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Old Mutual to shut its two resource sector unit trusts

It will simplify its offering, but not all investors are pleased.
The performance of both funds has been outstanding over the past year. Image: Bloomberg

Old Mutual has informed investors that it intends to close two of its longest running unit trusts. The asset manager has proposed that both the Old Mutual Mining and Resources Fund, which was launched in 1987, and the Old Mutual Gold Fund, which opened in 1990, be amalgamated into the Old Mutual Equity Fund.

Siboniso Nxumalo, head of the Old Mutual Equities boutique, says the decision is part of a wider consolidation that has been taking place within the firm.

“What clients have told us is that we have too many products, and that it’s too confusing. The industry is too confusing,” Nxumalo explains. “When they come onto our website, they don’t know which are the best funds for them.”

Old Mutual has therefore slimmed down its offering. Earlier this year, the asset manager received approval to close five other funds – the Old Mutual Financial Services Fund, Old Mutual Industrial Fund, Old Mutual Growth Fund, Old Mutual Top Companies Fund and the Old Mutual Top 20 Fund. These were also all merged into the Old Mutual Equity Fund.


This is part of an industry-wide trend among many larger managers who are seeing a meaningful fall in demand for sector-specific funds in particular.

“In the past, clients would use sector funds, like the Gold Fund or the Mining and Resources Fund as building blocks to create their own versions of balanced funds,” Nxumalo explains.

“But over the last 10 years, across the industry, sector funds have been experiencing outflows. Our experience has been no different.”

According to information from the Association for Savings and Investment South Africa (Asisa), there was R5.65 billion invested in resources funds at the end of 2009. That had fallen to R3.95 billion by the end of June this year.

As Nxumalo points out, the importance of the resources sector on the JSE has also diminished substantially since these funds were started.

“If you go back to when we launched these funds, mining and commodities in general constituted a massive part of the JSE All Share Index,” he says. “But as time has gone by, their contribution has shrunk. In the 1980s, there were 50 listed gold companies on the JSE. Now there are six. So, over time, the relevance of these funds has faded.”

Nxumalo believes there will therefore be benefits to clients by closing these products.

“There is a cost attached to having a lot of products,” he says.

“There are a lot of back-office costs in running these funds, and ultimately it is the client that pays for that. So if we simplify our offering, we not only make it easier for clients to understand what we do, we also make it cheaper over time, which means  we can add more value.”

The team at Old Mutual Equities, which will remain fully intact, will now be looking after just three funds instead of 10. Nxumalo hopes this improved focus will also lead to better outcomes.

Unhappy investors

Not all investors are, however, enamoured with Old Mutual’s decision – particularly because the recent performance of these two funds has been outstanding.

According to figures from Morningstar, the Old Mutual Gold Fund has gained 111% over the past 12 months.

This makes it comfortably the top performing unit trust in South Africa for this period. The next highest return is 31%. 

Financial advisor David Melvill, a long time gold bull, is particularly concerned that investors in this fund who have patiently sat through years of underperformance are now being denied the opportunity to receive these higher returns.

“Some of our clients have been loyal supporters of this fund for 20 years,” Melvill points out. “In these floundering times, gold is the perfect uncorrelated asset.” 

Nxumalo, however, sees matters differently.

“I think this is actually the best time to close the fund,” he says. “Clients have gotten a lot of value from it, especially over the last six or seven months. And if we look at the historical performance of this fund, whenever it has delivered the kind of performance it has over the last few months, it generally sets it up for disappointing performance over the next 12 months because of the volatile nature of gold shares.”

While there may be informed investors who understand the risks of these products, Old Mutual’s experience is that they can be a trap for performance chasers.

“One of the big dangers we have witnessed in managing these funds over time is that they can lead to mis-selling,” Nxumalo says. “Advisors see strong recent performance and they put clients who should never be in such risky funds into it at the wrong time, at the top of the cycle.

“We understand that there are some people who love these products, especially now, but we have to be a lot more prudent in the products that we provide to clients.”

Investors in the funds are currently being asked to vote on the proposed closures.

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Another reason to move your money offshore where you have a large number of gold funds to choose from. The local market is rapidly becoming irrelevant.

You and Mr Heystek – – see below and tell me what you make of it please

“According to figures from Morningstar, the Old Mutual Gold Fund has gained 111% over the past 12 months.”

What other investment fund, globally, has shown this growth?

