur trading fees, buy-sell spreads, and days of out-of-market exposure, all of which directly impact investment returns. And, ultimately, the employees end up bearing the bulk of these costs.”

Another subtle but important consideration is the overlap of underlying assets. In South Africa’s relatively small market, moving from one umbrella fund to another often results in owning the same equities and bonds on the new platform. You are essentially buying and selling the same assets – the provider may change, but the trading and administrative costs remain real and measurable.

Ganie stresses that disinvesting from an umbrella fund is rarely warranted purely due to investment performance or minor administrative frustrations. Valid reasons include serious governance concerns or persistent, unresolved servicing issues that cannot be rectified.

Ultimately, investing in umbrella funds, especially those with exposure to private markets, requires careful deliberation, patience, and professional guidance. While the rewards, including enhanced returns, social impact, and alignment with national policy objectives, are substantial, the hidden costs of poorly considered fund switches can erode value and undermine long-term outcomes.

By prioritising informed, strategic decision-making and working with expert advisers, employers can safeguard their employees’ retirement savings while participating in the growth of the broader economy. For employers and trustees, the strategic choice is clear: work with established employee benefits and investment advisers who understand both the operational nuances and the long-term horizon.

“An experienced partner helps employers and trustees to evaluate not just the returns of a fund, but also the full cost and implications of moving funds. A long-term relationship with a trusted adviser ensures decisions that are based on knowledge and alignment with the employees’ best interests over decades, rather than short-term performance,” ends Ganie.

Your Investments – Strong Growth, Smart Perspective

Great news! The investment portfolios that follow Regulation 28 rules have done very well over the past three years, giving members strong positive returns.

The Big Idea: Aggressive Portfolios

Aggressive portfolios aim to beat inflation by 5%. Currently inflation is about 3.5% (moves up and down) so we would want to see the aggressive portfolios give returns of 8.5% per year.

As a reminder, inflation is what happens when the prices of almost everything, like bread, petrol, and electricity, keep going up.

The aggressive portfolios have given members returns of over 17% per year for the last 3 years! That’s 8.5% more per year than we were expecting!

Important Information, Remember: Investment performance goes up and down over time – that’s normal. And because we have had such good returns over the last few years we can expect that there will be some weaker performance coming in the future. We don’t know when but we know it is coming. Could be tomorrow but it could be next year or maybe even the year after that!

For the longer-term inflation has mostly been around 5%per year and the investment returns for aggressive portfolios has been about 10% per year.

Remember stay focused: Past performance doesn’t guarantee future results. The best approach is to stay invested and think long term.

Why single parents cannot afford to put off writing a will

More than 85% of South Africans do not have a will, and five out of six estates registered at the Master of the High Court in Pretoria are not executable because they are not legally compliant. According to the FSSCA (Financial Services Sector Conduct Authority) 5 million single mothers are not leaving guardianship instructions for their children, and more than 60% of children born in South Africa does not have a father on their birth certificate. Lastly, 8.7 million homeowners and 5.4 million car owners not ensuring that their assets are distributed according to their wishes.

Stian de Witt, CFP®,  Executive Head of Financial Planning at advisory firm NMG Benefits, explains that if someone dies intestate (without a valid will) their estate is wound up by the State, and this can be a slow and complicated process, with outcomes that may not reflect the deceased’s wishes – especially when they are survived by minor children: “Children may not be financially protected, or someone you did not choose may end up being responsible for their care.”

Five essentials every single parent should know

1. Drawing up a will is simple: Essentially, you must be of sound mind, over the age of 16, and sign your will in the presence of two witnesses who are not beneficiaries. NMG Benefits provides an easy, free, online platform where you can write a will, update it any time, and safely save it for when it is needed.

2. Update your will regularly: Life changes quickly, and an outdated document can lead to conflict. If you marry, have another child, or an intended beneficiary passes away, you should update your will.

3. Choose your executor carefully: Your executor ensures your debts are paid and assets distributed. It is vital to nominate someone you trust, and who can navigate the legal and financial process. If you do not name an executor, the Master of the High Court will appoint one, and this person might not carry out your wishes.

