Barak Fund Management Fraud Investigation Favors Victims
Calls for reopening a probe into Barak Fund Management and its whistle-blower allegations after South African authorities reportedly shut down previous probes are justified. Barak currently pushes investors to continue investing in the fund and approve the restructuring of a $1bn trade finance fund, riding on their claim “the allegations were proven inaccurate and media reports inaccurately position us in a negative light.”
While the company has provided the option for investors to exit the fund or remain invested, both avenues propose a disadvantage. Should investors wish to remain invested, their investments will be transferred into new proposed products under the new restructuring, with those wishing to opt up receiving an initial cash payment – a portion of the underlying liquid assets possessing accurate valuation – to be paid out on an unknown date.
With investor withdrawals barred from the flagship fund since last April, investors are left with the option of hard-to-sell assets or waiting an infinite period of time for their financial investments to be paid out – if ever.
Worse yet, investors and clients of Barak who do opt for liquidation will only receive their cash back when Barak is able to sell the holdings, if Barak’s investors do decide to restructure. Should investors opt to remain invested, they will receive allocations in a relatively liquid part of the fund. According to MoneyMarketing, “They will continue to put money into the private debt market, and a ‘side-pocket’ created to park illiquid holdings.” Whether this renders negative outcomes or not for investors is unsure, however, still creates much concern.
“I don’t want to hear about plans to ‘restructure’ or ‘modernize’. All I am asking for is to keep the probes going. It is the only hope I have of getting at least some of my money back,” as one investor said.
“Barak’s troubles are a reminder of how plowing money into higher-yielding yet hard-to-sell assets can hurt investors when they want their money back quickly, a danger exacerbated by the global Covid-19 pandemic as prices began tumbling across financial markets last year,” financial advisor Aurum Trust said.
Apart from investors, other victims affected include Botswana’s major Labor Union Pension Fund, South African pension funds, and pension funds with Zambia and Tanzania. Botswana Public Officers Pension Fund, the largest pension fund in Botswana, had invested 1.36 billion pula ($123mn) in the firm as of March 31 last year, according to its latest annual report. “The pension fund’s CIO did not respond to a request for comment,” reports Bloomberg.
Adding to the list of victims are those within the coal mining, consumer goods, and fertilizer production sectors, with Barak’s illiquid investments comprising more than half of the fund’s assets within these sectors. As a ripple effect, cash-strapped businesses within relevant countries which have sought alternative sources of capital and cash flow solutions through Barak have been negatively affected as well as the generally poor black majority in relevant African countries.
To assist the victims, it is recommended that investors, whether activists or those accepting to remain invested in the fund, as well as others affected and involved, hear the call to push for further probing into Barak Fund Management.