Stanlib ordered to repay fees it was not permitted to charge
The asset manager has been forced to pay back an undisclosed amount of performance fees to investors
Stanlib insists that there will be minimal damage to its reputation after the regulator fined it for charging performance fees it wasn't entitled to because this had resulted from an administrative oversight.
The Financial Sector Conduct Authority (FSCA) said on Wednesday it had fined the asset manager, which is owned by insurance group Liberty, R500,000 after it charged investors in some of its investment portfolios fees that were not disclosed in legal documents. Stanlib has paid back the money.
“I would have been more concerned about brand damage if we never disclosed to investors that the funds had performance fees. Investors were fully cognisant of that fact," said Stanlib CEO Derrick Msibi.
Msibi said the amount paid back to investors in the form of increased unit prices was less than 10% of the profit the company made last year. Stanlib SA posted earnings of R252m in 2017.
The fiasco comes at a sensitive time for active asset managers globally as their fees and transparency come under greater scrutiny from investors who are increasingly opting for index-tracking funds that cost less less and often outperform.
Msibi said none of the fees were earned by Stanlib. Instead, they were paid directly to the external underlying managers.
When Stanlib entered into contracts with new underlying fund managers who charge performance fees, it did not amend the legal documents of affected funds to reflect that they had started charging performance fees.
"The only mistake we made is that we didn’t ensure that the trust deeds were amended when we entered into agreements with underlying fund managers who charge performance fees,” said Msibi.
He said the performance fees levied on the affected funds were below the industry standard of 0.50%.
“But we have to foot that bill right now because we had contracts with the underlying managers. It is a negotiation we’ll need to have with them but we are unlikely to recoup that money,” said Msibi .
The FSCA said although the fees were disclosed to investors, it was “not permissible for a manager to charge performance fees that are not stipulated and provided for in the supplemental deeds of the portfolios concerned”.
The breach was discovered during an on-site visit conducted by the Financial Services Board, before it was renamed the FSCA in April.
The affected funds are part of Stanlib multimanager portfolios. As at end of June 2018, Stanlib managed and administered R609bn assets for more than 500,000 investors.
Msibi said the fees and investment growth were refunded into the affected portfolios during in November . They were not refunded to investors in their individual capacity. Instead, there was a one-off increase in the unit prices of the affected portfolios.