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Unit trusts: Managers stick with Resilient despite losses


Unit trusts: Managers stick with Resilient despite losses

Brutal January and February in listed property stocks

Giulietta Talevi

Despite a disastrous January in the unit trust performance tables, Absa Asset Management is sticking by its Resilient positions – for now.
Fund manager Fayyaz Mottiar, who scooped the Raging Bull award for the performance of the Absa Property Equity Fund over the past three years – thanks partly to his backing of the Resilient group of companies (Resilient, Fortress, Greenbay and Nepi Rockcastle)– says “the longer term performance of the fund needs to be taken into account as the investment horizon for any investment we make is much longer than six to eight weeks”.
The first eight weeks of 2018 have been brutal, however.
In January the SA Listed Property Index posted a total loss of -9.91% – due largely to Resilient’s fall of 21%, Fortress B’s drop of 27% and Greenbay’s 29% slide.
That selling continued into February, and Resilient has now shed 51% in the year to date, Fortress B has lost 61%, Greenbay 47% and Nepi Rockcastle 42%.According to figures released by Glacier two weeks ago, the Absa Property Equity Fund was the worst hit in January, losing 22.49%, followed by the Catalyst SA Property Equity Prescient Fund, down 10.21%, and the Sesfikile BCI Property Fund, which gave up 9.93%.
The Public Investment Corporation must be nursing heavy losses too: the custodian of government pensioners money owns a chunky 8.25% of Resilient, 8.4% of Fortress B, 7.13% of Nepi Rockcastle and 5.63% of Greenbay. Apart from entities related to Resilient, it is the biggest single shareholder in the entire stable.
Over the same period, the Nedgroup Investment Property Fund closed 0.63% higher. Ian Anderson, the fund’s manager has long been averse to Resilient’s lofty premium to net asset value.
He said earlier this month that “we’re not big fans of buying businesses at substantial premiums to their net asset value. And Resilient is almost unique in the world in that it trades at such a massive premium. We could never understand that.”
While Resilient has justified its premium on the basis that its distributions had grown at rates above that of the market, Nedgroup said “we didn't buy that. You can do it for maybe five to seven years, but the properties get older, and you can’t keep doing it forever.”Clearly, that view is not shared by Absa, Stanlib and Momentum Asset Management – all of whom are in the top 20 shareholders of Resilient stable stock.
But if Absa’s Mottiar is feeling the heat, he’s not showing it.
“Our pragmatic value investment philosophy is a bottom-up, fundamentally driven investment philosophy which enshrines the principal to act in the best interest of clients, and only base decisions on facts and in depth research and analysis, ignoring rumours and other market chatter.”
Mottiar says their assets under management have “on balance, remained stable” over the period.
Stanlib’s head of property, Keillen Ndlovu, is also backing the group for now.
“We continue to support the Resilient management until we see factual evidence to suggest otherwise. From our experience, management has and continues to come up with credible responses to these allegations in our continuing engagement with them.”
The asset manager says it’s “happy” to continue holding the Resilient table of companies “based on their proven track record”.
Ndlovu said: “We are of the view that provided they continue to provide superior distribution growth to their peers, they deserve to trade on a premium yield to other companies in the market.”
Stanlib may look to buy more of the group following its market rout, but says if they are found guilty of manipulating their stock “we would have to reconsider our positioning, given we place a premium on strong governance at companies that we hold”.

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