4. Form a trust for minor children: If your children are under 18 and you die without a will, the assets you leave for them will likely be managed by the state’s Guardian’s Fund, and the outcome may not be as beneficial as you would have wished. However, setting up a testamentary trust in your will allows a trustee whom you nominate to manage the inheritance in line with your wishes until your children reach an age you determine. “We always advise our clients to work with our legal professionals to ensure this aspect is watertight,” says de Witt.

5. Communicate your wishes
A will only works if your loved ones know it exists and where to find it. Talk to your family about your intentions and store the document in a safe, accessible place.  “A will is there to make life easier for the loved ones left behind”, de Witt says.

A will is a legal document setting out how assets, debts, and guardianship of minor children should be handled after death. It forms part of your overall estate planning, but proper planning takes a broader view by structuring assets like pension funds, life insurance policies, and investments in the most efficient way to protect and transfer wealth to beneficiaries. Some kinds of investments and policies have their own beneficiary nominations, which are guided by the law, and which override your will. If you do not update these documents after major life changes, these benefits may end up being paid out to the wrong individuals.

“While anyone can draft a will, professional guidance helps avoid costly mistakes and, for single parents, the stakes are especially high,” says de Witt. “Your will is a safeguard for your children’s future and a way of protecting the legacy you are working so hard to build. Working with a Certified Financial Planner® will help ensure your wishes are carried out after you pass away.”

The modern woman's guide to building wealth

For many women, investing is one of those ‘I’ll get to it later’ items on life’s to-do list, somewhere after putting food on the table today, paying next month’s bills, and saving for next year’s school fees. But, delaying investing now can mean delaying your financial independence later in life. And women simply can’t afford to do that.

This is according to Raazia Ganie, Executive Head: Investments at advisory firm NMG Benefits: “We’re seeing that women are increasingly the decision-makers in their households. This makes it more important than ever for women to be financially literate and empowered.”

The truth is that investing well begins long before you start a retirement fund, or buy your first share or unit trust. It starts with budgeting. “Many households set aside little silos of money. One for bills, one for emergencies, and one for ‘spoils’ like holidays. This is the foundation of good financial planning,” Ganie explains.

Without this discipline, lifestyle spending can creep up. The allure of credit cards, deals on things we don’t really need, and ‘buy now, pay later’ offers is real. Used wisely, these tools can help with essential purchases or emergencies. Misused, they can quickly spiral into debt. “A credit card is essentially a loan at a very high interest rate,” Ganie cautions. “If you pay it off in full during the interest-free period, it can work in your favour. But outside of that, it becomes expensive and paying it off (which is the right thing to do) may mean that there isn’t much money left to invest.”

Too often, women view insurance as a grudge purchase. Ganie urges a mindset shift. “Short-term insurance is an investment in your financial wellbeing. You may not see a tangible benefit every month, but when life throws you a curveball, like a car accident or a burst geyser, you’ll be grateful you’re covered.”

When it comes to long-term insurance, a vision of how you want to live when you retire and how you want to provide for your family after you’ve passed on, combined with advice from an accredited financial planner and disciplined investing, are essential.

The good news? Investing has never been more accessible. Many platforms and bank-linked apps now let you invest small amounts – less than a hundred rand a month into the stock market. “You don’t need thousands upfront. Small, consistent investments compound over time, and grows quietly in the background,” says Ganie.

This wisdom applies to retirement savings as well. And, for those women who’ve been saving diligently for when they go on pension, withdrawing the ‘savings pot’ from their retirement funds offers an alternative way to pay off high interest-bearing debt and for genuine emergencies where all other avenues have been exhausted. This is particularly relevant when interest rates are higher than the returns available on your retirement fund.

Perhaps the most important investing tip for women is to stay informed. Whether you’re the one currently managing the household budget or not, life circumstances change. At some point, every woman will need to take charge of her finances, and the importance of partnering with a financial adviser at every life stage can’t be over-stated.

