What Steinhoff shows us about the dangers of exchange controls
The decimation of the retailer’s share price highlights the risks of extreme concentration of domestic unit trust holdings in a relatively illiquid market
The 92% collapse in Steinhoff’s share price over the past three weeks, due to suspected accounting irregularities, has resulted in a $16bn loss of market value to the company’s equity investors, many of whom were South African unit trust and retirement fund holders. This substantial loss highlights a potential significant concern for South African domestic investors — the extreme concentration of domestic unit trust holdings in a relatively illiquid market. A simple analysis of the disclosed top 10 holdings on the fact sheets of the 10 largest South African pure equity funds holding a combined $10.4bn of assets, revealed the following staggeringly high levels of concentration by international norms: • Every fund held Naspers at an average weighting of 15.2% • Every fund held British American Tobacco (BAT) at an average weighting of 7% • Every fund held Sasol at an average weighting of 4.4% • Every fund (except Allan Gray Equity Fund and Satrix 40) held Steinhoff at an average weight...
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