SA Property Funds Exposed to NEPI Rockcastle

28 November 2018 | SA Views | Ian Stiglingh

Viceroy Targets NEPI Rockcastle

Viceroy Research, which in the past has released damaging reports on companies like Steinhoff and Capitec, released on Thursday 28/11 a report on NEPI Rockcastle [JSE:NRP]. Viceroy says its investigations have “uncovered numerous inconsistencies within NEPI Rockcastle’s financial reporting and major links to an established financial fraud”. The share price reaction was very negative, plunging 14.5% by lunch time on the JSE. A summary and link to the report can be found here.

Property Managers Also Caught Out

NEPI Rockcastle (NRP) is one of the largest constituents in the FTSE/JSE SA Listed Property Index, with a 13.70% weight in the index. Passive funds tracking the index are also being impacted. Looking at end of September holdings data: Sygnia’s Listed Property Index holds 13.10% NRP while the Satrix Property ETF has 9.48% exposure to NRP. Satrix has a 10% cap on the weight of each underlying share and this clearly benefits the fund by keeping the concentration of its positions in any single share to a palatable weight.

Active managers are expected to manage risk in their portfolios and should have the upper hand versus their passive peers, but some managers were caught out. The average weight in NRP held by active managers was 9.51% at the end of September 2018. At the time of writing only a few funds have updated holdings to the end of October 2018. The highest exposed fund at this date was Metope Property Prescient with 16.51%. Only 4 out of 36 actively managed funds did not hold any NEPI Rockcastle in their portfolios. A summary is given in the below table.


The Sharenet BCI Property Fund had 6.42% invested in NEPI Rockcastle, less than half the weight in the benchmark. Our substantial underweight was due to risks associated with the company. These risks need to be balanced with benchmark risk that arises from deviating from benchmark weights.

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Sharenet Investments has a range of unit trusts and solutions making use of both index trackers and active managers. Investment decisions are also backed by a firm and reliable asset allocation process.



Ian Stiglingh
Quantitative Investment Analyst 

Ian Stiglingh is a full time quantitative analyst, responsible for research of equities across all industries. Ian completed his degree in Mathematical Science in 2013 and his Honours degree in Financial Risk Management in 2014, both at the University of Stellenbosch. During his studies, Ian worked as an intern at Old Mutual Actuaries & Consultants as well as J.P. Morgan in Johannesburg, and is currently a CFA candidate 

The information contained in this article is for informational purposes only and must not be regarded as a prospectus for any security, financial product or transaction. It is neither to be construed as financial advice nor to be regarded as a definitive analysis of any financial issue. Investors should consider this research/article as only a single factor in making their investment decision. We recommend you consult a financial planner/advisor to take into account your particular investment objectives, financial situation and individual needs. The views and opinions (where expressed) in this article are those of the author and do not necessarily reflect the official policy or position of Sharenet.

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