When was RECM founded?
RECM was founded in 2003. Today RECM remains an owner-managed business, with our largest shareholders comprising of senior members of the investment team along with our investing clients. Our approach uses a fundamental, bottom-up research and valuation-driven approach to investing, which necessitates a long-term view. This is based on our conviction that this approach delivers the best long-term absolute return for investors.
What is RECM's philosophy?
We are value investors who emphasise the quality of the businesses we invest in
Our investment philosophy explains what we aim to do for our clients. We look to buy cheap assets that are of good quality.
Importantly, we distinguish between price and value. Value is what we calculate an asset to be worth; price is what the market is prepared to pay for it. Sometimes they are the same, often they are not. When price is substantially below value, we become interested.
When a low price is associated with a good quality asset, we are even more interested. By quality, we mean the ability of a company to withstand competitive pressures as well as its ability to increase its intrinsic value over time.
These attributes of a good investment - quality and cheapness - help us reduce the chances of our clients suffering a permanent loss of capital. A cheap asset has a large margin of safety to cater for the possibility of our analysis being wrong; and a good quality business can grow its way out of trouble over time.
Risk management lies at the heart of our activities
Our investment process explains how we implement our investment philosophy for our clients. A good process does not guarantee a good outcome each and every time. But if we apply a sensible process to a sound philosophy consistently over time we can expect to generate a good overall outcome. In this way, we manage the central risk of investing, which we define as a permanent loss of capital.
Our investment process has the following characteristics:
Valuation plays a central role in what we do. We spend a lot of time understanding the economics of the businesses we invest in. This is the only way that we can determine what their intrinsic value is.
We value assets on a bottom up basis. We do not buy into specific geographies, themes or narratives. We do not do any economic forecasting because we feel we have no competitive edge in this area. But then, neither do economists.
Once we decide to purchase an asset our position sizes are determined by their investment risk – not by their proportionate representation in any index.
Our process requires us to act in a contrarian fashion. It is exactly when everyone agrees on the investment merits of a specific asset that they are most likely to be wrong – and the investment risk of the asset is at its highest. If you do exactly the same thing as everyone else the outcome will at best, be average. We believe we are paid to deliver superior real returns over the long term
Where does RECM have offices?
We have offices in Cape Town, South Africa.
How do I contact RECM?
RECM in South Africa:
Switchboard: +27 21 657 3440
Fax: +27 21 674 1085
6th Floor, Claremont Central
8 Vineyard Road
PO Box 45040
Why invest in Unit Trusts?
What is a unit trust?
All RECM funds are unit trusts. Also known as a Collective Investment Scheme (CIS), a unit trust is a professionally managed and diversified portfolio of investments (such as shares, bonds and cash) that individual investors can access by pooling their money. The pool is divided into equal units and investors share (in proportion to their investment) the fund’s gains, losses, income and expenses.
Who should invest in a unit trust?
Anyone who can afford to invest for the medium-to long-term and who wants to benefit from a diversified portfolio of professionally managed investments could invest in a unit trust. They are best for people who don’t have the expertise, process or time to choose their own underlying investments or alternatively don’t have enough money to access and build a diversified portfolio of investments with the money they are able to invest.
There is a range of unit trusts available to meet the majority of investor needs, but they have different objectives and different risk profiles. You should seek independent advice if you are not sure which unit trust is best suited to your needs.
How long should I be invested in a unit trust?
Unit trust investments are medium-to long-term investments. The RECM philosophy is by nature long-term which means that RECM investors should be willing to invest for at least five years or more unless they are using the RECM Money Market Fund as a temporary “parking place” for their money.
Are there any guarantees?
A unit trust investment does not provide any guarantees. Investors bear the market and investment risk. Please remember that past performance is not an indicator of future performance.
What unit trust funds are available at RECM and what is the minimum that I can invest?
Do you have a "high watermark"?
A high watermark means that you have to first make up any past under-performance before a future performance fee can be charged. RECM unit trust funds operate similarly in that a performance fee is accrued for returns above a certain level (referred to as the “hurdle”) and refunded for returns beneath it (assuming a positive fee accrual exists).
How do I open a unit trust account with RECM?
New investors need to complete an application form for either a natural (individual) person or a legal entity. Our application forms are available on our website. We can also email you the relevant form. Please fax the completed application form and supporting documents to 021 674 1088 or email your documents to email@example.com
or post your documents to RECM Client Services, P O Box 45040, Claremont, Cape Town, 7735.