Ultimately, investing as a modern woman shouldn’t be about giving up the joys of traveling or occasional spoils. It’s about balance. “Build the financial foundation first and then you can enjoy life’s luxuries. When your debts are paid off and you’re investing regularly into your future, you and family can live without stressing about what’s to come. That’s the real power of investing as a woman today,” says Ganie.

South Africa’s workforce is drowning in debt: Here’s how employers can help

According to Stats SA, April 2025 saw more than 26,000 debt-ridden South Africans being summoned to appear in court. While this is a slight decrease from the first three months of the year, R30.2 million (12%) of the debt against which this action was taken is for rent – a basic necessity.

SA Reserve Bank figures show the outstanding balance of household debt growing at an average annual rate of 5.2% from 2015 to 2022. And, Experian reports that vehicle finance accounts in default rose by 31% from March to June 2024 alone. 

Lettesha Pillay, Head of Business Development at advisory firm NMG Benefits, says this financial distress is the norm rather than the exception. Data from DebtBusters supports this: the most vulnerable consumers, taking home R5,000 or less per month, use 76% of their income to repay debt, and those earning R35,000 or more spend 77% servicing debt.

Pillay says that South Africa’s financial stress landscape is different from other countries. “Strained household finances stem from endemic unemployment that often pressures households budgets even if there is one breadwinner. It is compounded by soaring living costs. Multiplied by dealing with medical and other emergencies. And rooted in a lack of basic financial education.”

It thus critical for employers that wish to better support their workforce, to partner with local experts who understand the nuances of our economy and workforce behaviour.

However, Pillay notes that many employers are at a loss on where to start and understandably so. Money brings up a lot of emotions, including fear, guilt, and shame, and NMG case studies show that employees fear judgment and career repercussions if their employers learn the extent of their over-indebtedness. They are unlikely to open up unless they feel safe and protected; confidentiality and trust are crucial. All of which makes one-on-one, anonymised, confidential interaction essential for driving real behaviour change.

As a leading financial advisory expert and employee benefits provider, NMG does not impose untested programmes on the employer groups that it works with. A case in point: they rolled out a financial support solution called SalarySaver in-house, and quantified its success, before adding it to their offering.

“NMG SalarySaver goes far beyond surface-level budgeting advice,” says Pillay. “It tackles the root causes of financial distress with practical support that’s scalable, sustainable, and measurable.” The programme targets the high-impact areas of the “systematic drains” on employees’ salaries:

SalarySaver’s financial professionals help employees consolidate multiple funeral and credit life policies into a single, more affordable and more beneficial policy, often saving hundreds of rands a month. Debt restructuring is a major focus area, and the programme has helped employees move from exploitative short-term loans to affordable credit solutions with a total cost of credit (TCOC) of 15%–19%, resulting in meaningful monthly savings. Wherever possible, SalarySaver steps in when it comes to managing garnishee orders, along with accessing responsible salary advances. For those starting to save, it also includes access to an innovative, flexible retirement annuity, into which employees can direct any savings – even if the amount differs from month to month.

SalarySaver empowers employees to crush debt, optimise insurance, unlock savings, and auto-fund their futures, at no personal cost, while employers get aggregate data to track improvements in workforce wellness.

“On average, we’ve saved 40%-50% on employees’ monthly insurance and debt costs since making SalarySaver available,” says Pillay. “This in turn has helped plug the 23% (average) drainage in employee effectiveness caused by financial stress. By turning take-home pay into long-term wealth, SalarySaver is a true financial transformation model.”

How to turn your retirement savings into a monthly pay cheque

One of the most important and often most overlooked questions people should ask themselves as they approach retirement is this: “How do I turn my life’s savings into a reliable monthly income?”

It’s not just about how much you’ve saved although, of course, that matters. It’s also about how you convert your accumulated capital into a sustainable income. “You don’t want to start planning five weeks before you retire,” says JB Smith, Asset Execution Executive at advisory firm NMG Benefits. “You want to give yourself a good five years and more. That’s the realistic way to make strategic decisions with the help of a financial adviser.”

The two main options available are a life annuity or a living annuity, and both come with benefits and risks.

