Department of Business Management

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Browsing Department of Business Management by browse.metadata.advisor "De Villiers, Johann U."

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    Active management and the cost of active management of South African general equity unit trusts
    (Stellenbosch : Stellenbosch University, 2017-03) Coetzee, Ruan; De Villiers, Johann U.; Stellenbosch University. Faculty of Economic and Management Sciences. Dept. of Business Management.
    ENGLISH SUMMARY : Investors have various investment options available to provide future wealth. One of the options is to invest in unit trusts. On 31 December 2015 there was a total of R 1 656 448 million invested in South African unit trusts, making this a large investment vehicle. The objectives and constraints of investors should determine in which type of unit trust they invest. This study examines general equity unit trusts in South Africa. Many investors do not know how actively their active unit trusts are managed, what portion of the management cost is attributable to the active component of the unit trust and how much is attributable to the passive component of the unit trust. The focus of this study was to determine how active general equity unit trusts in South Africa are managed, whether the active management delivers enhanced risk-adjusted returns, and how much investors are paying for active management. The study was conducted over eight years, from 1 January 2008 to 31 December 2015. The primary objective consisted of two sections. Firstly, the study set out to classify general equity unit trusts in South Africa according to how actively they are managed. This is done through calculating the active share and tracking error for the unit trusts. The results indicated that most (71%) of the analysed general equity unit trusts had an active share lower than 50% and a tracking error lower than 8%. These active funds invested more than 50% of their assets similar to the index. Secondly it was determined how the classifications of unit trusts performed on a risk-adjusted basis. This is calculated through means of five risk-adjusted performance measures. The study found that the amount of active management does not influence risk-adjusted returns in a statistically significant manner. The secondary objective investigated the cost of investing in general equity unit trusts. The unit trusts were divided into an active and a passive component based on active share and tracking error. The total expense ratio (TER) of the unit trusts was compared to the active and passive components of the unit trusts to determine how much of the TER is attributed to active management. The average fund TER was 1.55%, with the average cost on the active component being 3.85%. The average alpha for the active component was -1.54%. This means that investors are paying a substantial amount more for the active component of the unit trust than for the passive component, without receiving the benefit of a higher return.
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    Annuity decision-making
    (Stellenbosch : Stellenbosch University, 2021-03) De Villiers-Strijdom, Jeannie; Krige, J. D. (Jacob Daniel); De Villiers, Johann U.; Stellenbosch University. Faculty of Economic and Management Sciences. Dept. of Business Management.
    ENGLISH SUMMARY : As a standard practice, retirement capital is converted into a subsequent income stream. There are two main annuity income products to choose from, namely: (i) a guaranteed/life annuity (or annuitisation); and (ii) a living annuity (or self-annuitisation). The former guarantees an annuity income for life, whereas the latter exposes capital to volatile investment returns, with the possible danger of depletion before death, especially in the wake of excessive withdrawals. The world-wide phenomenon of reticence among retirees to protect themselves against longevity risk, is an annuity puzzle that has been the subject of vigorous academic debate. This study investigated the factors that relate to individuals’ annuity perceptions, intention and satisfaction. Based on existing literature in this field, a theoretical framework is presented with respect to the annuity puzzle, on the basis of which two questionnaires are designed as measurement instruments, namely: (i) a questionnaire for employees who are members of various retirement funds in order to ascertain the factors that relate to annuity perception and intention; and (ii) a questionnaire for pensioners, in order to measure their satisfaction levels that relate to the eventual outcome of their annuity choice. Based on an investigation into the factors that relate to annuity decision-making, the principal conclusions of this study are: (i) a bias towards self-annuitisation before retirement is mainly related to investor confidence in earning an above-average income based on the capital growth generated by the underlying capital, although the accompanying issues with respect to managing these investments often prove problematic; (ii) the bequest motive, which refers to the desire to leave retirement capital to heirs, often results in an unjustified belief in living annuity desirability, with the possible negative outcome of outliving retirement capital and facing poverty in retirement, the result of which could lead to dependency on the state or family members; (iii) a substantial impact on individuals’ perception and intention to annuitise, is the expectation of a predictable and consistent annuity income stream, without continuous involvement in investment decision-making; (iv) trust in the integrity of financial advisors significantly relates to individuals’ annuity perceptions and intentions. Finally, this study presents a new annuity decision-making tool, consisting of two questionnaires and user’s manuals, to be used by benefit counsellors and financial advisors, in guiding their clients with respect to their choice of an optimal annuity income option. In summary, this study therefore provides further insights into the intriguing annuity puzzle.
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    South African risk behaviour archetypes in the domain of discretionary investments
    (Stellenbosch : Stellenbosch University, 2022-04) Nixon, Paul; Gilbert, Evan; De Villiers, Johann U.; Stellenbosch University. Faculty of Economic and Management Sciences. Dept of Business Management
    ENGLISH SUMMARY : More recent models of decision making under conditions of risk have built on Cumulative Prospect Theory. They propose that, in addition to the framing of choices, individuals' recent experiences of investments can lead to them making investment switching decisions that could potentially harm their chances of reaching their desired investment returns. A dynamic model of risk preferences is key to explaining investor behaviour during evolving market conditions. This study partitions investors into homogenous groups by using the medoids clustering algorithm based on the dimensions highlighted by this body of theory. This provides evidence to support this dynamic perspective on risk-based decision- making behaviour and demonstrates the viability of this method for segmenting investors from an advice, marketing and communications perspective. This should be of value to financial advice and investment management practitioners.