Can I invest in the name of my child or a third party?
Yes. You can invest in the name of a minor or someone for whom you have power of attorney. As a guardian or parent, you act as the authorised signatory on the account. This means you need to complete and sign the initial application form and any subsequent instructions on the minor’s behalf. We would require copies of yours and your child’s (or the other person’s) FICA documents. For example, if you open an account in your child’s name, we need your FICA documents, your child's proof of identity, and a copy of the birth certificate that verifies you as the child's parent.
Can I invest in the name of a company or trust?
Yes - you are able to invest in the name of a company or trust. Please refer to the application form for legal entities for further information.
Can I add someone as a joint owner and not require them to co-sign transaction requests?
Yes. To do this, the joint owners must give us a properly executed power of attorney or joint mandate authorising and specifying an alternative basis of signing. Without this, all joint owners will be required to complete and sign initial and subsequent instructions.
Can I send my initial application form and supporting FICA documents by fax?
Yes, but should any of your documents not be legible, we reserve the right to request legible or original copies. All instructions which are sent to us by fax will only be accepted if sent to the RECM fax number on the relevant RECM transaction form. Please note that you bear the risk of us not receiving any instructions by fax.
How long does it take to process my investment?
Once we have a completed and signed application form and all the required supporting documents, we will process instructions we receive before 14h00 on any business day that same day at the NAV price for the specific unit trust fund as calculated at 15h00 on the day. We will process applications and instructions we receive after the cut-off time of 14h00, the following business day at the following day's NAV price.
Please note that the cut-off time for new investments into, or instructions relating to the RECM Money Market Fund is 11h00. For investments into or instructions relating to the RECM Global Fund, the cut-off time is 15h00 Guernsey time.
How long does it take to process a withdrawal or disinvestment?
A withdrawal or disinvestment is also often referred to as a redemption. If we receive and verify your instruction before the cut-off time of 14h00 (11h00 for the RECM Money Market Fund), it will be processed on the same business day. The proceeds of the sale of units will be deposited into the bank account we have on record on the following business day. It may take up to 72 hours from when your instruction is processed for the money to show in your bank account. We cannot guarantee this timeframe because it depends on the banking process and the timing that applies between your bank and ours.
What documents do you send to clients?
We will send you a monthly statement, quarterly newsletter, and annual tax certificates (IT3b and IT3C).
Please feel free to contact us to change the frequency of your statements; or whether you prefer to get them by post or email. Investors in the RECM Global Fund are emailed their statements on a monthly basis. They also receive contract notes when you transact. There are no tax certificates for the Global Fund.
Can I request that the proceeds from a disinvestment be paid to a third party?
No, the proceeds from a disinvestment on your account cannot be paid to a third party. We will only make payments to the bank account belonging to the authorised account holder.
What happens to my investment in the event of my death?
In the event of the death of the registered account holder, authority to act on the account will fall to the executor of the estate. The executor will be required to provide RECM with the death certificate and proof of executorship before any changes to the account or a transfer of money can be made. If a joint investor dies, the remaining joint investor(s) will be the only authorised persons recognised as having any title to the investment.
Who is the Portfolio Manager of my fund?
RECM adopts a multi-counsellor approach which underpins how we apply our philosophy and informs who manages the money. Through our multi-counsellor approach, all the assets of the firm are consolidated and split between our portfolio managers: Piet Viljoen, Wilhelm Hertzog and Paul Whitburn. Each and every unit trust and segregated portfolio is managed by these portfolio managers in the exact same proportion as the overall split.
- ensures that all funds and clients benefit equally from all the portfolio managers’ expertise and experience;
- provides natural diversification;
- enables portfolio managers to act independently, without the need for consensus but with clear accountability for their actions. The portfolio managers have full discretion in terms of what and how much they buy and sell from securities added to the RECM Buy List.
What are unit trust income distributions?
South African tax legislation requires South African unit trust funds to distribute the net income in the fund (interest and dividends less expenses) periodically. This can take place annually, semi-annually, quarterly or monthly, depending on the type of unit trust fund. Please refer to the fund fact sheets for further information on when the different funds declare distributions. Distributions are paid to investors in proportion to their unit holding. We will pay distributions into your bank account or you may instruct us to reinvest these into your unit trust fund to buy more units.
Do RECM unit trust funds pay income distributions?
