A BIT OF BAD NEWS JUST BEFORE CHRISTMAS L

 

You may have heard the shocking news of Steinhoff Pty Ltd, one of the biggest companies listed on the JSE, as well as offshore. German regulators are busy investigating allegations of fraud and corruption and Steinhoff’s shares dropped with almost 90%,  in 1 day last week.

 

The underlying funds of Kanaan BCI Balanced FoF also had exposure to Steinhoff, some as much as 5% and our fund is already down with -1.71% luckily less than the JSE, which is already down -3.22%.

 

Our Kanaan Hedge FoF is down with -2.3%.

 

Hopefully we have seen the worst of it. Most economists believe that the Ramapoza win will be good for the South African market.

 

WHO LOST THE MOST?

 

Morning Star data showed that the highest holdings – above 10% - in Steinhoff International at the end of last quarter were in two index funds. Specialist industrial funds, as well as some equity sharia and value funds, had exposures between 5 and 10%. We have always advised against direct investment in the share market and in Index funds. These specialist funds, where you tend to have too much eggs in one basket with one share, usually causes bad diversification.

 

The above-mentioned again underlines the importance of not having all your eggs in a seemingly fantastic company like Steinhoff, or for that matter, also a fantastic company like Naspers. Within literally 24 hours you can lose 90% of your life savings! Clients who are properly diversified, also in our offshore Moriah Global FoF did not get any of this bad exposure. The ZAR which has already appreciated with more than 10% since Rampamoza’s election is causing a great window of opportunity to invest in Moriah Global FoF.

 

Friendly greetings

 

Andre Delport