The equity funds that didn’t own Steinhoff

Who dodged a bullet for their clients?

When Steinhoff’s share price plunged over 60% on Wednesday after news that CEO Markus Jooste had quit, the immediate reaction was to check who would be most affected. Who are Steinhoff’s major shareholders, and which unit trusts carry the largest exposures?

There is, however, another side to the story. And that is to ask which equity unit trust managers did not own any Steinhoff shares in their funds?

The stock was, until last week, one of the ten largest constituents of the FTSE/JSE SWIX All Share Index and therefore hard to ignore. It was, in fact, one of the most held counters on the JSE.

That’s not to say that every manager that didn’t include Steinhoff in their portfolios had identified that there were serious problems with its accounting. Some may simply have decided it was too complex to understand properly or that it wasn’t offering compelling value.

Whatever the case, however, fund managers that avoided Steinhoff successfully identified that there was more risk in the stock than they were prepared to take. The beneficiaries of that decision will be their clients. Generating good returns is as much about which stocks you avoid, as which you buy.

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The list

Checking which funds didn’t own Steinhoff is not quite an exact science, since the latest comprehensive portfolio information available is from September 30. It is possible that managers may have bought shares in the interim. It also requires cross-referencing different sources, which don’t always align. It is therefore possible that it may not yield comprehensive results.

However, the list below shows, to the best of our knowledge, which local equity funds had no exposure to the counter at the end of the third quarter. This does not include funds of funds, since the stock selection would be made by underlying managers, or index tracking portfolios.

The list also indicates instances where a manager did not include Steinhoff in its equity fund, but did hold the stock in one or more of its other portfolios.