Sygnia, Wierzycka and several ‘small related party transactions’

Advisory fees of R25m a year for investment firm co-owned by former CEO.
Magda Wierzycka. Sygnia purchased a 20% stake in Oxford Sciences Innovation before it emerged as a major player in the development of the Astra-Zeneca vaccine. Image: Supplied

Last week’s Sens announcement dealing with ‘small related party transactions’ involving Sygnia and associates of Magda Wierzycka, the company’s single largest shareholder and former CEO, is the latest remarkable development at this smallish but high-profile listed fund manager.

The small related party transactions involved the February 2020 renewal of property lease agreements between Sygnia subsidiary Sygnia Asset Management on the one side, and Beret Properties and Widok Properties on the other. The properties involved are The Foundry in Cape Town, Newport House in Cape Town and the Katherine and West building in Johannesburg.

Wierzycka is the executive chair of Sygnia, which she founded in 2006. In addition, she is a material shareholder in Sygnia through her associate The Zatoka Trust. Beret and Widok are both 100% owned by The Zatoka Trust.

Because of the relationship, Sygnia was required to provide the JSE with written confirmation from an independent expert stating that the terms and conditions of the agreements are fair to Sygnia shareholders.

Transaction deemed fair

The latest Sens announcement was confirmation that the transaction was deemed fair by independent expert BDO Financial Services. BDO’s analysis of market valuations and rentals concluded that the agreements were based on market-related terms and practice.

Although each of the three rental agreements was struck at 5% above going market rates, BDO said: “We are of the opinion that a variance of 5% in respect of a monthly rental value is within market-related ranges.”

However, Sygnia’s Sens statement provided no explanation for why the independent fairness opinion was released more than a year after the agreements had been renewed.

Delay attributed to the pandemic

Sygnia CEO David Hufton explained to Moneyweb that the delay was due to the Covid-19 pandemic.

“Those renewals were subject to an independent fairness opinion, which was not possible for a large part of last year due to the lockdown restrictions imposed on non-essential service providers. At the same time it suited our business to allow the agreements to tacitly renew monthly, as we continually assessed our need for office space while a large proportion of our staff worked remotely,” said Hufton.

Certainly the property agreements are not significant, but the delay in disclosure is.

And it does appear from BDO’s fairness report that much of the analysis was done on a desktop basis, which shouldn’t have been critically affected by the lockdown.

However, there’s no doubt that the period since Covid-19 began to wreak havoc across the globe has been a busy one for Sygnia.

Two busy years for Sygnia

A second related party transaction involving an investment in high-profile venture capital firm Oxford Sciences Innovation (OSI), major and unexpected changes in the leadership structure, the sudden resignation of a recently appointed director, and a fractious AGM from which journalists were banned, all helped to ensure that the Sygnia board was kept active during the past 24 months.

And then there’s the considerable inconvenience of having to bed-down its third external auditor in three years. After firing KPMG in July 2017 because of its involvement in state-capture, Sygnia appointed Deloitte.

Read: JSE to determine facts over Sygnia and Deloitte break up

In a Sens statement issued in June 2019 Sygnia said Deloitte had resigned with immediate effect after Sygnia communicated its intention to formally terminate Deloitte’s appointment. In July 2019 Sygnia appointed Mazars.

The Oxford Sciences Innovation deal

Perhaps the most significant development during the past 24 months has been Sygnia’s purchase of a 20% stake in OSI, making it the single largest shareholder in the entity, which owned rights to patents developed by Oxford University.

The investment, financed by funds from Sygnia Life and initially held by Sygnia UK, pre-dated the ‘formal outbreak’ of the Covid pandemic, and became an extremely attractive asset when OSI emerged as a major player in the development of the Astra-Zeneca vaccine.

The British-Swedish pharmaceutical company had developed the vaccine in co-ordination with Oxford University.

Listen to Ryk van Niekerk’s interview with then Sygnia CEO Magda Wierzycka about the company’s OSI Fund (or read the transcript here):

The first formal announcement of the relationship between Sygnia and OSI came in early March 2020 when Sygnia issued a Sens statement informing shareholders of two “small related party transactions”. The first transaction related to a service agreement between Sygnia Asset Management and a previously little-known entity called Braavos Investment Advisers.

