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.