It is anticipated that most of the total returns of the RECM unit trust funds are earned from capital appreciation on their investments rather than from dividends or other income. Investors should therefore expect that in most years, after deduction of a fund's expenses, the fund might not have any net income available for distribution. If a fund earns net income (income within the fund exceeds expenses), the fund will distribute this to its investors.
What should I do if I require a regular stream of income from my investment?
Investors who require a regular income from their investment can either invest in the RECM Money Market Fund , which distributes income monthly, or take advantage of the funds' daily dealing and the absence of transaction fees to redeem units for the amounts and at the times that they need the money.
Do the owners and portfolio managers of RECM have their own money invested in the RECM funds?
Yes, most members of the RECM investment team including senior management are invested in the RECM funds. Just as we prefer to buy companies in which management have a significant stake of their own wealth, we also believe that fund managers do a better job when their personal assets are pooled with those of their clients.
What are the fees for investing in Unit Trusts?
What fees are levied on investments in RECM funds?
There are three categories of fees levied on investments in RECM funds:
- Annual fund management fee – a flat rate annual fee paid to RECM for managing the fund.
- Performance fee – an additional fee paid to RECM only when investment returns exceed the stated (appropriately high) hurdle rate. This aligns the interests of RECM with those of our investors.
- Financial advisor fee – possibly a fee paid to your financial advisor (If you have a financial advisor and you have agreed to pay your advisor a fee) for providing you with financial advice.
The rates for the fees levied against each of the funds are displayed in the table below.
* Excluding VAT, # Where applicable
RECM Money Market Fund
RECM Equity Fund
RECM Global Flexible Fund
RECM Global Fund
RECM Global Feeder Fund
Annual Fund Management Fee*
20% above and below hurdle over a rolling 5 years
Financial Advisor Fee*#
Which RECM funds charge performance fees?
Performance fees are charged on the RECM Equity Fund, RECM Global Flexible Fund and RECM Global Fund. The RECM Global Feeder Fund invests in the RECM Global Fund, and does not charge a further performance fee.
At what rate are performance fees charged?
Performance fees are charged at 20% of investment performance above or below the hurdle rate subject to a positive performance fee accrual over a rolling 5 years. The hurdle rates applicable to each of the funds are shown in the table below.
RECM Equity Fund
RECM Global Flexible Fund
RECM Global Fund
FTSE/JSE All Share Index
SA CPI + 6% p.a.
US CPI + 6% p.a.
FTSE/JSE All Share Index +2.5% p.a.
SA CPI +8% p.a.
US CPI +8% p.a.
What is a performance fee accrual?
Performance fees are calculated and accrued every day as part of the calculation of the unit price of our funds. These daily performance fee accruals are added together over a 60 month period at every month end to determine whether any performance fees can be paid to RECM. The performance fee accrual is also used to refund performance fees to investors in the case that the fund underperforms its hurdle rate.
What is a benchmark?
A fund’s benchmark is a standard against which the performance of the fund is measured and is chosen to give investors an indication of reasonable expected returns of the various funds over time.
What is a hurdle rate?
A fund’s hurdle rate is a rate of return which RECM has to beat before charging performance fees. Our hurdle rates are set above the benchmarks to compensate investors for the fact that RECM already receives a management fee and to ensure that performance fees are only charged when the investment returns exceed the reasonable returns of the benchmark by a fair margin over a long period – five years.
How often are performance fees charged against my investment?
Daily performance fee accruals are added together over a 60 month period to determine whether there is a positive performance fee accrual from which fees are rebated in the event of underperformance. Investors only pay performance fees on performance that they have received. Daily fund closing prices include all fees (including performance fees).
What are the maximum and minimum performance fees charged?
Performance fees are accrued at a rate of 20% of investment performance above the hurdle rate for each fund. There is no cap on the total performance fees chargeable.
No performance fees are charged on investment returns below the hurdle rate. To the extent that performance fees have been accrued during the five-year period preceding the calculation, investment returns below the hurdle rate result in the refund of those accrued performance fees to the fund on the same basis as performance fees are charged – that is, at a rate of 20% of the underperformance.
Are performance fees ever charged on negative returns?
The RECM Global Flexible Fund and the RECM Global Fund target absolute returns in the form of a return above inflation (South African or US, depending on the fund). In a world of positive inflation, performance fees are not charged on negative returns.
The RECM Equity Fund has a hurdle rate set at 2.5% above the FTSE/JSE All Share Index. This index has the tendency to both rise and fall in absolute terms. In a falling market, performance fees will be levied where the value of the fund falls less than the index, provided the decline in fund value represents more than 2.5% outperformance against the index.