Braavos is a limited partnership registered in England and Wales and its two 50% partners are Wierzycka and Andre Crawford-Brunt, who joined the Sygnia board as a non-executive director in October 2018.

The five-year service agreement involved Braavos using UK-based services and facilities owned by Sygnia Asset Management for a fixed annual fee of R13.9 million.

The second, much more significant transaction involved Sygnia Life committing to invest into various Braavos-related funds and to appointing Wierzycka, Crawford-Brunt and Braavos as the investment advisors.

The Sens statement provided no figure for the fees Wierzycka, Crawford-Brunt and Braavos would receive, merely stating the net effect of the two transactions is that a fee of approximately R11.1 million will accrue to Braavos each year.

Hefty investment advisory fees

This suggests Sygnia is paid Braavos investment advisory fees of a hefty R25 million in the first year of the contract, which is equivalent to around 1.9% on the R1.9 billion of assets Braavos manages for Sygnia and around 12.5% of Sygnia’s 2020 taxed profits.

What is remarkable about the announcement is the way in which Braavos was able to interject itself into the relationship between Sygnia Life and OSI and extract a hefty recurring fee.

Despite this, the March 2020 statement dealing with the two small related party transactions informed shareholders that BDO had provided an independent opinion “confirming that the terms of the Transactions are fair insofar as the shareholders are concerned”.

Weeks later, in early April 2020, Sygnia announced that deputy CEO David Hufton had been appointed joint CEO with immediate effect.

Things remained reasonably quiet during the next few months although there were ongoing rumours of shareholder unhappiness about the advisory fees being pocketed by Wierzycka and Crawford-Brunt.

This unhappiness appears to have boiled to the surface by the time of the Sygnia AGM in January 2021.

Journalists were banned from attending the meeting but parties in attendance reported that a key issue of contention was the related party transaction involving Sygnia OSI and Braavos. This appears to have been confirmed by the announcement, accompanying the results of the AGM voting, of Crawford-Brunt’s sudden retirement.

Hufton tells Moneyweb that all questions related to the Braavos related party transactions were answered at the AGM and during engagements in the following week. “There have been no further questions posed to us by shareholders on the matter,” he said.

The 2021 annual financial statements are likely to prompt a resumption of questions given that the funds invested in Braavos via Sygnia have been increased from R1.9 billion to R3.4 billion.

This means the fees payable for 2021 will be significantly higher.

Management changes

But getting back to the remarkable developments over the past 18 months: in late March Wierzycka announced that she would be stepping down as joint CEO, with effect from May 31.

Wierzycka, who remained a major shareholder, would become a non-executive director of Sygnia while Hufton became sole CEO.

“After successfully leading Sygnia since its inception in 2006, Ms Wierzycka will continue to play a key role in shaping the strategic direction of the company together with its executive team and its board of directors,” the company told surprised investors.

Investors were even more surprised when, on June 9, just over a week after giving up the CEO position, Wierzycka re-emerged as the executive chair with immediate effect.

“Ms Wierzycka will focus on helping the board to shape the company’s strategy, both domestically and internationally,” said a Sens statement at the time.

Wierzycka assured journalists that Hufton would have full control of the day-to-day operations as CEO but said she would be involved in strategy, including new projects. To this end she will be spending up to a year from September in the US examining investment opportunities.

Spate of departures

Meanwhile, earlier this week the company announced that Herschel Mayers, who joined the board on January 1 this year, has resigned with immediate effect.

Mayers’s departure is the latest in a spate of departures that leaves the board in the remarkable position of having only two directors who have served for more than five years – former non-executive chairman Haroon Bhorat and current executive chair Wierzycka.

In addition to Crawford-Brunt and Mayers who left this year, other recent departees are Shirley Zinn who resigned in December 2018, Kaizer Moyane in March 2020, and Ropfiwa Sithubi in December 2020.


