CIS exposure to African Bank not big enough to warrant panic

The Association for Savings and Investment South Africa (ASISA) has assured collective investment scheme (CIS) investors that there is no need to panic about the woes currently facing African Bank.

Leon Campher, CEO of ASISA, says the exposure of local equity and fixed interest portfolios to African Bank stock and debt instruments is minimal.

“Since equity portfolios are priced daily, the unit price you see today has already factored in the decline in the value of the African Bank share price,” says Campher. “Therefore there is no point in selling your units now in reaction to the developments at African Bank.”

He says in the case of the 15 money market portfolios that hold African Bank debt instruments, the total exposure to African Bank is only 1.9% of assets under management within these portfolios. According to Campher the exposure to African Bank in all other fixed interest and multi asset portfolios is also not material.

Campher points out that in terms of the support measures announced by the South African Reserve Bank (SARB) yesterday, African Bank senior debt instruments and wholesale deposits retain 90% of face value.

“Despite the 10% reduction in value, the exposure to African Bank debt instruments is not high enough to cause meaningful losses in the context of the portfolios that hold these instruments.”

Campher says fixed interest investors should therefore avoid knee-jerk reactions and remember that they invested for a high yield return, which will not be materially affected by the challenges facing African Bank.

He says ASISA is pro-actively engaging with its members, the Financial Services Board (FSB) and SARB on developments at African Bank, which was placed under curatorship on Sunday 10 August 2014.