The Strategic Growth Fund, which was at the centre of the allegations around the so-called “Belvedere Group” has no assets that can be recovered. Any investors who were left in the fund should therefore accept that they will only get back the small portion of their money that was held in cash.
This is the conclusion reached by Alan John Roberts and James Robert Toynton of Grant Thornton, the Joint Administrative Managers (JAMs) of the Global Mutual Fund, the white label fund under which the Strategic Growth Fund was run.
In a final report to the Royal Court of Guernsey, a copy of which Moneyweb has obtained, the JAMs estimate that the total book losses to investors in the Strategic Growth Fund will be in the region of $72 million (R956 million). The report however states that the JAMs were not fully able to investigate the causes of the total failure of the fund. They do not find that anything fraudulent or illegal took place.
The losses are almost entirely attributable to private equity and property investments in South Africa. The Strategic Growth Fund held exposure to these assets through its investments into sub-funds in Mauritius that were managed by Belvedere Management, and BKOne. All of these entities are currently in liquidation.
“The JAMs consider that there is no prospect of any realisation of assets at the sub-fund level that would exceed the costs and liabilities of those sub-funds, and as such there will be no assets recovered for the fund and no distribution to creditors or investors,” the report states.
As Grant Thornton notes, the Strategic Growth Fund was initially invested in a range of mutual funds, similar to unit trusts, run by managers such as JP Morgan and Investec. However, between September 2008 and December 2010 the fund sold out of these funds and instead invested predominantly into private equity assets. There is however no indication that these investments were in contravention of the fund’s mandate.
Critically, the report also does not provide an independent valuation of the fund’s assets either at the time that it was suspended in February 2013 or when the JAMs took it over in March 2015. It only notes reported values at the latter date.
It is therefore not able to make a finding as to whether the value was lost before or after these events took place. In other words, there is no conclusion as to whether previous valuations of the private equity assets were correct or not.
The fund managers
The JAMs also note that the investors in the Strategic Growth Fund were all introduced by advisory firm deVere. In a previous report they stated that this has been confirmed by deVere itself, and that approximately 272 clients of the firm had been invested.
Grant Thornton adds that the discretionary manager of the fund was United Asset Management (UAM), which is “understood to be owned by deVere”. Cobus Kellermann was employed by UAM and was the fund manager at the time that the investments in the fund were changed, but he has consistently maintained that he did not make investment decisions alone. He says that there was an investment committee in place that included deVere staff.
Kellermann and David Cosgrove were the subjects of an investigation by the Guernsey Financial Services Commission that centred on the Strategic Growth Fund. That investigation was however closed last year and no action was taken against them.