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STEINHOFF: WHAT YOU NEED TO KNOW
Steinhoff International Holdings (SNH) released a statement last Wednesday morning confirming the resignation of its CEO, Markus Jooste, amid reports of irregularities in its financial accounts.
This has been a seismic event for South Africa. It has been costly for many South Africans and will undermine the reputation of corporate South Africa domestically and on the global stage. The current potential impact for South Africans with pension and/or unit trust investments could be a loss of around 1% of their wealth. The impact for you, as an Old Mutual Unit Trusts client, will depend on the fund in which you’re invested.
Holding within Old Mutual multi-asset class funds
The impact on multi-asset class funds is limited due to the diversified nature of investing across asset classes. While the funds hold some Steinhoff shares, they have low weighting relative to the benchmark. Following the drop in the share price this impacted negatively on the fund as of 30 November but remains well up year-to-date. This highlights the power of diversifying across asset classes in navigating shock events like this. The table below reflects the holdings of Steinhoff as at 30 November 2017.
Holding within Old Mutual equity funds
On Monday 4 December, Steinhoff was ranked one of the Top 40 companies on the JSE. Due to its size most South African managers would have had some exposure to Steinhoff. This could mean that the interim performance of some of our equity funds will be negatively affected. The tables below reflect the holdings of Steinhoff as at 30 November 2017 for South African Equity, Global Equity and Specialist Equity funds.
Holding within Old Mutual multi-manager funds
The funds managed by Old Mutual Multi-Managers had exposure to Steinhoff International mainly via domestic equity managers and a small exposure in global funds through a global equity manager with exposure to SNH. While the underlying managers held divergent views on the company, our equity building block held slightly more than the 2.3% weight in the FTSE/JSE Shareholder Weighted All Share (SWIX) Index. However, the funds had no exposure to any Steinhoff fixed-income instruments or bonds. The table below reflects the holding percentages of Steinhoff as at 30 November 2017.
Old Mutual’s view on Steinhoff going forward
Currently, Steinhoff shareholders have little insight into the potential impact of the accounting irregularities being investigated and are reliant on public statements issued by the company. We will continue to assess the situation and decide on an appropriate course of action as more information becomes available.