CAPE TOWN – The allegations against Belvedere Management involving South African fund manager Cobus Kellermann have caused am understandable stir. The scale of the alleged $16 billion (R200 billion) makes it a compelling story.
When something of this nature comes to the attention of the media, we greet it with mixed feelings. We want to go after the bad guys, but at the same time we have to be 100% sure of any information we publish.
The allegations were first made in an article on OffshoreAlert that claimed to have unearthed a massive criminal enterprise. It named Kellermann together with Irishman David Cosgrove and Mauritian accountant Kenneth Maillard as the supposed masterminds behind a Ponzi scheme that made anything we had seen before seem like the cocktails before the real party.
As soon as it was brought to our attention, it was clear that this was potentially a major story. But our responsibility to the public and the people implicated means that we have to independently verify the facts for ourselves before we publish them.
Some people have assumed that we are doing so because we want to prove OffshoreAlert’s claims to be false. That is not the case. We are simply being old-fashioned, checking and re-checking the evidence so that we can make up our own minds.
It may be that OffshoreAlert has uncovered something. When there is this much smoke, there is very likely to be some fire. However, exactly what it is and how big a problem it may be, we do not know. That is what we have been trying to find out.
What we do know for sure is that Kellermann could not have stolen any money from South African unit trusts. The assets in a regulated unit trust are always segregated from the fund manager and held by the trustee, which is an independent entity. MET Collective Investments and the trustees of the funds with which his name is associated have all independently verified that the assets are where they are supposed to be.
However, it is what we do not know that is the real focus of the story. There is a complicated raft of allegations that we have been trying to sift through, and unfortunately answers are not easy to find.
On Friday, Moneyweb had the opportunity to speak to Kellermann.
He asserted that he is an absent shareholder in Belvedere, and so is not able to comment definitively on all of its business dealings. He claims that he is not actively involved in the running of the company.
His shareholding in Belvedere is through Stonewood Holdings. Stonewood is beneficially owned in equal share by Kellermann and David Cosgrove, and in turn Stonewood owns 51% of Belvedere.
He nevertheless, together with written responses Moneyweb received from David Cosgrove, provided some of his side of the story on a few matters.
Two fund companies administered by Belvedere – Lancelot Global and Four Elements – are currently the subject of enforcement actions by the Financial Services Commission (FSC) in Mauritius. They are suspended from taking any new business and are under administration by PwC Mauritius.
The FSC will not however reveal why these companies were suspended nor what its investigations have revealed until they are complete. Neither will it confirm or deny whether any investor money is unaccounted for. PwC has only taken over the files in the past few days and is not yet in any position to comment on what they are facing.
Kellermann and Cosgrove’s explanation is that the suspension came following a routine visit from the FSC.
“When explaining how Lancelot and Four Elements operated, the authorities raised concerns that they would not be able to trace all the underlying beneficial owners/investors in the funds,” they said. “The FSC was not satisfied with so-called reliable introductory certificates from other institutions verifying the beneficial owners. The FSC wanted to find out who are the beneficial owners themselves, which was not practical for us. For instance Friends Providence International may invest on behalf of clients as a custodian and the information about the underlying investors is subject to confidentiality.”
Kellermann and Cosgrove said that they have not appealed against the actions taken by the FSC.
Until the FSC reveals its findings, therefore, we cannot know what the scale of the concern is. Any speculation about what may have gone on therefore remains only that – speculation.
It is also worth noting that these are not Belvedere’s only interests in Mauritius, which raises the question why, if the whole company is a fraud, did the FSC not stop Belvedere from operating altogether. Again, that question only invites more speculation.
There are further allegations that a fund in the Cayman Islands, the Brighton SPC Kijani fund, is simply a Ponzi scheme. This is based on the fund’s almost unerringly positive performance record and the fact that it was relocated to the Cayman Islands from Gibraltar last year.
While it was resident in Gibraltar, Kijani, was administrated from Mauritius by Belvedere. And the fact that it released its private placement memorandum four days after Lancelot Global and Four Elements were suspended by the FSC has led to the suggestion that it was hurriedly relocated to avoid being suspended itself.
