Absa Closes Its Money Market Fund

Absa Closes Its Money Market Fund. In an extraordinary move, Absa has decided to close its popular Absa Money Market Fund. It says that many investors in the fund are under the mistaken impression that it guarantees the unit trust. South Africans have invested almost R86 billion in the unit trust, which has been around for 25 years.

The lender has been considering the sale of Absa Asset Management (Pty) Ltd. for some time, Warwick Bam, the Cape Town-based head of research at Avior Capital told Bloomberg. It was planning to restructure the unit ahead of a possible sale to a group of black investors, Business Times reported two years ago. “Absa could be simplifying the asset-management entity by closing the fund, decoupling it from the bank and facilitating a sale. The switch from a unit-trust fund to a deposit or cash-savings vehicle could be beneficial for Absa bank as it could increase lending capacity.” said Bam.

Absa said most of the money would probably not be channelled into deposits as large institutional investors did not have that option. “We expect some of the money to become Absa deposits, but since clients have full flexibility of choice, it is too early to comment with authority on the expected outcome of the closure,” it said in a statement.

The executive director and portfolio manager of Denker Capital also told Bloomberg that Absa faces a risk, with retail clients potentially taking their business to another money market fund. “It’s going to be very interesting to see how other banks respond to this. Standard Bank, for instance, renamed their money market from Standard Bank Money Market to Stanlib Money Market. They haven’t got that direct bank name connection, so clients won’t think they’re getting a bank guarantee.”

The Money Market Fund was a secure short-term investment. This fund gave clients an attractive alternative to savings and deposit accounts, as it was a short-term, capital-secure investment with minimal volatility.

“Yes, a new Money Market Fund, called the Absa Prudential Money Market Fund (APMMF) will be available from 1 April through Financial advisers. The APMMF will not be accessible or serviced via the Absa Bank platforms, as per the closing product. This will allow us to align the APMMF with the rest of our Unit Trust fund.” Absa said in a statement on its website.

By Thomas Chiothamisi