Did you not read the article? This was extensively explained.

@IIIphil now please expand that graph to 5 years. What do you see?

Fund is coming off a low base so 110% doesn’t mean much. It’s awful for investors who took tough times and are now seeing their upside taken away. Why?


Wow you can chose to read just what you want to can’t you.

I call confirmation bias Phil!

“Confirmation bias is the tendency to search for, interpret, favor, and recall information in a way that affirms one’s prior beliefs or hypotheses. It is a type of cognitive bias and a systematic error of inductive reasoning.”

Here’s an example of confirmation bias.

‘Gold and gold funds have been a terrible investment over the last 3 years.’

OLD Mutual Gold Fund
3 Year Return: -2.42%

And if you look back to 12 Sept 2016 the gold price was ~$1 362 and today it’s ~$1 501 so that’s a ~10.2% increase.

Look at the bigger picture. If you bought gold in January 1980 at around $2 235 believe it was going up you’d be singing a whole different song if you held on and eventually decided to sell after almost two and a half years in June of 1982 at $832.

Why do you keep looking at little snippets of time when it comes to things like investment. If you want to look at short term stuff go be a day trader or go gamble, it’s not the same thing as investing over decades, for retirement and the generations to follow.

Sadly our friend “Iced Coffee” is not stating the facts accurately. The OM UT reports in their August report that the OM Gold fund achieved 3% over the 3 year period (and not -2,4%) this is a lot better than most general equity funds.

Furthermore, gold hit an all time high in 1980 of $850 (not $2235 as stated). It did fall back as the US raised interest rates to an unbelieveable high of 19% in order to persuade the gold investors to sell their gold for cash in teh bank at extremely attractive interest rates. This caused gold to fall in price. It hit a low of $250 in 2001.

Gold does go through seasons, but remains a good long term investment. It is the best uncorrelatted investment – when markets fall, gold does the opposite. An insurance you cannot afford to be without.

Getting ready to pump investors’ money into the black hole of ANC prescribed assets.

Yes, that is it! Eye roll.

Agree prescribed assets is a danger, but fail to see the relevance of rolling up two resource unit trusts into a general equity trust has to this topic.

Presribed assets typically entail forcing pension funds to allocate a larger portion of its assets to goverment bonds. Firstly these funds are unit trusts, not pension funds and secondly they are equity funds not balanced or asset allocation funds.

In opposing the danger of things like prescribed assets we should guard against becoming like the EFF or certain ANC factions that picks up on a certain soundbite or concept, white monopoly capital, Stratcom, expropriation of land etc and then just start shouting it mindlessly in any context even if it has no relevance whatsoever.

I enjoy having a dig at Old Mutual since they endorsed the idea of prescribed assets. But your explanation is correct.

Thanks for often being a voice of reason on these comments.

investors should just buy their own individual shares. That way they get to pick who they like, avoid the ones they don’t like, avoid advisory fees, avoid fun damager fees, have some fun.

Nxumalo – Never have I heard greater rubbish out of any managers mouth. You clearly do not understand Gold as an alt asset class. Too many funds? Too much work? Running a Gold fund is like running a river.
So when equity markets come under pressure, I should seek refuge in your Equity fund?
When your Equity fund delivers a good result in the future, also please see it as a good time to close that fund down as well.
Patrick – when do OM plan to close these funds?

OM plan to close it on 31st October. You need to vote before the 15th Oct., in order to have your say (Vote). Email

“There are a lot of back-office costs in running these funds, and ultimately it is the client that pays for that. So if we simplify our offering, we not only make it easier for clients to understand what we do, we also make it cheaper over time, which means we can add more value.”
with direct reference to the above my question is: did it take om 20 years to come to the conclusion that”back-office costs in running these funds” is high???? – if the answer is positive, it means the investor was screwed through all the years.
The term “cheaper over time” is not time related(is it a year or 50 years?) – it should have an immediate effect with a 70% decrease in investment funds available.
How is / was the different funds, now reduced to only 3, “back office cost funded?? – directly or cross funded – the better performing ones funding the other or not????
Together with meaningless reasoning like above and the ongoing pathetic handling of a management crisis at o m’s board of directors level, it does not leave much of a positive image of itself to the public.

Agreed, Nxumalo does display a poor understanding of investment matters. He was parachuted in from the now defunct Old Mutual Global Emerging Market fund, which was delivered disastrous returns for its shareholders and subsequently shut down. I doubt that these are the finsest investment brains out there.