Listen to Ryk van Niekerk’s interview with Magda Wierzycka (or read the transcript here):



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Loads of about turns and changes of face. A whole lot of dust in the eyes to disguise a personality cult and built-in IRR (insider rate of return!)?

Skimming the fat on some tasty long-term property deals. With positive (but limping) real returns the ship keeps sailing- just not to investors port o’call.

Back in the good ol’ US of A.. aye aye to built-in inflated cheques and bank balances/. oops- excuse the Zumain slip, of course I meant checks and balances!

Potentially more standard SA corporate governance shortfalls and untouchable even with a barge pole of a nautical mile.

Deloitte’s alleged role in Tongaat Hulett fiasco was a pretty good excuse to fire them. But according to Moneyweb in 2019, the JSE were going to “determine the facts” and investigate whether Sygnia’s SENS announcement misled shareholders.

So what was the outcome of the investigation? I know what my bet would be.

I like the idea that Magda is relieved of day-to-day CEO duties to focus on innovation outside of the “normal”. I reckon the OSI fund is way ahead of anything I’ve seen elsewhere.

Lol Deloitte has far worse scandals

A quick look at Property24 for offices to rent at The Foundry clearly shows that the rent per m² that Sygnia are paying Magda is much more than 5% above market. Market rents are R140-180/m², not the R231/m² that Sygnia are paying Magda. And 8% escalations in this market are way too high. It’s shocking that for all Magda’s virtue signaling she just couldn’t resist using Sygnia as her personal piggy bank to enrich herself at the expense of shareholders. Shame of BDO for just chasing fees and not exercising independent judgement

Not to mention that both Beret Properties and Widok Properties have loans from Sygnia. Why exactly these companies would have loans from Sygnia to possibly buy property that they then lease back to the company on onerous terms is not exactly clear…

Whilst Ann is looking into non-exec departure, she may also want to look into executive departure. Is a single member of the executive (other than Magda and family) who was listed on the pre-IPO presentations still with the company? What happened to Joseph Potgieter, Willem van der Merwe, Niki Giles, Michael Buckham and many others? Why did they all leave?

She is an energetic and competent lady but lacks judgement with all the related party issues. Either you are a public company with all the negatives that brings in terms of absolutely no self-dealing as just one example, or you stay a private company and do what you want.

If the firm were not renting from her, would work-from-home and covid have prompted changes not in the interest of the landlord, like everybody else is implementing?

It is like Dischem when they continued paying rent for director-owned warehouse but reneged on retail landlords. You just cannot do stuff like that. Between that ethics breach and the price-gouging I have not shopped there since and know others that also drew that line. Happy to support independent family-owned pharmacy.

Mess with the high fee asset management industry at your peril. They will at some point let loose the dogs of war and try and destroy reputations.
Magda has done the unforgivable by shattering the fee-cartel as well as introducing other highly innovative products which makes them look silly and plodders.

And on cue, Sygnia’s biggest shill arrives at the party.

WHAT! Her company pushes reg28…isnt your mickey mouse firm all about offshore investment? Isnt your whole claim to fame about being against reg28?? Going through Sygnia site, loaded with “active managment” funds with high fees, all that attacking of active managers is hypocritical. Your comment is disgraceful.

Pushing regulation 28. Like they have a choice. The clue is in the first word: REGULATION.

Think your comment is very unfair, Sygnia provides multi-managed solutions which include passive investing. All Sygnia funds are top quarter for over five years and they’re cheapest provider of Reg28 products, however they don’t only push that, there 4IR (top performer) which is not Reg28

Pushing regulation 28. Like they have a choice. The clue is in the first word: REGULATION.

So because she’s been innovative in driving down fees mean she’s now immune from criticism? Surely not!

Such a disappointing comment from you Magnus. How is it the asset management industries fault to cream off via related party transactions?? Also those “highly innovative” products are high fee themselves. No man, not cool.
PS: This should be a line in the sand for any shareholder on a ethical basis.

Believe it or not, Magda can have done good work on lowering fees AND also engaged in some questionable related party transactions. Both are possible, Magnus.

And how do you excuse her using her reputation and platform to push lockdowns and vaccines while she’s invested in the companies that make them?

