OLD MUTUAL INVESTMENT GROUP
Play open cards with us, investors tell Resilient
Resilient’s efforts to address the issue had so far left investors "frustrated"
Old Mutual Investment Group (Omigsa), one of the asset managers demanding a forensic investigation into the Resilient group of companies, says share price manipulation allegations that have cost investors almost R130bn in 2018 are indicative of a broader malaise in ethical leadership in corporate SA.
Resilient’s efforts to address the issue had so far left investors "frustrated", Omigsa said.
In an unprecedented move, some of the country’s largest investors last week wrote to the boards of the four companies, saying previous attempts at addressing the allegations lacked independence and had "insufficient scope".
The collapse started in February after 36One Asset Management published a report alleging the companies’ share price had been manipulated.
"From our point of view, we are looking for more transparency and disclosure. The current situation has led to more uncertainty and there is a degree of frustration on behalf of investors of simply not knowing," said Rob Lewenson, head of environmental, social and governance engagement practice at Omigsa.
"So we as part of a collective of institutional shareholders, are advocating for ethical leadership across the group and they must play open cards with us."
Part of Old Mutual Ltd, Omigsa is one of the country’s biggest asset managers, overseeing more than R650bn.
Other investors that have demanded answers include the Public Investment Corporation, which looks after R2-trillion on behalf of government workers, as well as Allan Gray, Coronation, Investec, Stanlib, Sanlam and Prudential.
The companies’ size relative to the listed property sector means electing to divest from them completely is not a realistic option, Lewenson said.
The stable consists of Resilient, Fortress, Nepi-Rockcastle and Greenbay Properties.
"We also want to ensure that there is no risk of cross-contamination where an issue at one of the group of companies affects others by virtue of the current and historical cross-shareholdings that exist,’’ he said. "So the outcome of an investigation impacts all of them. That is why we think a full-scale investigation is required."
The Financial Services Conduct Authority announced in March that it was investigating possible insider trading and price manipulation in the Resilient group of companies, and possible false and misleading reporting.
The group, which owns shopping centres such as Jabulani Mall in Soweto and The Grove Mall in Pretoria, and has stakes in retail landlords in Eastern Europe, at one point made up as much as 40% of the FTSE/JSE South African listed property index. Collectively, their shares have slumped 37% to 62% in 2018, erasing R128bn from their market capitalisation.
A fifth of investors at Nepi-Rockcastle’s annual general meeting on Tuesday voted against reappointing Des de Beer — founder and CEO of Resilient — as director.
Asked whether the manner in which the letter sent to Resilient is indicative of broader frustration with the deterioration in corporate governance, Lewenson said it is no coincidence that Omigsa had recently written to CEOs of SA’s top public companies stressing the importance of governance.
"We expect transparent and ethical dealings by directors and for the leadership team to take responsibility for the ethical issues in the company’s operations as well as its goods and services," Omigsa MD Khaya Gobodo and head of investments Hywel George said in the letter.