A life annuity is more predictable option. It’s an insurance product that guarantees you a set income, how the markets perform. “

A living annuity gives you much more flexibility. You choose how much you can draw out every month, decide how the underlying capital is invested, and any remaining funds will transfer into your estate or nominated beneficiaries when you pass away.

“This is a good option for people who want more control and are comfortable managing some level of risk. Your money stays invested, so it has the potential to grow and keep pace with inflation – but this means it can also shrink, especially if markets dip or you take too much out, too quickly.”

Many South Africans also hold investments outside of their formal retirement funds, such as unit trusts, tax-free savings accounts, and fixed deposits. These assets can play a valuable role in supplementing your retirement income, but they also need to be structured correctly.

“It’s not just about your retirement fund,” Smith emphasises. “You have to look at your whole portfolio as one ecosystem. Everything needs to work together to support your lifestyle goals, but this is where professional advice becomes critical. An adviser can help you optimise your tax position, time your withdrawals, and build a plan that aligns with your immediate needs as well as your long-term goals.”

Retirement isn’t just a date in the calendar. It’s a new phase of life that demands thoughtful planning long before you receive your final salary. And, it’s not just about picking products. It’s about creating a holistic plan that gives you confidence, security, and freedom.

“A registered, qualified financial adviser, like those at NMG Benefits, will help you structure a sustainable retirement income plan that supports the lifestyle you’ve worked for,” says Smith.

Investing for the first time? Avoid these Investment mistakes

Making your first investment can be exciting, but also intimidating. With so much information (and misinformation) out there, it is easy to make mistakes that could cost you down the line.

The good news is that, with the right knowledge and support, you can avoid the most common stumbling blocks and make smarter, more confident decisions with your money. Raazia Ganie, Executive Head of Investments at financial advisory firm NMG Benefits, breaks down some of the most common pitfalls:

Waiting too long to start: Time in the market matters more than timing the market. Thanks to the power of compounding even small investments can grow significantly, if you start as soon as you can. As the saying goes, the best time to invest was yesterday, if you missed it then today is the day!

Not understanding returns: New investors often overestimate how much money they will make, especially in the short-term.  It is essential to understand the timeline and risk involved. In addition, you should always look at your net returns after fees and inflation. A 7% gross return may look good, but if inflation is 5% and fees are 2%, your real return is 0%. This means the real  value of your asset hasn’t grown at all. Knowing what your investments are actually earning (and costing) helps you make better decisions.

Not matching goals with risk: Without defined goals, it is difficult to choose the right investment products or measure success. Whether you are saving for retirement, or a holiday in six months’ time, knowing your ‘why’ helps shape your risk strategy. Higher returns usually come with higher risk, but that does not mean that high risk is always good – or bad. Your risk tolerance depends on your goals, time frame, and personal comfort with volatility. You should always aim to match your risk tolerance and your ability to take risk.

Trying to time the market: It is tempting to buy when markets are rising and sell when they fall, but this emotional cycle often leads to poor outcomes. Consistent, long-term investing is a far more effective strategy than attempting to predict short-term market movements – but it requires discipline and a focus on the bigger picture.

Not diversifying: Diversifying means putting your money into different types of investments—like stocks, bonds, property, and cash—both locally and internationally, to reduce risk when markets are unstable.

Not reviewing your investments regularly: As your life and the markets change, so should and does your investment portfolio. Regular reviews help to ensure you are still on track to meet your goals, and allow you to adjust your strategy if necessary.

Ganie says that it is essential to work with a qualified, trusted adviser. “This means you will get recommendations that are backed by both professional training and regulatory oversight. It also means you are more likely to get advice that is tailored to your personal goals and needs.”

Before you commit to working with an adviser, ask them these questions:

In addition, an adviser should also be able to offer the full spectrum, from retirement planning and risk protection (like life cover and income protection), to investments, tax-efficient strategies, wills, and estate planning.

“At NMG, we believe financial advice should be accessible, transparent, and deeply personal. This is why every investor we work with gets access to a qualified financial adviser who takes the time to understand individual goals and circumstances,” says Ganie.

