Absa shuts down massive unit trust. Many investors have the wrong idea about the fund, it says
- Absa is closing its popular money market unit trust.
- It says many investors are under the mistaken impression that it guarantees the unit trust, and its returns.
- The Absa money market fund's effective yield dropped from 6.74% a year ago to 3.85% by February.
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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 money market is where banks and other institutions lend and borrow money for short periods of time — anywhere from one night to a couple of months. Money market funds invest in these short-term credit assets. These unit trusts seek to give a better return than a one- to three-year fixed deposit bank accounts, and are seen to be among the most conservative investments.
“However, the [money market unit trust] is not a bank account - it is a collective investment schemes product (also known as a “unit trust”) and therefore capital and returns are not guaranteed. We have therefore decided to close the [fund] as of 6 July 2021 (the closure date), in the best interest of our clients, and given our findings that the majority of retail clients believe that their capital and returns are guaranteed.”
Investors in the fund will receive their investment back, or they can switch to another fund before 1 July.
The bank says investors can be transferred to an Absa investment bank account, which is guaranteed by the bank and currently offers 4.5% a year “which is equivalent or better than what you are currently receiving from your (money market fund) investment”.
The Absa money market fund's effective yield dropped from 6.74% a year ago to 3.85% by February.
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