PPS Investments (PPSI) About PPSI PPSI has been providing customised savings, investment and retirement solutions for PPS members for the past 15 years, assuring them of the very highest standards of investment management. With a proud performance track record, the core PPS fund range provides a broad range of portfolio outcomes to meet members’ needs regardless of career or life stage. Members who hold qualifying PPS life products can earn additional Profit-Share allocations when they take up products from PPSI as well as when they make use of the PPS funds. These allocations are further enhanced through the PPS Profit-Share Cross-Holdings Booster where we reward members when they diversify their portfolio across our subsidiaries and affiliates. Our customised savings and investment solutions enable our members to save for specific goals (in some cases tax free) and to create wealth through investment in our multi-manager portfolio of funds. We also offer a range of retirement solutions to ensure that members can enjoy a comfortable retirement after a lifetime of work. Performance Despite the ongoing pandemic and economic uncertainty, PPSI had an exceptional year. Total assets under administration increased to R54.0 billion by the end of 2021, representing a very important milestone for the business. Gross inflows were R7.1 billion, profit after tax increased an impressive 56%, while the number of investors increased by 7%. Performance was positively influenced because PPS members did not withdraw as much of their assets during the year as we had anticipated which resulted in net new business exceeding expectations. This is testament to the fact that the graduate professional market is, in general, a more reliable and lower-risk segment than the general market. The performance track record of the PPS fund range is approaching 15 years (we will reach this milestone in May 2022) and pleasingly reflects consistent delivery in terms of both performance relative to investment benchmarks as well as relative to comparative funds within the same category of funds. This has been recognised in the latest Morningstar Fund Ratings, which reflect that PPS Management Company that manages the PPS fund range ranks within the top three of the 46 competitors in terms of the percentage of its funds awarded four or five stars. South African equities delivered their strongest calendar year return since 2012 (up 27.1%) and global equities since 2015 (up 28.8% in rand). South African equities have now compounded at close to our long-term expectation of CPI+6% per annum over the past ten years, and global equities at CPI+15% per annum, almost three times as much. For the year, South African inflation-linked bonds (up 15.5%) and nominal bonds (up 8.4%) also comfortably outperformed South African inflation (up 5.9%) and South African cash (up 3.6%), while South African property (up 36.9%) clawed back much of its prior year’s underperformance, and foreign property (up 39.9%) comfortably outperformed foreign bonds (up just 1.1%). The multi-asset funds within our fund range proved to have been well-positioned through the year, being overweight South African bonds (and especially South African inflation-linked bonds) and foreign equities and moving to an overweight position in South African equities over the year. During 2021, there was a clear shift in the key drivers of portfolio returns, compared to 2020. Property and domestic equity markets delivered strong returns during 2021 compared to the muted returns delivered in 2020. Financial markets have positively rerated companies outside of the larger capitalisation stocks that had been penalised through much of 2020. There have also been signs of a reversal of the significant underperformance of value shares relative to growth shares. While PPS Multi Managers modestly reduced foreign equities to overweight in 2021, our base view remains that the global and local environment should remain supportive of risk assets and cash is likely to remain an unattractive asset class. However, the global outlook is uncertain and financial markets are likely to remain volatile, particularly if global inflation remains persistently elevated or geopolitical risks materialise and central bankers are forced to raise rates assertively. In terms of the opportunities for their appointed managers, while global managers have a much larger opportunity set to exploit, South African valuations look more compelling, especially if local economic growth and reform surprise on the upside. Investment administration The new web-based administration system designed to future-fit our business and support more effective remote working, which was introduced in 2020, has continued to add value and deliver measurable efficiencies, as has the introduction of straight-through processing (STP) and bulk transaction capability (BTC) for various transaction types. Regrettably, our ease of communication to members and advisers was reduced for a period following the cyberattack experience that affected the PPS Group in March 2021. However, the potential impact of the attack was materially mitigated by the swift response from our Group IT team, such that neither client information nor sensitive business information was compromised. The event also did not pose any risk to investors as our investor administration functions are outsourced and all of our portfolios are housed in a separate and secure offsite environment. PPS Integrated Report 2021 PPS Group performance at a glance | 64
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