Magda Wierzycka plans to launch an activist fund, intended to effect positive change at listed companies and profit off their rehabilitation, next month.
“In the last year, I’ve come across so much corporate governance abuse in South Africa, weak management, weak strategy or things being swept under the carpet of listed companies and I’ve done a lot of deep-diving into a number of these issues. I think that there is space for launching a fund which focuses specifically on these companies and engaging with management in a positive manner to effect change,” the chief executive of Sygnia said.
The fund, to be added to Sygnia’s product offering, will see the financial services company buy shares in listed companies that are trading at deep discounts to net asset value or which it perceives to have either a weak strategy, weak management team or weak corporate governance. It will then engage with management to effect positive change and profit off its position in the stocks once such change is effected, marking a divergence from passive management.
“I think there is a lot of scope to create value and add value to shareholders by becoming an activist investor,” she said referring to what she termed her involvement in having the CEO of Net1 replaced through writing about the company. She also said her engagement with JSE management at the group’s recent AGM is an illustration of what can be achieved.
According to Wierzycka the fund would not have to be a majority shareholder in the said companies to successfully engage with management and the board of directors, who would likely rather work with them than risk exposing themselves to negative publicity or to pointed questions at AGMs.
Wierzycka told Moneyweb that she will not be the portfolio manager of the fund but rather the voice of the fund. Sygnia will partner with a well-respected overseas-based South African, who will act as portfolio manager, she said
Sygnia, currently awaiting the greenlight from the JSE to launch a cryptocurrency fund, also announced plans to launch SygniaCoin, its own independent cryptocurrency exchange in the fourth quarter of the year.
Wierzycka said an exchange is appealing in that it provides the company with an opportunity to use the Initial Coin Offering (ICO) structure, whereby funds are raised by issuing tokens to investors, to launch new and interesting products and use blockchain technology for social good. It could also potentially use the fund for international expansion, she said.
For the six months ended March 31 2018, Sygnia reported a 41% increase in revenue to R207.3 million as assets under management (AUM) and administration increased 14% to R180.6 billion. It said it benefitted from concerns about market volatility, which saw few retirement funds making changes to their asset manager appointments and as cost became a key consideration. “Sygnia has benefitted from that trend in the form of strong growth in its AUM where the strategies are passive in nature.”
Its headline earnings per share dipped slightly to 25.34 cents from 26.23 cents. Anthony Clark, a small- and medium-cap analyst at Vunani Securities, said that the costs of Sygnia’s continued investment in its business has yet to reflect in earnings benefit. “Investment in Sygnia’s retail side should pay handsome dividends mainly in FY2019.”
Sygnia maintained its dividend at 25 cents per share.
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