“Given the highly-publicised failure of African Bank last week, we feel it important to provide context to fund holdings at the time of the collapse. Coronation was a significant investor in the equity of African Bank, but held virtually none of the debt,” Coronation Fund Managers said in a statement.
[DATA CMN:Coronation] is a one of the biggest shareholders in African Bank Investments Limited, a key player in South Africa’s unsecured lending industry.
Last week, [DATA ABL:African Bank] had a 90 per cent fall in stock value after its CEO Leon Kirkinis stepped down, and following the firm’s reporting an expected headline loss of nearly 6.4 billion rand for the financial year in a trading statement.
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“African Bank in many ways created the institutionalised unsecured lending market that we have in South Africa today. It was our view that African Bank was a responsible lender within its industry and would be one of the few to come out of the current downturn in what, we hoped, would be a more consolidated and better regulated industry,” Coronation explained.
Coronation added that in response to African Bank’s trading statement, which disclosed that bad debts were worse than expected, Coronation reduced its position in the bank to less than 9 per cent of the shares in issue.
The fund manager however explained that between August 2013 and 2014, they had been managing risk to their funds in African Bank.
(READ MORE: Curatorship the start to saving African Bank)
These strategies included investing only funds with a higher risk budget into the bank, and investing in equity while avoiding debt, preference share and money market exposure. Coronation however suffered some loss, which they explained they swiftly dealt between clients and stakeholders of the firm.
“Losses have been incurred. It is, however, important to consider those losses in total portfolio context. We made sure that only those funds with appropriate risk budgets invested and that exposure was contained to appropriate levels,” said Coronation.
“This has been clearly demonstrated by the resilient performance of all our funds this month.”