Botswana Public Officers Pension Fund (BPOPF) is at risk of losing close to P 1 billion in pensioners’ savings invested with Mauritian Barak Fund Management (BFM).
Sunday Standard can reveal that the fund manager is having a cash flow problem and is unable to raise enough money to pay off the BPOPF investment in full.
This follows a report by Bloomberg that whistle blowers have raised concerns about the quality of Barak’s collateral links to some of the loans and warned about the overvaluation of some assets.
BPOPF Chief Executive Officer Moemedi Malindah confirmed to Sunday Standard that “the BPOPF invested USD 100 million through 3 tranches in February 2018, March and April 2018. The BWP equivalent was 957.5 million.”
Following allegations of impropriety, Barak Fund Management gave investors an option to exit at great discount on their investments.
BPOPF had to roll the dice and decide on whether to cut its losses and exit at a great loss or to continue invested with Barak and hope things get better.
Malindah conceded that “the issue created panic for investors and some investors wanted to redeem. Redemption during difficult times result in investors getting less since it is a forced sale environment. Barak was thus faced with a liquidity issue and offered options to investors to exit at heavy discount or remain invested. We evaluated options available to investors as the Fund and we chose to remain invested.”
It has also emerged that Barak Fund Management is winding down three funds and launching two new ones, while widening its focus to the Middle East, as it seeks to rebuild after suspending investor withdrawals for nearly 18 months, according to a report by Global Trade Review.
It says the Africa-focused alternative lender ran into difficulties in March last year, freezing redemptions and suspending some of its funds.
Bloomberg has since reported that more than half of its investments were stuck in illiquid assets, meaning it was unable to return funds quickly to investors when the Covid-19 pandemic struck.
Responding Sunday Standard queries, Malindah said the BPOPF is aware of the whistle blowing report.
“It was given to all participating investors. Immediately the Fund consultant carried out an investigation on the allegations. Numerous engagements were conducted with the firm and other stakeholders to determine what is going on at Barak. We were satisfied that the issue facing Barak was an operational matter that was also affecting the Trade Finance sector as a whole,” said Malindah.
“Barak was hopeful that markets would stabilise and that the suspensions would be lifted,” Global Trade Review cited a statement issued recently by the company as saying. “Unfortunately, this did not transpire, as Covid-19 second and third waves impacted economic recovery.”
Barak Management Fund was also quoted as saying it remains confident in alternative assets as a class and in the sectors it targets for investment, but that the pandemic is expected to continue impacting liquidity for at least 18 months.
The suspensions have been lifted on three of its funds, but Barak reportedly said that as a result of those forecasts, it “has decided to wind down the remaining three funds in a controlled way to balance those investors requiring redemption with the need to maximise value for all investors.”
International media reports also indicate that some investors are pushing for the reopening of investigations into allegations raised by the whistle-blowers.
Asked what the position of BPOPF is regarding this, Malindah said: “Our investigation revealed more of operational challenges than what the whistle blowing report was driving at. We also identified areas of weaknesses that the manager had to fix. So, investors were pushing more on fixing existing gaps and ensuring that their investments are secure and that the manager can deliver on their mandate.”
Reports also suggest that the whistle-blower allegations were reviewed by the fund’s compliance officer, and not by the auditors, ending in a favourable outcome for the firm and that a second review by an external audit firm seems to have quietly fizzled out.
PricewaterhouseCoopers also resigned as auditor of Barak’s trade finance fund last year, before completing its 2019 audit, Bloomberg reported.
Some reports also reveal that Barak is currently pushing investors to continue investing in the fund and approve restructuring and modernization strategy.
Regarding this, Malindah said: “We believe the push is more from investors that committed to stay. Barak is responding to the needs of the investors and this is to be expected. Whenever there are issues facing a company, investors are going to drive some reforms to ensure better corporate governance, better risk governance frameworks and avoid or mitigate risks. It would be a big problem if such an event occurred and investors are not actively involved or the manager is not making any changes.”
