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Stanlib responds to African Bank impact

Cape Town - Fin24 user Paul wrote to say he is upset about the impact African Bank's curatorship had on his investment with Stanlib.

He writes:

I had over R3m in the Stanlib Income Fund Class R with R1.5 of this being added only a month or so ago.

I queried with Standard Bank on why my balance was reflected on the website by  over R40 000 on Monday August 11 and was told there was no technical problem.

On Friday 15 I received a very condescending automated mail from Dublin referring to their website and saying the impact was minimal.

I have sent two mails to the Stanlib contact centre since querying what happened, asking how they justify reducing by 1.66% the Stanlib income fund when it is largely a money market account, paying about 1.5 % over the money market.

So, how come all the exposure was in African Bank, in what is supposed to be a well managed fund?

All I get is another automated mail saying they will respond in 24 hours - nothing. Absolutely shocking Customer service.

Rachel Lailey of Stanlib responds:

First of all, please accept our sincere apologies for any frustration that our customer service has caused you.

This is not acceptable and we would like to assure you that we are addressing it as a matter of priority.

While the investment community always says that investments can go down as well as up, we know you entrusted us with your funds to make them grow.

The collapse of African Bank has created unforeseen losses for some of our investors and anxiety for all.
 
While losses are a reality of our industry, they are not taken lightly. Please rest assured that we are committed to your investments and will continue to do all we can to fulfil your long term expectations.

As for your investment in the Stanlib Income Fund, it is not a near-money-market fund and over 70% of the assets are invested in the South African bond market.

The bond holding in this fund includes government as well as corporate debt, and some of those bonds were issued by African Bank. This is in line with the mandate of the fund.

Unforseen move
 
On Sunday August 10 2014, the South African Reserve Bank (Sarb) issued a statement to say that African Bank has been placed under curatorship and the stewardship of Tom Winterboer of PwC.

This move was unforeseen by all market players, ourselves included.

All investors in African Bank, either directly or through their unit trust portfolios, have felt an impact.

The impact on individual investors in the Stanlib funds will vary depending on the exposure of their chosen funds.
 
The portfolios with exposure to fixed interest instruments, such as yours, were impacted by a write-down in the value of those fixed interest instruments, referred to as the “haircut”.

The senior debt has been written down by 10%, while the subordinated debt and preference shares have been written off altogether.

This is as per the recapitalisation agreement and the guidelines issued by the Sarb on August 10 2014.

The Stanlib Income Fund had an African Bank debt exposure of 6.47% of total fund value prior to the write-down.

As you correctly pointed out, the overall impact on your portfolio was 1.66%. On a R3m account, this would amount to a loss of R49 800.
 
I am sorry that you did not receive an adequate explanation of this drop in value when you called on the August 11.

As such the Standard Bank representative you spoke to was correct in saying that this was due to “technical problems”, but that is clearly not the whole story. We are addressing this problem with them.
 
We would once again like to profusely apologise for this. We will be sending a more comprehensive client communication over the coming days.
 
However, we would like to pull up your records to allow us to access your personal information, which will allow us to provide you with a more detailed response.

- Fin24

Do you have a pressing financial question? Post it on our Money Clinic section and we will get an expert to answer your query.

Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers.

Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.

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