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10X Investments steady as Steinhoff plunges

07 December 2017Steven Nathan, 10X Investments
Steven Nathan, chief executive at 10X Investments.

Steven Nathan, chief executive at 10X Investments.

10X Investments’ chief executive Steven Nathan on Thursday reassured investors that Steinhoff International’s heavy losses had not had a material impact on the financial group’s own funds.

This will steady the nerves of 10X’s investors as news organisation Moneyweb reports that “virtually every South African with investments in the form of retirement savings via retirement annuities or provident and pension funds, will all be poorer because of what has happened to Steinhoff.”

But 10X’s Nathan said 10X’s exposure to Steinhoff was managed through diversification, and described the 1.1% holding as “modest”.

Shares in Steinhoff, the international home retailer, plunged by more than half on Wednesday after it announced the sudden exit of its chief executive amid allegations of a possible fraud.

The departure of Markus Jooste sent the shares into a nosedive. The company, which recently became a star of the JSE as it gobbled up various European retailers, is the subject of an investigation into accounting irregularities in Germany.

“Events like this highlight the benefits of diversification within a broad index fund,” Nathan said. “While just about every local investor will be impacted, active fund managers take on more concentration risk as a matter of course; those with a higher Steinhoff weighting will see a larger impact on their returns.”

Moneyweb reported that the Government Employees Pension Fund (GEPF) would be hard hit.

Noting its source as the Steinhoff shareholder register as at November 24, Moneyweb said  government employees were “in good company” as shareholders in Steinhoff along with “every large asset manager in the country”, as well as other large pension funds.

This will come as a heavy blow to the active fund management community’s claim that active management protects investors from events like this. They have failed their investors by not picking up on this earlier and largely ignoring the overseas developments until it was too late.

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