Manager Research

Kagiso is proposing a change to the investment policy on the Kagiso Equity Alpha and Kagiso Islamic Equity funds to clarify the permissible offshore exposure in their funds and to allow for investment in foreign collective schemes. For the changes to go ahead they have to ballot investors and receive approval from the majority of investors. This is the second round of balloting around this specific proposal. The first ballot held in April this year could not be passed as too few investors participated in the vote.

For some context, here is more detail on the proposed changes: 

Amendment 1: Clarification of allowed offshore exposure

The current investment policy makes no provision for the maximum allowable offshore exposure in the fund. The fund has been managed in line with the maximum offshore exposure allowed under the ASISA Equity General category, which limits offshore to 30%. The proposed change merely formalises this arrangement, by inserting a clause that explicitly states the fund’s commitment to invest offshore up to the maximum amount permitted by ASISA. This does not change the way that the fund has been managed thus far. 

Amendment 2: Allowing for the investment in foreign collective investment schemes (CIS)

The investment policy as it stands only allows for the investment in local CIS, not foreign CIS. Many fund managers have moved to wrapping the offshore assets of their local funds in a foreign domiciled unit trust. So instead of having to trade into every individual offshore security every time the local funds receive a cash flow, they simply invest into the unit trust. Kagiso has proposed to amend the investment policy to allow for investment in foreign CIS. For example, this would allow the Kagiso Equity Alpha fund to invest up to 30% in the Kagiso Global Equity fund, which is a UCITS regulated fund domiciled in Ireland but managed by Kagiso. 

Neither of these changes impact the investment process or philosophy. The former merely formalises the parameters of the current process, while the latter creates efficiencies in trade implementation and portfolio construction. As such, we would vote in favour of the proposed changes.

Where assets are invested via a platform, the platform would have already voted on the investor’s behalf. However, any direct investors into the funds via Kagiso’s manco, will have to vote on the changes. Completed ballot letters must be received by Kagiso’s auditors, PWC, by the 20^th of November. Investors would have received the ballot via correspondence from Kagiso.

If approved, the changes will be implemented on the 1^st of February 2020.