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Belvedere allegations: Money in SA unit trusts is safe

Cobus Kellermann could not have diverted funds.

CAPE TOWN – The allegations that local fund manager Cobus Kellermann could be involved in a $16 billion (R200 billion) Ponzi scheme through the Mauritian-domiciled Belvedere Management Limited has caused a lot of consternation in South Africa. Many investors have been worried that money they put into unit trusts managed by Kellermann could be at risk.

Kellermann established Clarus Capital in 2009. Until July last year, Clarus managed a number of funds administered by MET Collective Investments, including the Clarus MET Equity Value Fund and the Clarus Optimal Fund.

These funds, although they still carry the Clarus branding, are now managed by Contego Asset Management. Contego is still awaiting approval from the Financial Services Board (FSB) to change their names.

Contego took over management of these funds after signing a new investment management agreement with MET Collective Investments in 2014. Since July last year, therefore, Kellermann has not been involved in these funds in any capacity.

However, even when he was managing these funds, there was no opportunity for him to take money out of them. The South African unit trust market is highly regulated and there are always custodians that stand between the investors and the fund managers to prevent any kind of fraudulent activity.

“In the history of unit trusts in South Africa there has never been any evidence of a fraudulent act,” says JC Louw, the Asset Management CEO at Contego. “Kellermann could not have touched the money in these funds.”

Every unit trust has an appointed administrator and fund trustee. These are reflected on the fund fact sheets.

The administrator is responsible for verifying the assets held in the fund, while the trustee is a bank which holds those assets in trust. In effect, the fund manager doesn’t actually handle any money. They run the fund off a spreadsheet.

“We can’t withdraw money and the trustee bank will not pay out to a third party,” Louw says. “The custodian will only pay out to a FICA verified bank account supplied by the investor.”

It is also not possible for a unit trust to invest in any unlisted instruments, so a manager cannot divert funds into an obscure holding that they can then raid. The assets held by the fund must always be verifiable by the administrator.

“So there is no evidence whatsoever of money that has gone missing and no evidence of irregularities in South African funds whatsoever,” Louw says. “South African unit trusts are safe.”

The scale of the allegations

The allegations about Kellermann and his partners at Belvedere, Irishman David Cosgrove and Mauritian accountant Kenneth Maillard were first made in an article on OffshoreAlert. It claimed that Belvedere “appears to be one of the biggest criminal financial enterprises in history”.

It based this on Belvedere’s submission to the Mauritian Financial Services Commission that it has $16 billion (R200 billion) of assets under administration, management and advisory. OffshoreAlert suggested that all of this is at risk.

The amount of money in question is huge. It almost matches all of the assets under management in Allan Gray’s South African unit trusts, and is almost twice as much as that managed by Nedgroup Investments in its suite of unit trusts.

However, Moneyweb made enquiries at a number of large local financial advisers and none had heard of Belvedere before the rumours broke. Nor did they have any knowledge of RDL Management – the investment management and advisory arm of Belvedere of which Kellermann is the 50% owner.

This is in rather stark contrast to Herman Pretorius’s R3.1 billion RVAF Ponzi, which was widely known when he committed suicide.

This may be an indication that there is not a lot of South African money with Belvedere. It also raises questions about the allegations in general.

It takes a long time to accumulate an asset pool of that size, and Belvedere is reported to have over 120 funds. So far, however, the only claim that anybody has not been able to recover money from any of them are those from the deVere Group.

deVere is an independent financial advisory group, and seems to be the primary source of information supplied to OffshoreAlert. It claims that clients lost money in one of the fund’s administered by Belvedere: the Strategic Growth Fund.

However, no other investors appear to have come forward to claim that any money invested in any of Belvedere’s other vehicles is unrecoverable. That doesn’t mean there isn’t impropriety going on, but it does raise questions about what evidence really exists.

Kellermann was not available for comment at the time of publication.

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COMMENTS   5

Comments on this article are closed.

Oh where to begin.

Re. “It based this on Belvedere’s submission to the Mauritian Financial Services Commission that it has $16 billion (R200 billion) of assets under administration, management and advisory. OffshoreAlert suggested that all of this is at risk.”

Er no. This figure is undoubtedly false. As our article stated, Belvedere routinely inflates assets and we provided one specific example concerning a farm in South Africa, which is clearly too much work for you to check out.

Re. “… Moneyweb made enquiries at a number of large local financial advisers and none had heard of Belvedere before the rumours broke. ” All you’re revealing here is how poor your sources are.

