Guardian Trust freezes $249m

Guardian Trust has frozen $249 million of investors' funds, involving about 3700 investors, in a bid to ride out the global financial crisis.

A total of 16,700 investors in three big mortgage fund managers have had more than $1 billion in money frozen.

Guardian Trust managing director Sean Carroll said new investments and withdrawals from the mortgage fund had been suspended "to protect investors".

It was expected that distributions would continue to be paid, but there was no word on when investors would be able to get access to their capital.

"We are taking a cautious and prudent approach. We will review the situation regularly, and will update investors and the market appropriately."

The fund was suspended to ensure fairness among all unit holders after the amount of cash available to meet withdrawals had fallen to below 5 per cent of the fund's value, Mr Carroll said.

"Poor liquidity is a feature of today's markets. We need to manage liquidity requirements very closely in funds such as these, where the assets, primarily mortgages, cannot be converted to cash quickly."

The fund, one of eight offered by Guardian, was established in May 1986 and invested in first mortgages on commercial, retail, industrial, farming and residential property.

The maximum amount lent was 60 per cent of property valuations.

In March ING New Zealand suspended withdrawals indefinitely from two of its funds worth a collective $521 million.

The value of those funds had fallen to an estimated $455 million by June.

Insurance and investment firm Tower followed in April by closing its $242 million first mortgage fund, Tower Mortgage Plus, affecting about 5000 investors, because property loans were falling into arrears.

The money at risk in the funds is in addition to the $3 billion of investor money tied up in 26 finance companies that have failed or struck trouble in the past two years.

Meanwhile, South Canterbury Finance has tried to reassure a market spooked by continuing failures in the finance company sector.

Yesterday it issued a statement on its trading outlook, saying trading was strong, with good business flows supported by sound liquidity.

The Timaru finance company said it had $334 million of cash on hand at June 30, 2008, plus $150 million of undrawn bank facilities. In terms of reinvestment by existing investors it had had a 63.7 per cent retention rate in the year to June 30.

In the wider finance sector, companies including Hanover Finance have frozen investors' funds in recent weeks and are seeking moratoriums on repayments.

Other finance companies seeking moratoriums are Dorchester Finance, Dominion Finance Holdings and St Laurence.