Steinhoff’s share price has declined by more than 95% since the admission to accounting irregularities. Allan Gray confirmed yesterday that apart from a brief period in 2013, it had not owned Steinhoff on behalf of its clients.
“We initiated a small position in Steinhoff in October 2017, after the share underperformed meaningfully due to a tax investigation and other negative news. We did this with knowledge of the risks noted above, largely because we felt these risks were reflected in the share price. This is not unusual for us. Evaluating and managing risk versus potential return is key to our investment process,” Allan Gray said.
As of December 8 last year, Allan Gray had exposure to Steinhoff through unit trusts, Allan Gray Equity Fund, Allan Gray Balanced Fund and Allan Gray Stable Fund.
Its Equity Fund and Balanced Fund both had 0.11% exposure, while the Stable Fund had 0.1% exposure. The funds declined by 0.44%, 0.4% and 0.16% respectively after Steinhoff’s share price decline.
“Given the size of the position in our unit trusts, we are not a material shareholder, but we will be monitoring the company closely for further developments and will take action accordingly,” Allan Gray said.
The group made sure that its portfolios were well diversified, so that when one share or asset class is performing poorly, potential returns can come from somewhere else. “A diversified portfolio limits the risk of permanent capital loss, and maximises the probability of real returns over the long term,” Allan Gray said.
Coronation Fund Managers, which has a larger exposure to Steinhoff, promised to respond yesterday before the end of the day. However, by the time of publication they were yet to answer the questions sent to them.
Specialist banking and asset management group Investec said it incurred trading and investment losses of R220 million as a result of its exposure to Steinhoff International during the period.