For example, if the index falls by 10% and the fund declines by 5%, the fund has outperformed the index by 5%, and its hurdle rate by 2.5% despite delivering a negative performance. A performance fee of 0.5% will be raised (outperformance of 2.5% multiplied by the sharing rate of 20%).
Is fund performance reported before or after fees?
All fund prices (and therefore published performance) are reported after all fees.
What performance fee will be charged if the underlying portfolio of a fund performs?
- 5% worse than the benchmark?
- In line with the benchmark?
- 5% better than the benchmark?
- 15% better than the benchmark?
* Performance fees = (Investment Performance – Hurdle Rate) x 20%
Performance Fee charged for various levels of Investment Performance
RECM Equity Fund
RECM Global Flexible Fund
RECM Global Fund
# Performance fees rebated to the extent that there are positive accruals in the previous five years
How often are performance fees paid to RECM?
Performance fees are potentially paid to RECM at the end of every month. This payment is made out of the performance fee accrual, which consists of the total of the daily performance fee accruals over the previous 60 months. To the extent that performance fees were earned during the first month of the 60-month period, and the total performance fees accrued for the five year period is positive, a payment is made to RECM. If no performance fees were earned during the first month of the 60-month period, or the total performance fees accrued for the five year period is negative, then no payment is made to RECM.
Will I be charged performance fees on past performance?
Performance fees are calculated daily and included in the closing fund prices. Daily performance fee calculations therefore reflect daily performance and are not based on past performance, which investors potentially did not receive on account of not being invested in the fund at the time.
Funds with an inflation-related benchmark use the latest available inflation data. While inflation data is reported in arrears and therefore relates to past periods, current fund performance data is used in the performance fee calculations.
Does RECM use a rolling measurement period when calculating performance fees?
No, performance fees are calculated on daily returns, but only paid over to RECM after 60 months.
What happens if my fund underperforms its hurdle rate?
Performance fees are accrued when fund performance exceeds the fund’s hurdle rate. When a fund underperforms its hurdle rate, a reversal is made against the performance fee accrual on the same basis. If the performance fee accrual reaches zero or falls below zero, no performance fees are paid to the fund manager.
If the performance fee accrual falls below zero, the negative balance must be offset by future performance fee accruals before any performance fees will be paid. This system is known as a high-watermark.
How long does past underperformance count against performance fees?
Any underperformance in the 60 months prior to calculating the performance fee will influence the performance fee calculation.
Do any RECM funds charge implicit performance fees?
Yes, the RECM Global Feeder Fund invests directly into the RECM Global Fund and is therefore affected by the performance fee charged in the Global Fund. The RECM Global Feeder Fund does not charge performance fees on its own performance.
How do the management fee and performance fee impact on a Fund’s Total Expense Ratio?
Both the management fee and performance fee are included in the Total Expense Ratio (TER). Where applicable, we disclose the impact of the performance fee on the TER separately. The TER represents total expenses for the fund over a 12 month period and is calculated at the end of each calendar quarter.
How is the financial advisors fee charged?
To the extent that an investor has a financial advisor and have agreed with the advisor that a fee will be charged, this fee is included in the daily calculation of the price of the specific fund, and paid to the advisor on a monthly basis by RECM on behalf of the client.
Does RECM use Commission Sharing/Soft Dollar Agreements?
Yes, RECM pays full service brokerage rates with selected brokers, in exchange for both execution and research. RECM can direct commission from one of these full service brokers to any third party for their research services. All of the external research services we use directly assist us in our decision-making processes (including quantitative and qualitative processes).
Does RECM use brokers that don’t have Commission Sharing /Soft Dollar Agreements in place?
Yes, RECM pays execution-only brokerage rates with any broker that can assist us in best execution.
Does RECM have any client-directed Commission Sharing/Soft Dollar Agreements in place?
No, RECM does not have any client-directed Commission Sharing/Soft Dollar Agreements in place. We do not envisage having any as we do not think that it is in the clients’ best interest.
What services does RECM receive in exchange for client brokerage?
RECM uses client brokerage to pay for external research services that directly assist us in our investment decision-making processes for our Clients.
RECM does not use client brokerage to pay for any of the following items:
- Services or products used in the management of RECM and/or in its interests.
- Mixed-use services and/or products.
