GEPF breaches ownership limit

 <p>THE LATEST ANNUAL REPORT of JSE Ltd confirms our contention late last year that the Government Employees' Pension Fund (GEPF) is now the biggest single shareholder in the specialist markets operator. The annual report shows the GEPF - South Africa's largest pension fund administrator - holds a 15,4% stake in JSE Ltd. </p>
<p>The GEPF's stake is more than twice the size of the next biggest shareholder - Northern Trust Global Services - with a stake of 6,45%. In the JSE's 2008 annual report Standard Financial Markets was listed as the biggest single shareholder in the JSE, with a holding of 6,45%. </p>
<p>The real issue is that the GEPF's stake is in breach of the limitation imposed on shareholders that invest in JSE Ltd - a seemingly archaic regulation that remains in place for strategic reasons. Regulations preclude any single shareholder holding more than 15% of the JSE. However, the JSE has pointed out the 15% threshold was merely intended as a guide and that applications could be made to SA's Security Services Regulator to go above that limit. </p>
<p>But a few years ago financial services group PSG was blocked from increasing its 15% holding in the JSE. </p>
<p>When approached for comment on the change in major shareholdings, the JSE investor relations head Michelle Joubert told Finweek the GEPF holding wasn't considered a breach. That was because the GEPF holds its 15,4% interest through a variety of funds: namely, Stanlib Asset Management, SIM Financial Fund, GEPF Equity, Kagiso Asset Management and Coronation Fund Managers. </p>
<p>Joubert says the four funds that hold the GEPF stake in JSE Ltd have different arrangements for voting the shares they hold. </p>
<p>Fair enough. But that does raise some interesting questions. What would happen if the GEPF pushed its stake through 25% over the next year - also utilising a variety of funds? Would the JSE reconsider its "technical" verdict if the GEPF collectively held what would amount to a strategic stake? </p>
<p>Another consideration is whether the voting rights attached to the JSE shares really do reside with the individual funds or whether the GEPF "technically" holds the voting rights. </p>
<p>Shareholder activist Theo Botha says the GEPF has a new mandate. "It's taken back control as regards voting. Therefore, if it wants to be a responsible investor it must review and exercise control over the voting procedure." Botha argues the GEPF can't leave voting up to the fund managers. "It really means the GEPF can and will influence the company into the future." </p>
<p>Botha reckons the JSE is being unfair. "It's treating shareholders differently. It would seem the GEPF has more rights as a shareholder than did PSG..." </p>
<p><img src='http://www.fin24.com/downloads/Media/article_images/fweng_img/2007/sep/ee_the290410.gif'> </p>
<p>Foreigners back at JSE </p>
<p>OVERSEAS INVESTORS were net buyers of R70bn in equities last year - a swing of around R130bn from 2008 (the year of the global financial crisis). It seems buyers not only took a liking to South African stocks but also to JSE Ltd - the operator of SA's stock exchanges. JSE Ltd's annual report shows (unspecified) shareholders overseas held a chunky 32% of its issued shares. That's well up from 2008, when offshore ownership of JSE Ltd dipped to just 18%. </p>
<p>McGregor BFA says some of the biggest foreign shareholders in JSE Ltd include Northern Trust Global Services, JPMorgan Chase Bank, Fidelity Funds (Europe), Brown Brothers and the Bank of New York. </p>
<p>Interestingly, institutional shareholding in JSE Ltd dropped markedly, from 49% at year-end 2008 to 28% at end-2009. But pension funds invested in JSE Ltd increased from 15% to 28% over the same period. </p>