One of the consequences of the collapse of ABIL is that certain fund managers who had exposure to African Bank in the form of either ABIL shares or ABIL debt, have decided to draw a distinction between those assets and the other assets in their unit trust funds which are affected by ABIL. The net effect of this is that so called side pockets have been created within affected unit trust funds to house these illiquid Abil instruments.
These side pockets do not mean that investors’ market values have dropped, but rather that the interests of investors are being protected. This is being achieved by keeping “infected” ABIL assets away from those assets within a unit trust fund which are not at risk.
Clients will therefore be issued with two separate valuations, one for the side pocketed ABIL assets and one for the other assets for the foreseeable future until such time as the ABIL debacle has been satisfactorily resolved between the Reserve Bank and those commercial banks which the SARB have appointed to assist with the takeover of ABIL.
Investors will continue to transact as normal in the affected funds, however, no transactions will be allowed in respect of the side pocketed or retention fund assets until liquidity in Abil assets returns to the market and the relevant management company realises (sells) these assets.