Absa winds down R86bn money-market fund

Absa is closing its money market fund, which has almost R86bn in assets under management, citing clients’ mistaken belief that investments in the fund would enjoy the same degree of safety as cash invested in a savings account, as the primary reason for closing the unit trust.

In a letter dated April 7, which was posted on Absa’s website, the bank said clients had about 90 days to withdraw their funds from the Absa money market fund and place the proceeds into their bank account or switch their investments into an alternative financial product.

The cut-off date for switching out of the Absa money market fund is July 1, with the winding up of the fund due for completion by July 6, according to the letter.

Absa Fund Managers head Sylvester Kgatla said the decision followed a recent review of its financial products to assess whether they were aligned to customers’ needs and expectations.

“The outcome of the review highlighted that most of our retail clients mainly require a bank account that is guaranteed by Absa, at an attractive interest rate,” Kgatla said.

“Most of our institutional clients want continued access to a money-market fund [a unit trust] at a competitive rate.

“The findings of the review are not inconsistent with our previous notifications to our clients, which reiterated that the Absa money market fund was a unit trust and that capital and returns were not guaranteed.

“In our effort to respond effectively to this insight, we decided to close the Absa money market fund, which was an important decision but certainly a difficult one,” he said.