- Rewarding a broker or any other intermediary for client referrals.
- Facilitating principal trades.
- Transacting with an affiliated broker.
- Paying for computer hardware terminals and software, for example Bloomberg or Thomson Reuters Datastream.
With which brokers does RECM have Commission Sharing/Soft Dollar Agreements in place?
A complete list of brokers with commission sharing agreements, can be obtained by emailing firstname.lastname@example.org
Is my money safe if I invest in a unit trust?
A unit trust is legally known as a Collective Investment Scheme (CIS). Each CIS is regulated by the Financial Services Board and governed by the Collective Investment Schemes Control Act, No 45 of 2002. Independent trustees oversee each CIS and an independent financial institution (currently Standard Bank Limited in RECM’s case) acts as custodian of the assets for the benefit of investors in the unit trust. The assets of the unit trust funds do not form part of the assets of RECM. Each CIS is also required to act in accordance with certain guidelines laid out by the Association for Savings & Investment South Africa.
It is important that unit trust investors distinguish between safeguarding the assets of the unit trust or CIS as the above provisions do, and market and investment risk. When you invest in a unit trust there are no guarantees and so investors bear the market and investment risk. RECM’s investment philosophy aims to preserve capital first – which provides a measure of reassurance, but it is important that investors understand that all investments are subject to some risk.
What is FICA and why is it important?
The Financial Intelligence Centre Act 28 of 2001, also referred to as FICA is a South African law that is designed to prevent criminals from using the financial system to benefit from, hide or move the proceeds of crime.
In terms of FICA, all accountable institutions (such as banks and ourselves) are required to help prevent money laundering by knowing who our clients are and where they live. This is also known as a "Know your Client" (KYC) check.
This is why investors are required to provide us with proof of who they are and where they live. We require the following before we may accept you as a client and invest your money:
Proof of identity
Proof of address
- A copy of your South African green bar-coded ID book (preferably certified). If you do not possess a green bar-coded ID book, we will need a certified copy of your passport.
Proof of bank account details
- An original or copy of a utility bill is required to verify your residential address.
- An original or copy of a recent bank statement or cancelled cheque is required to verify your banking details.
What is money laundering?
Money laundering describes the process criminals use when they use the financial system to make the proceeds from crime and criminal activities appear legitimate. Criminals who launder money:
- place their money in the financial system, without arousing suspicion;
- move the money, often in a series of transactions crossing multiple jurisdictions, so it becomes difficult to identify its original source; and
- move this back into the financial and business system, so it appears legitimate.
Will my personal information be kept confidential?
Yes, your information is dealt with in the utmost confidence. We respect your right to privacy and we take great care to maintain this.
How are unit trusts taxed?
There are two types of tax on unit trusts.
a. Tax on interest income from any source.
Unit trusts earn income via interest and dividends. At the end of each tax year, RECM will issue an IT3(b) certificate to investors to advise them of the total interest, total dividend and total distribution paid to them on their investment during the tax year. These amounts should then be included in your annual tax return to SARS.
b. Tax on capital gains
The second type of tax, Capital Gains Tax (CGT), is levied when investments are sold and a capital gain is made.
Are there CGT implications when I switch between funds?
Yes, there are CGT implications when you switch between funds, as you will be selling units in the one fund and buying units in another fund.
What is an IT3(b)?
Unit trusts earn interest and dividends. At the end of each tax year, RECM will issue an IT3(b) certificate to investors to advise you of the total interest and total dividend you earned on your investment during the tax year. These amounts should then be included on your annual tax return you submit to SARS.
What is an IT3(c)?
An IT3(c) is a tax certificate that we will issue at the end of each tax year to indicate the capital gain or loss you made on any investment that was sold during the tax year. These amounts should be included on your tax return you submit to SARS. If you do not sell any of your units during the tax year, you will not receive an IT3(c) certificate.
How to find an adviser?
How do you confirm the licence information for a new financial adviser?
All financial advisers who wish to offer financial advice need to register as a Financial Services Provider (FSP) with the FSB. They are obligated to display their FSP certificate in their reception area.
If you wish to register with RECM as a registered Financial Services Provider, please contact RECM Client Services on 021 657 3440 and we will forward you the documents you need to complete.
What annual adviser fee do you pay?
An annual fee of 0.50% (excl VAT) is levied against the market value of a client’s investment. This fee is payable to the appointed financial adviser who has registered with RECM. This fee is in addition to the annual management fee for each fund.