I agree with Magnus 100%. There is nothing untoward here….just the Green eyed monster at work!

Best excuse since Titanic – COVID.

Magda blocked me for asking similar questions – she must have something to hide – my view – and all those who covered for her – would you invest when these types of ‘fair’ deals are made?

Not me, long time, not me.

Now, MW, I expect you to keep on covering and refuse to place my comment.

Well, well, MW – thanks for placing my comment

Brilliant reporting Ann!

Any professional investor looking through Sygnia statements cannot help to laugh, utter blatant boundary pushing. Magda screams and accuses publicly but back at home her firm is milking shareholders just the same. Professionals have know the situation for a good few years now, stock suffered heavily. Directors and employees have tapped out. How utterly embarrassing. I just cringe.
Many blinded by their racism and cheer for her personal attacks against certain SA politicians, but there is always more to a story hey.

Remember when she was advocating for a wealth tax.

Not to mention offering our pension savings to the ANC to bail out SOEs…

Maybe people will think I am wealthy if I rail against wealth taxes. You are fooling no one.

Maybe people will think I am wealthy if I rail against wealth taxes. You are fooling no one.

Disappointing to read but way too many of SA’s listed company executives do not seem to be able to resist such “opportunities”. Why? Culture, ethics, greed, lack of controls?

Hoisted by her own petard. The handmaiden of hubris

The revelation of Sygnia’s domestic woes together with their administrative chaos shows that this once darling of the investment fraternity is going downhill fast.

A slight tangent: When a company blocks journalists from attending an AGM, is it not possible for the journalists to buy a single share, attend in their capacity as shareholders, and then report back as normal?

We’re lucky we have innovative providers in SA as with Sygnia. All this anti Sygnia stuff is rather strange. Maybe SA just has a crab mentality!

“ethics breach”
“enrich herself”

These are the phrases that pop up when the word corruption is painful to say.

Ja – Magda’tjie should wipe her own nose before she self-appointed tries to criticise all and sundry. Own medicine and not so clean hey Magda??

Agreed. If you want to be a purveyor of good corporate behavior you need to make sure you keep your nose clean, very clean.

Comment removed

Be careful, she might block you if you were a Twit follower of hers

I fail to see how any of this is worth writing an article over…

All of this is public knowledge, its all been disclosed, shareholders disagree all the time…

Title of the article should be Corporate does Corporate stuff and owners argue amoung themselves.

Thats why I choose my fund managers carefully. I only trust Perpetua in our market. They even specialise in overseas markets.

Phew what a bunch of misogynistic pricks in this game!
Just because you didn’t think of all her innovations and yes, pushing the envelope, you’re all up in arms at her success. Nothing illegal, no fraud, no hiding behind auditors “mistakes” Get a life!

Easy Mac, I have criticised quite a few directors who have, IMHO, played a bit fast and loose with mixing their own personal interests and the company’s. But enlighten us, is all this “hefty” Braavos payment completely ethical (it may well be legal and within the rules applicable) but, to me, smacks of vested interests, at the very least.

Sadly vested interests are what makes the World go round! Whether it’s a Socialist or Capitalist economy…it’s just human nature!

…..and, in addition, also… not only is she smart….she’s gorgeous!

I think Madga and family / trust hold about two thirds of all Sygnia shares (maybe someone has actual figures). So even if the rental arrangements were lowered and an extra R18M or something became available for distribution to the shareholders, two thirds of that would end up back in the family anyway.

But the fact that BDO said it was OK, and the JSE’s hyped-up “probe” to investigate the firing of Deloitte fizzled out. We’re arguing about these things here because there is at least some level of transparency.

And yelling going on here about the crashing share price? They listed in 2015 at R8.40, 19x over-subscribed IPO, been trading around R17-R20 this year, they pay reasonable dividends twice a year, the company has consistently grown assets under management and expanded its offerings. Personally, I can’t see compelling reasons to switch Sygnia shares to any of their competitors.

Ordinary shareholders sit behind the founder who crafts favorable deals which diverts the flow of cash in perpetuity?

You mean like Naspers?????

End of comments.



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