However, Kijani was actually incorporated in the Cayman Islands in May 2014, which is a number of months before the FSC acted against Lancelot Global and Four Elements in Mauritius. When it relocated, it also appointed new counterparties – of particular interest is that Drake Fund Advisors took over as the administrator from Belvedere.
Kellermann and Cosgrove said that the reasons for relocating the fund were a more appealing tax and regulatory climate.
What does raise eyebrows is Kijani’s performance record. From 2011 to 2014 it reports annual returns of 44.18%, 19.36%, 16.24% and 21.44%. Over all of that time it reported only one month of negative returns.
The fund’s fact sheet also says that it targets 20% per annum capital growth in the Class A shares, or quarterly distributions at a rate of 2.25% per calendar quarter in the Class AG shares, which are for investors seeking an income. These are the sorts of numbers that tend to raise suspicions.
However, the fund notes in its material that it does not guarantee this performance and that an investment in the fund carries substantial risk. The current fund administrator, Drake, has also told Moneyweb that, based on the work it has done, the assets in the fund appear to be verifiable. It has also seen audited financial statements from December 2013 and drafts for 2014 which it said it “placed comfort in”.
Cosgrove and Kellermann said that they could not comment on Kijuani’s performance, as those questions should be directed to the investment advisers, Straffan Asset Management.
There may be links between Straffan, and RDL Management, which part of the Stonewood Holdings Group owned by Kellermann and Cosgrove. However, a link does not prove impropriety. What has to be shown is that money is actually missing.
Another set of allegations against Belvedere relate to a police raid on the London offices of forex trader CWM FX. The raid on March 3 was supported by the Financial Conduct Authority (FCA) and 13 people were arrested over allegations of fraud and money laundering.
CWM FX is part of the CWM World Group, which also offers funds and financial solutions. One of those funds is the Brighton SPC CWM, a section of the same umbrella fund under which Kijani sits. The CWM cells have not yet however been launched.
There are other links to Belvedere in that it appears that Belvedere acts as investment advisor to some of CWM’s other funds.
However, these links to Belvedere do not prove that this is all part of a huge scam. While they contribute to the suspicions around the group, it still has to be shown that money went missing and how Belvedere would have been the ultimate beneficiary.
Kellermann told Moneyweb that to the best of his knowledge, CWM is an independent company. It is regulated by the Financial Conduct Authority in the UK and is not owned by Belvedere.
The most recent allegations around Kellermann came up on Thursday and are not part of the original expose. They relate to a website for Trinity Scheme, which is an investment company that on its website notes that it is managed by Lancelot.
The list of funds on its website includes the “Anchor Global Diversified Fund”, under which is a link to the website of South African asset manager Anchor Capital. The CEO of Anchor, Peter Armitage, has however stated that this fund does not exist and that Anchor has certainly never managed it or taken a fee from it.
Kellermann’s explanation to Moneyweb was that he and Armitage discussed setting up this fund in the course of last year. He said that Armitage may have forgotten about this, but the fund was indeed established. He does not, however, think that it ever started operating or took any assets.
He said that over the next few days this matter will be resolved between the lawyers of the two parties once they have had a chance to go over relevant documentation.
So what do we know?
The problem with reporting on a story like this is that the facts are so difficult to verify. The regulators investigating these companies won’t talk, so we don’t actually know what they are investigating until they’ve finished their work and make a public statement.
Kellermann and Cosgrove have provided their side of the story, but it is only really by scrutinising financial reports, asset registers and bank accounts that proof or otherwise can really be established. We don’t have access to those unless we have an inside source, but the regulators will and it is on that basis that their determinations can be made.
The Financial Services Board in South Africa has said that it is cooperating with the regulatory authorities in Mauritius and Guernsey with their investigations into Kellermann.
It may be that Belvedere is a giant scam and that it will unravel with major repercussions around the world. However, we can’t report that as fact until we know for sure. And there simply isn’t enough information available yet to make a certain judgement.