CEO of PSG Piet Mouton responded in outrage to Vunani’s Anthony Clark’s allegations that PSG’s relationship with Zeder “is a scandal waiting to explode”.
Earlier in the week, CNBC Africa spoke to equity analyst Clark where he expressed his concern with Zeder and PSG.
He started by disclaiming how analysts should never have fear or favour in the stocks they cover and that many CEOs take the criticism of their companies personally.
“A stock that I’m currently covering very closely is Zeder Investments, the underlying fees that PSG Group which manages Zeder is actually taking out of that business just for managing, what I see is a mostly passive investment fund,” said Clark.
He expanded stating that Zeder Investments has a market value of 11.6 billion rand and a 72 per cent valuation in Pioneer Foods, basically a Pioneer Foods proxy.
He said he would be happy to pay for the management fee for some of its nice unlisteds but not that much for a mostly passive fund.
“They are taking out 818 million rand to managing, basically a passive investment fund, there are probably fund managers watching who would love to charge that kind of fee on an 11.6 billion rand fund,” he said.
“It is an absolute disgrace and a scandal waiting to explode.”
PSG Group’s Piet Mouton couldn’t disagree more, he responded by saying it gets higher returns because of the active way it manage its portfolios.
“He’s statement is so untrue PSG only receives 162 million rand, now I did a quick lesson in accounting, if you own more than 50 per cent of a company, you need to consolidate 100 per cent of their financials,” Mouton said.
He adds: “So 636 million of that 818 million relates to the expenses of our subsidiaries, so it is simply not true what he is stating, it’s accounting – we only take 162 million of those fees so I don’t know where he gets that from.”
He believes there is a misconception about Zeder out in the market.
“Firstly I think one should measure Zeder like a unit trust, because all unit trusts out there charge fees to manage the assets so, all of them charge base fees and performance fees and if you look at the flagship fund of the asset managers, in total they charge three per cent more if they perform and I stress, if they perform,” said Mouton.
Which is why they are earning performance fees Mouton says because Zeder has performed well over the last couple of years.
“Since inception, when Zeder started on 1 December 2006, Zeder has returned 19 per cent per annum to shareholders, compared against a 1000 odd unit trusts out there,” he said
Mouton says Zeder ranks fourth, compared to the best fund which only returned slightly more at 19.2 per cent at a 2.7 per cent charge per annum.
“The 100 best funds only returned 11 per cent per annum over the period, that’s considerably behind us and they are charging 1.7 per cent per annum.”
He added that these fees were agreed on by shareholders so he finds these complaints strange.
In response to our article Clark tweeted:
@cnbcafrica I set PSG questions post interview on fees specifically on PFG stake & why the ZED discount is growing. I gained NO response.
— Anthony Clark (@SmallTalkDaily) October 9, 2015