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The hardest hit Abil shareholders?

Government pension fund could have highest exposure. See table.

JOHANNESBURG – The Government Employees Pension Fund (GEPF) had the most equity exposure* to African Bank (Abil) on July 25, according to data from TimBukOne and STRATE, holding more than 186 million shares. Liberty Life came in second at nearly 77 million shares.

On July 25, the GEPF’s shares would have been worth more than R1.2 billion, while Liberty’s shares would have been worth R509 million. When African Bank hit an all-time low of 28c earlier on Thursday, these investments would have been worth roughly R52 million and R22 million respectively. Shortly before 14h00, the share was trading at 89c.

Below is a graph reflecting the top 25 beneficiaries of Abil shares at July 25.

Click image to enlarge it

Source: TimBukOne and Strate

*This table reflects only the ultimate beneficiaries of the shares (not taking into account indirect holdings). This is why the 22% Coronation stake does not reflect, as Coronation is not the ultimate beneficiary of the shares (its clients/investors are). The table also only reflects dematerialised shares, therefore the two million odd paper shares, which have not been dematerialised and traded electronically, would be unaccounted for.

Dan Matjila, chief investment officer at the Public Investment Corporation (PIC) (the GEPF’s primary asset manager), said it holds a stake in Abil in line with its client mandates. “As such, we have lost value in our investment like all other Abil shareholders,” Matjila said. He said African Bank posed less risk to the banking system, since it was not deposit taking, but that “a default on its debt obligations could be detrimental to the country’s financial system and could negatively impact the cost of funding for other financial institutions”.

Matjila added, “Along with other like-minded shareholders, the PIC will do whatever it can to salvage our investment and also minimise the negative impact on the country’s financial system. We are currently engaging with Abil management and other stakeholders and cannot comment further.

Unit trusts

The latest data available from Morningstar shows that 124 local collective investment schemes – both unit trusts and exchange-traded funds – hold Abil stock. While Coronation holds the greatest value in its funds, its funds will not be as affected as those which carry substantial weightings.

For instance, the Momentum Value Fund held more than 10% of its portfolio in Abil shares at the end of June. The Momentum Small/Mid Cap fund had more than 7% of its assets in the lender at the same time.

The Stanlib Financials Fund is another to have taken a big position on Abil, with over 5% of its portfolio assigned to it.

The drop in Abil’s share price is however not only going to be felt in South Africa. More than 600 international funds have some level of exposure to the counter. A large number of these are index trackers.

Mostly their positions are relatively small, but the FP Hexam Global Emerging Markets Fund had over 4% of its portfolio in Abil at the end of March. The Nile Capital Pan Africa Fund allocated just under 4% of its assets to Abil stock at the time time.

A further 47 local funds also hold Abil preference shares. Element and Momentum have some of the largest positions.

The Element Flexible Fund allocated more than 5% of its assets to Abil pref shares at the end of March. The Momentum Flexible Fund had 4.4% of its assets in Abil pref shares on 30 June.

Investec, Stanlib comment

A statement out from Investec Asset Management noted that it had, on behalf of clients, exposure only to Abil’s debt. “The exposure to the corporate debt is held across our multi-asset and fixed income portfolios. At this stage we do not wish to speculate regarding the financial position of the company,” the statement noted.

A statement from the Liberty Group’s asset manager, Stanlib, was equally tight-lipped. “Being the largest fixed interest manager in the country we have holdings of African Bank debt in our funds. Following African Bank’s announcement on Wednesday, we are and will be analysing all available information over the coming weeks to ensure we make informed decisions for our investors,” the statement said.

“The impact is likely to be negligible in our balanced funds and only slightly more in our equity funds. We can inform individual investors of the African Bank exposure in their individual investments but only if they request it,” Stanlib said.

Financial services giant MMI Holdings commented, “The MMI Group is a regular investor in the South African equity and bond markets and as such has exposure to African Bank equities and bonds.”

MMI said it would decide on a way forward that was in the best interests for the group and its clients after reviewing Abil’s restructuring initiatives. “All MMI policyholders and unit holder funds remain secure, as their exposure to African Bank was very limited. We are confident that affected funds will continue to deliver on their investment mandates.”

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