It is very sad that Old Mutual never promoted their Gold Unit Trust. In all the years that I have known about the fund (29 years), they never had a function where “The role of gold in a portfolio” was the reason for the seminar. How would you expect a fund to grow, if you did not believe in it?

Alas, the best and only Gold fund in SA is destined to close. Investec has a Gold Fund, but you need your funds offshore to participate in that growth option.

If you are a client that invests direclty you WANT as many options as possible! “Too complicated?” Its b equity fund with factsheets haha.

Old mutual really is a grandpa company.

Good riddance. Anyone with a functioning brain would have seen that since its inception this fund has basically hedged SA inflation.

Totally agree with Bench, total rubbish for closing these funds because of their current sectors and move them to other much more volatile sectors. Must be crazy or much more behind the story.

As an investor that owned the gold fund until recently and sold it all, I was disappointed with OM stock pics, it did not even outperform the gold index, I would have made more buying an index fund. And at the TER price I can see why investors are not investing.

The constant opening/shutting down of funds at old mutual over the years leaves investors confused. Just a few years ago, the “Botique Strategy” envisaged by Thabo Dloti was overridden by Diane Radley and now a new CEO sweeps a whole lot of funds away again. Who is responsible for Old Mutual Strategy? Who are these new Heads of Botique who appear from nowhere?

The Old Mutual Investors fund according to their July 2019 factsheet , has delivered negative real returns for its investors over 1 , 3 and 5 years. No doubt the current Pm’s must be very proud of their performances.

Just another move from Old Mutual showing they are useless.

I had dealings with them for the first time a few years ago. Useless.

How they handled the whole Peter Moyo situation, just another feather in their hat of incompetence.

It seems as if Old Mutual is having difficulty managing their affairs properly lately. I strongly oppose the amalgamation of the funds as proposed. The time for precious metals has come and the equities are stagnant for the past few years. I am not in agreement and must consider another commodities fund.

The real truth regarding the OM saga: Manuel wanted one resources funds and Moyo wanted two. Has Manuel won?

Mr Nxumalo, where is the honesty and integrity ? Unfortunately very many Fund closures have as their prime motivation the intention of ultimately making greater profit for the Unit Trust Company. Can this never be stated as the major reason or even a reason ?
(Old Mutual Wealth are closing many existing non Old Mutual Funds with transfer into what is deemed “similar” Old Mutual Unit Trusts ?)

Two points for consideration:
i. For a specialist Unit Trust Fund should there not be at least a 10 year notice period of the intention to close the Fund? The Unit Trust Company has promoted, encouraged, marketed their Fund and many Investors are in for the long term. Is it fair and reasonable that Investors should be taken out, possibly at a very inopportune time, seemingly upon the whim of Senior Management when, as aforementioned, shareholder profit is normally put before Investor interests. A reasonable notice period would enable Investors to move out at their discretion, and not an enforced “pulling of the plug” when seemingly Investors are treated like cattle – “we know what’s best for you and we’re effecting this on your behalf”. If no notice period then a significant compensation to be paid to Investors – the practice of Unit Trust Companies opening and closing Funds at will needs to be stopped.

ii. The ballot is something of a farce – non response is counted as a “yes vote”. How many Investors (especially via platform arrangements), actually get the ballot, and if they do can they understand it and make informed decisions in a short space of time ? Would it not be fairer, more legitimate and acceptable for a non vote to be counted as a declinature ? This would then make for acceptance being “real”, and not some hypothetical exercise seemingly intended to justify the whims and fancies of Senior Management ultimately, as aforementioned, predominantly to increase the “bottom line”.

Clients these days will walk with their feet. Clients in Retirement Funds
will utilise Section 14 Transfers to move to Providers offering greater and unenforced choice. The days of these kind of high handed approaches needs to be limited – unfortunately many institutions still think they are king to rule over “their subjects” as they deem fit !

I am trying to get a ballot form via Investec, they appear to be unaware of this mayhem.
But it appears that all investors are being asked to vote on this, not just the ones affected. To ensure that this totalitarian exercise is a stitch up all unreturned ballots will be counted as in favour.
This is insane in every way imaginable.
They are forcing people out. They are destroying their own business. They are playing for the opposition.
Indeed the court should lock them all up, and have their sanity clinically examined for their own safety.

End of comments.





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