Authorities dragging their feet on Resilient —fund manager

Property fund manager Catalyst has attacked SA regulators for not moving fast enough to resolve questions about what led to a sell-off in the Resilient group of companies that cost investors about R120bn and cast a shadow over the whole sector.

In the company’s November report, CEO Michael Arbuthnot said the authorities had not done enough, nor been vocal enough, on the scandal, which was sparked by accusations of insider trading in the company’s shares and the potential release of misleading information.

“It is nearly a year now that investors have suffered at the hands of rumours and speculation around the Resilient group of companies,” he said in the report.

“One must ask where are the authorities that are tasked with bringing stability.”

Catalyst has invested in real estate companies since 2001 and runs two global funds worth about R17.5bn together, two SA funds with R1.82bn as well as a R206m hedge fund.

The decline in the shares of the four companies — Resilient, Fortress, Nepi Rockcastle and Greenbay — started in January, and in August some of the country’s biggest fund managers asked for a forensic probe.

The companies largely rejected this, saying they would rather conduct their own investigations. Fortress broke ranks last week, announcing that it had appointed PwC.

Short seller Viceroy has released two reports into East European shopping centre owner Nepi Rockcastle, saying that the company overstates its profits so that it can deliver market-beating dividend growth.

The reports were strongly disputed by the company, which called them works of fiction and threatened legal action.

The Financial Sector Conduct Authority (FSCA) did not say when it expects to complete its own investigations.

HIT SQUAD

The leader of the directorate of the market abuse investigation team, Alex Pascoe, referred Business Day to a report released last week which says the probe is ongoing.

The report also says that “allegations of possible false and misleading reporting regarding Nepi Rockcastle pursuant to the [first] Viceroy report,” will be investigated.

Viceroy itself has faced accusations that its work is aimed at pushing the share prices down and is more like price manipulation than genuine research.

“They are a hit squad,” Reserve Bank governor Lesetja Kganyago said of the research company in November.

Viceroy burst into prominence after issuing a report into Steinhoff in December 2017, just days after the company admitted to “accounting irregularities” in what would be one of SA’s biggest corporate scandals so far.

The JSE has said it was working with the FSCA as it can hand over information about trades on its exchange.

Attempts to reach the JSE on Monday were unsuccessful.

Arbuthnot said the lack of progress meant that uncertainty in the sector would persist.

The FTSE/JSE South African listed property sector is down about 25% in 2018.

Ian Anderson, chief investment officer at Bridge Fund Managers, said that the market needed a better understanding of the investigations and time frames.

“It’s frustrating for investors given how long the investigations are taking and this is creating more uncertainty for the sector overall,” he said.

R120bn the amount the Resilient group of companies’ sell-off cost investors