Re. “So far, however, the only claim that anybody has not been able to recover money from any of them are those from the deVere Group.” Ah yes, the Mauritius Financial Services Commission suspended and later revoked the licences of two Belvedere fund groups because investors were having no problems and investors in the many Belvedere funds that collapsed or disappeared clearly suffered no losses.

Re. “deVere is an independent financial advisory group, and seems to be the primary source of information supplied to OffshoreAlert. ” deVere provided information for a small part of the article, which should be obvious to any intelligent and impartial reader.

Re. “… it does raise questions about what evidence really exists.” Ah yes, a London police raid and 13 arrests on March 6th, two fund groups suspended in Mauritius and their licences later revoked, two sub-funds de-listed by the Mauritius Stock Exchange, etc.

I have saved this article and another one on this site and, when this group officially collapses with massive losses to investors, I intend to blog about your irresponsible reporting of this matter.

Dear David – the fact is that all the Clarus funds are 100% save – it has been confirmed by both METCIS/MMI and Standard Bank Trustees. Also if you visit https://www.fsb.co.za/Departments/fais/searches/Pages/providers.aspx you will see that CK is not a KI or rep of Clarus. You and AH is doing our local unit trust industry great harm as it is not impacted by the offshore issues.

Dear David – the fact is that all the Clarus funds are 100% save – it has been confirmed by both METCIS/MMI and Standard Bank Trustees. Also if you visit https://www.fsb.co.za/Departments/fais/searches/Pages/providers.aspx you will see that CK is not a KI or rep of Clarus. You and AH is doing our local unit trust industry great harm as the Clarus funds are not impacted by the offshore issues

@DavidMOA – Thanks for your response. As a starting point, we are not refuting your article. You may be correct and there may well be criminal activity taking place. But in order to be convinced of those allegations, we do feel we need to substantiate them for ourselves. We feel that there is a shortage of evidence to back up a number of the claims being made and we are in the process of trying to establish that evidence.

Our article makes one very important fact clear to our primarily South African audience – that money could not have been diverted out of South African unit trusts. This is not a claim made in your article, but has subsequently been implied in some reporting. We thought it important to emphasise that this could not have happened.

We have taken this issue as a starting point and will be looking at some of the other issues raised in your article in the coming days as we are able to establish a better picture for ourselves.

To go through some of the specific points you raise: You claim that the $16 billion is “undoubtedly false”. You may be correct in that Belvedere has since claimed that it actually has $200 billion. But that figure is the one you mention in your own article and is the only figure anybody has put forward. As it is the only official figure we have at this stage, we don’t feel we can use anything else.

You mention that Belvedere “routinely inflates assets”. Yet you only cite one specific example of a farm in Stellenbosch. This may be suspicious, but property valuations can vary quite widely, and it is not unusual for different people to come to different valuations. We are trying to look into this to determine what is going on with regards to this property. But what are the other examples that convince you that this is “routine”?

On the question of our sources, I don’t know if you have ever been to South Africa or if you know our financial sector, but we canvassed some of the biggest IFAs in the country. Belvedere was completely unknown to them.

With regards to the two Mauritian funds – do you know the reasons why these funds were suspended? Do we know what has happened to the assets in those funds? We are currently trying to determine this.

Similarly, the reasons for the London police raid are another thing we are still trying to determine.

We are not saying that these things are not an indication of fraud, but we are being diligent about substantiating any claims we make. We will not simply repeat allegations of this nature without doing our own fact checking.

David, excuse my ignorance but what does :
‘”These funds, although they still carry the Clarus branding, are now managed by Contego Asset Management. Contego is still awaiting approval from the Financial Services Board (FSB) to change their names”, mean? You can’t be half pregnant…which also then begs the question:
who is the fund administrator and fund trustee for this fund with no name?
I am also not convinced that there is much merit in all these rumours etc, on the facts in the public domain…
I went onto the Contego Asset Management site and read the following:
We offer a broad range of investment products and services from advisory and discretionary stockbroking to wealth and investment management. The main aim of private investors usually is to beat inflation over the long term and to protect their financial independence and wellbeing. READ MORE: I did and encountered the following: ACCESS DENIED !
…and on the Clarus site under Multi-Manager Investment Strategy and Management Approach :
“risk is seen as a function of time” …..I personally thinks that is a rubbish statement, as risk is a constant in any investment…time decay on an investment is actually a risk as it decays the intrinsic value of time!

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