OM decides not to close gold fund

Patrick Cairns

The Old Mutual Investment Group has decided against shutting the Old Mutual Gold Fund.

The unit trust, which has been around since 1990 and is the only remaining pure gold equity fund in the country, was slated to be merged into the Old Mutual Equity Fund from the start of November. A last-minute decision has however been made to keep it open.

Elize Botha, managing director of Old Mutual Unit Trusts, said they were concerned about the number of clients who wanted to stay invested. They, therefore, elected to continue giving them that option.

The ballot

As with the closure of any unit trust, Old Mutual had to seek the consent of investors through a voting process. This is largely a formality as few investors respond to the ballot, and the legislation considers anyone who doesn’t vote as in favour. In this instance, however, the sentiment from investors was unusually strongly opposed.

“If you look at ballots across the industry, only 8% to 20% of people vote,” Botha notes. “This ballot was in that region, but the number who voted against the proposal was higher than in the past.”

This means that, technically, the decision to close the fund was carried. However, after discussions with the Financial Sector Conduct Authority, Old Mutual decided to withdraw its application for the closure, since so many of those who did vote were against the proposal.

Investor sentiment

Much of the sentiment expressed against the fund’s closure had to do with its recent performance. The Old Mutual Gold Fund has returned over 80% in the past 12 months, making it easily the best-performing unit trust in South Africa.

This short-term strength is, however, massively overshadowed by its longer-term weakness. Over 10 years, the fund’s annualised return is 2.8% – the fourthworst performance of any local unit trust. Meryl Pick, the fund’s portfolio manager, said: “It’s on a winning wicket, so why would we want to shut that down? But the performance you have seen over the past 12 months is the kind of performance you see once every 10 years or so. As a long-term holder in the fund you do not actually do that well compared to some of our general equity funds.”

Moneyweb

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