Tips for making the most of your money in tough times

While the good news is that the proposed VAT increase will not be implemented, the not-so-good news is that many South African households will continue to struggle to meet their monthly financial commitments. SARS didn’t find money somewhere that they didn’t know about.  The R16bn Tax deficit that SARS tried to make up with the 0.5% VAT hike was substituted by merely not implementing a PAYE tax bracket increase.  This will be adding R16.3bn to the coffers.  This year the average tax payer will therefore feel the pinch of inflation increases even more in their pockets.  It is estimated that working South Africans spend 62% of their take-home pay on repaying debt, leaving little room for essentials. And, when it comes down to savings, fewer than 10% of working South Africans are adequately prepared for retirement.

Stian de Witt, Executive Head of Financial Planning at financial advisory firm NMG Benefits, says that prioritising savings, even during challenging times, is crucial – and the best way to ‘find’ money to save is to pay off as much as debt as possible.

“Some debt, like home loans and car financing, is hard to pay off in short periods of time, and it is important to include these payments in your monthly budgeting. But paying off other forms of debt, like personal loans, credit cards, and store accounts as quickly as possible should be a priority because of the high interest that is generally charged. Over time, loans, cards, and accounts can end up costing you a lot more than you would think.”

De Witt shares his top five tips for improving your financial wellbeing, starting today:

Track your spending: Review your bank statements, or start using one of the many available free apps to identify unnecessary expenses. Cutting back on impulse purchases or choosing affordable alternatives can free up some cash.

Get savvy with tax: If you have a retirement annuity or a medical aid, ask your employer to deduct these premiums from your before-tax salary, which will reduce your taxable income and boost your monthly take-home pay.

Do not stop saving: Even small savings add up over time. Try using the 50-30-20 rule: allocate 50% of income to needs (rent, groceries), 30% to wants (hobbies, entertainment), and 20% to financial goals (emergency funds, retirement savings).

Manage your debt: Reduce your high-interest debt by consolidating loans and prioritising repayments. Tools like NMG Benefits’ debt calculator can help you to develop a structured payment plan.

If your employer works with NMG Benefits, you have free access to programmes like SalarySaver, which is designed to help you stretch your salary and regain financial stability. SalarySaver addresses common financial pitfalls like stacked funeral policies – where the premiums for multiple overlapping policies drain monthly income – by consolidating your cover into a single, cost-effective policy.

It provides practical, expert-led debt relief. Financial professionals assist with garnishee order disputes, and help you to better manage and short-term emergency loans you might have taken out from predatory lenders, and more. The emotional payoff is also significant: less financial pressure, more peace of mind, and a real sense of empowerment.

“By starting to plan today, consumers can reduce their debt and the stress that it causes, and take steps towards a better financial future. Economic pressures are real, but having the right strategies in place can help everyone make the most of their hard-earned money,” says De Witt.

Seek professional guidance: A financial adviser can help to tailor a budget and plan for your unique situation, ensuring that you make informed decisions and avoid emotional spending mistakes

What does grey-listing mean for you?

On Friday 24th February the Financial Action Task Force (FATF) grey-listed South Africa, following a Mutual Evaluation Report (MER) on South Africa published in October 2021. What does this mean for you? Grey-listing by FATF means that South Africa is placed under enhanced scrutiny for the next 12 months, where eight areas have been identified needing improvement. Grey-listing indicates deficiencies found in strategic financial legislation resulting in a possible escalation in money laundering and financial terrorism, outlines Raazia Ganie, Head of Investments at NMG Benefits. 

The reality for South Africans and South African institutions is that it will become harder to do business. However, we have been under scrutiny for a while, which affects the financial services sector, in particular clients with investments offshore.

JB Smith, Head of Asset at NMG Benefits, points out that on a practical level, from an investment point of view, it will be more difficult to transact offshore, as at present it takes about 3 months to open an account with an offshore investment manager, which will now likely take even longer. “From a financial market point of view, we need to be careful not to label all the movements on our financial markets (JSE, Bonds and ZAR) as due to grey-listing” JB Smith.

