Millions may be lost in clothing industry pension fund

South Africa

Workers' fund faces massive Pinnacle losses

Clothing workers stand to lose R90-million through their provident fund investment in Trilinear Empowerment Trust, the main shareholder in the struggling luxury property developer Pinnacle Point.

According to minutes from a meeting held by the Cape Clothing Association, the clothing workers' provident fund invested R197-million in Trilinear and faces potential losses of around R90-million.

A Financial Services Board (FSB) investigation into the conduct of Trilinear was in progress, Jaco Pretorius, the provident fund consultant from Pan African Benefit Services, told the meeting in Mouille Point, Cape Town on March 14. The FSB found that the trustees of the provident fund acted "within the terms of their fiduciary responsibilities," Pretorius said.

Various representatives at the meeting expressed "particular displeasure in respect of this development and the role of the fund consultant" and a special work group was convened to review the details of the Trilinear transaction. Trilinear invested R100-million in Pinnacle in October 2009, and bought Absa's stake in the company for R150-million in February last year. In December, Trilinear invested an additional R13-million in Pinnacle to fund working capital and development expenditure.

Investec applied in February to liquidate four Pinnacle Point subsidiary companies, due to the non-payment of debt. The case has been postponed until June. The group has also signed an agreement

Reference:  JANA MARAIS
BUSINESS TIMES

27 March 2011

Pension fund investment contravenes Act

By: Nellie Brand-Jonker

2011-03-27

Cape Town - There is great concern within the Cape clothing industry after millions from the garment workers’ pension fund was allegedly invested in contravention of the Pension Funds Act.

The Financial Services Board (FSB) is currently investigating, among others, Cape asset manager Trilinear regarding the manner in which the investments were made. Various provident funds for the Cape clothing manufacturing industry apparently invested money in the fairly unknown Trilinear group’s Trilinear Empowerment Trust, and they are now struggling to get their money back from the asset manager.

One of the funds – the National Bargaining Council for the Clothing Manufacturing Industry Western Cape Region Provident Fund – invested almost R200m. The value of this investment was now almost half what it had been worth.

A report in Sake24’s possession about the provident fund's performance in the year to end-December 2010 indicated that all the assets under management at Trilinear were currently worth R105.6m. This report, sent to members of the provident fund and employers, showed with concern that the performance of the investment at Trilinear Empowerment Trust had fallen by 62%.

While the performance of most other asset managers managing the fund's money was in line with the set criteria, the trustees had for some time been concerned about the Trilinear investment, said the report. The provident fund trustees – who represent the garment workers and employers – had contacted Trilinear to disinvest, said the report. But disinvestment was apparently too difficult because of the nature of the assets into which investments had been made. There was a reference to "liquidity restrictions".

Trilinear’s poor performance had had a negative impact on the provident fund's overall performance for the past three years, said the report. Responding to questions, Sicelo Nduna, the general secretary of the provident fund, said the investment had not performed as expected and had led to the provident fund being in contravention with two aspects of the pension fund and its regulations. Nduna is the secretary of the National Bargaining Council for the Clothing Manufacturing Industry.

According to pension fund registrar Jurgen Boyd, the investigation involving Trilinear was examining how the investments had been made. It concerned contraventions of Regulation 28, which prescribes the percentage of pension fund monies that may be invested in certain types of investments, as well as Section 5 (2) of the Pension Funds Act which stipulates that the pension fund's assets must remain in its own name or in that of a designated company.

Reference: Fin 24