Are fees taking the bonus out of smoothed bonus funds in SA? Momentum Corporate has a solution
Momentum Corporate has found a way around steep fees and costly guarantees that eat into smoothed bonus fund returns
Given the volatile nature of local markets in recent years, smoothed bonus funds have increased in popularity among South Africans seeking a more stable ride to retirement. This most likely shows that South Africans, especially those who are most vulnerable, are opting for all the protection from market volatility that they can get. “The process of smoothing essentially holds back some of the returns in a reserve when markets are doing well and releases these reserves when markets are performing poorly – minimising the impact of market volatility for as long as the policyholder is invested,” says Pavit Ramnarain, an actuary at Momentum. However, considering the steep fees and costly guarantees that are typically associated with these funds, is this smooth ride all it’s expected to be? Ramnarain says the high capital charges come down to the expensive nature of providing investors with a guarantee on the money they invest (referred to as the “capital” amount) and on part of or all fu...
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