Manager Research

Investors in the Nedgroup Investments Entrepreneur Fund (Entrepreneur) would have recently received ballot letters seeking approval of the proposed merger between the Nedgroup Investments Private Wealth Small & Mid-Cap Equity Fund and the Entrepreneur Fund. Should the ballot be successful, Entrepreneur will receive the holdings from the Private Wealth Fund on the 4^th of June.

This merger marks the beginning of a broader rationalisation of the Nedgroup Investments Private Wealth business as they seek to streamline the fund range available to their advisors. There has recently been a change in leadership at Nedgroup’s Private Wealth business so we would expect further change moving forward as the new management team implements their strategy.

For any fund merger our primary concern is to evaluate the potential impact on existing investors. In this case our concern rests with the impact of the merger on the Entrepreneur Fund, with the fund carrying a Tier 1 rating. Concerns around issues such as liquidity and performance impacts are heightened in a small-cap mandate such as this.

We tested our concerns with Nedgroup and ABAX (investment managers of the Entrepreneur Fund) and have been given the following information regarding the likely impact on the Entrepreneur Fund.

• The Private Wealth fund is currently sub-scale, with the fund size measuring R24m at the end of February. This scale issue has likely been the driving force behind the proposed merger into the Entrepreneur Fund. The Private Wealth Fund therefore represents only a 2% addition to Entrepreneur.


• There is currently a 50% overlap in holdings between the funds that would require no change.


• The other 50% of the fund is invested in liquid stocks which they could sell in a day with no market impact.

Given this information we are comfortable that there will be no material impact on the Entrepreneur Fund and as such we have retained our Tier 1 rating.