Johannesburg - The JSE will feature a new listing on Tuesday in the form of a closed-end managed fund from leading value investor Piet Viljoen, but investors shouldn't expect fireworks when it lists.
Speaking to Fin24.com on Friday, Viljoen was upbeat about the success of raising R450m prior to the listing. However, he was quick to temper investor expectations, pointing out the vehicle consists purely of cash at the moment.
"This thing is going to do nothing in the short term," he said.
Two other listed investment vehicles could provide some clues as to what investors can expect.
The first is Reinet Investments, which listed in October 2008. It essentially serves as a proxy for underlying shares in British American Tobacco (BAT). The share listed at 2 105c and hit a low of 880c in the following month before stabilising around 1 050c a share.
During the past 12 months the company has been shifting its portfolio, including €153m committed to private equity players Trilantic Capital Partners, €49m towards land development and mortgages in the United States which has
raised some eyebrows around subprime mortgage exposure, and €74m to another private equity group, Vanterra Flex Investments.
This change in portfolio mix and threats of an irregular dividend going forward have seen the stock downgraded at stockbrokerage firm Imara SP Reid from "buy" to "add".
"The dividend policy may well turn out to be somewhat similar to that of a private equity fund or a PSG or Brait. In other words it is likely to comprise irregular amounts, whether by way of dividend or capital repayment, depending on realisations of its investments," the firm said.
Despite these changes, Reinet has been a popular choice with asset managers in the first quarter of 2010, who bought nearly 2.9 million shares. Big buyers included highly-regarded value investors Allan Gray, John Biccards Investec Value fund and the Nedgroup Investments Equity fund.
Viljoen pointed to the JSE-listed Foord Compass debentures as another example of how investors can benefit from buying into managers with a long-term strategy in place.
While these debentures are outside the mandates of some unit trusts, they have proven popular with asset managers as well with more than 3.3 million being bought in the first quarter.
The Foord Compass debentures, which give investors a mixture of exposure to equity, property and debt through a professionally managed portfolio, were trading around 500c per share in October 2005. In January 2007 they hit a high of 940c a share and are now trading at around 760c a share. In the last financial year the counter delivered an 83c/share dividend to investors, which equates to a yield of just under 11%.
This is perhaps where the value of these debentures begins to show through.
While Viljoen insists he won't be rushed into making investments and is not going to be benchmarked against peers, the bar in the listed environment has been set high by the likes of Foord. On top of this, investors have shown with Reinet that they get itchy feet when a portfolio is not working hard for them.
- Fin24.com