While markets ended in the red on Friday 24th February after the grey-listing announcement, one may be quick to blame the grey listing for this, however it is good to keep in mind that we are part of an open economy and are influenced by the flow of news from global markets.

As the only African member of FATF, which comprises 39 member countries, and holds participation and jurisdiction through regional member bodies on the African continent, South Africa falls into FATFs listing as a “jurisdiction under increased monitoring”. The eight areas identified as strategically deficient by FATF, are expected to be addressed by South Africa, no later than the end of January 2025.

Implications to Investors

Ganie notes that the effect grey-listing will have in the short term and almost immediately, is that South Africa can suffer reputational damage, deterring both foreign and domestic investment. This in turn could lead to further credit rating adjustments, as both rating agencies and financial institutions consider a listing of this nature as a risk. However, initial reactions from rating agencies have asserted that no change will take place due to the grey listing.

Further note that the cost of cross border funding and transacting with South Africa could increase due to additional checks and compliance requirements, as well as increased administrative and legal requirements. This can cause administrative bottlenecks within business due to extra processes and procedure that must be followed, outlines Ganie.

Smith asserts that grey-listing should not hold a risk in safeguarding assets or how your investments are currently managed. What grey listing does do, is add more administrative requirements in placing money offshore or withdrawing funds from offshore investment.

What are the next steps?

Now that FATF announced their findings, we expect more detail and guidance to follow from the government, regulators and external providers that will be able to outline their requirements and impacts of regulation around grey-listing in all jurisdictions. Ganie stipulates that the extra scrutiny will provide the oversite necessary to curb corruption within both public and private sectors. However, it is important to focus on long term investment, particularly as the effect of grey-listing will be on further administrative checks and balances but won’t impact investment in the long term. As South Africa is not black-listed and there are no sanctions against South Africa, there is merely additional scrutiny to the investment and removal of assets from South Africa.

T&C apply. NMG Consultants and Actuaries (Pty) LTD is an authorised financial service provider FSP 12968

South Africa vs Offshore: Is South Africa a good place to invest?

There are different types of investments available to retirement funds. Regulation 28 of the Pension Funds Act determines how much any fund may invest in any one asset class.

In March 2022, changes to Regulation 28, which sets out where retirement funds may invest, were published. The changes will allow funds to invest up to 45% (previously 40%) of their capital offshore (this includes the 10% allowance for other African countries); as well as investment in infrastructure.

In many ways, this extension of the limit for offshore assets is good news:

  1. Investment managers can further diversify the portfolios in which members’ savings are invested.
  2. It provides a bit more protection against the local economy’s performance.

In terms of the investment outlook for South Africa, the ongoing energy crisis (and the resulting weakening of our currency) as well as high inflation, have been causes for concern. Annual consumer inflation spiked to 7.4% in June, from 6.5% in May: this is the highest that inflation has been since May 2009 (8.0%), following the global financial crisis. It also exceeds the South African Reserve Bank's target range of between 4% to 6%, and leads to large hikes in interest rates as well.

On 21 July 2022, the South African Reserve Bank’s Monetary Policy Committee voted to hike interest rates by 75 basis points, taking the repo rate to 5.5% and the prime lending rate to 9%. This is the fifth increase in a row, and the biggest since September 2002.

According to Reserve Bank Governor Lesetja Kganyago: “While economic growth is slowing globally, inflation continues to surprise to the upside. Sustained policy accommodation, supply shortages and other restrictions have sharply increased the prices of many goods, services, and commodities”. 

Sadly, the knock-on effects do not end there. The South African Consumer Confidence index has dropped to levels lower than those recorded during the hard lockdown of 2020.

Consider the following statistics:

All of this means that offshore investments are looking far more attractive, as the returns that these investments earn are likely to be higher than local alternatives, given the underperformance of the Johannesburg Stock Exchange (JSE) compared to other global markets; and the large number of companies that are choosing to delist from the JSE.

T&Cs apply. The NMG SA Group of Companies are authorised financial services providers t/a NMG Benefits.