Staff jump ship from troubled fund

RICHARD MEADOWS
Last updated 09:58 21/03/2013

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Senior staff are jumping ship from an Australian fund manager which has trapped some $175 million of New Zealand investors' cash, after directors placed it in voluntary administration this week.

Gold Coast-based LM Investment Management operates a number of mortgage funds which were frozen after the global financial crisis, as loans slid into default and arrears.

LM directors have appointed John Park and Ginette Muller of FTI Consulting as voluntary administrators, blaming the move on liquidity problems caused by a smear campaign.

The company's CFO and portfolio manager are rumoured to have jumped ship, and an LM spokeswoman confirmed that some senior staff had left the company.

"As is to be expected, some personnel have made a decision to move on to other opportunities," the spokeswoman said.

LM's list of problems includes an investigation by the Australian Securities and Investments Commission over potential breaches of corporations law.

Meanwhile, celebrity landscape gardener Jamie Durie, whose involvement with one of the company's key developments was trumpeted last year, is now "in discussions" with LM.

"LM is dealing with all stakeholders, including Jamie Durie," the spokeswoman said.

The fund manager also faces the displeasure of investors trapped in the frozen funds, and what it says was constant sniping from rival fund manager Trilogy, which earlier made a failed attempt to take over the funds.

The company has blamed Trilogy, earlier branded "pirates" by LM boss and Kiwi expatriate Peter Drake, for some of LM's problems.

"It was due to Trilogy's relentless 10-month campaign of alarming and misleading statements to our global markets, which has impacted the liquidity of our funds, and therefore investors' interests," the spokeswoman said.

Yesterday Trilogy's managing director Philip Ryan denied any fault.

"The fact that LM can't pay its debts has nothing to do with us, and Peter Drake's statement says that it is related to margin calls on currency hedging," he said.

Ryan said it was worrying to see that LM had come to depend on inflows from new investors to remain solvent, and questioned its fitness to remain in charge of the funds.

LM moved to reassure investors about the impact of being placed in administration, saying it was the best possible avenue to keep the business intact.

Last night a spokeswoman said the first capital redistributions had come out of the frozen First Mortgage Income Fund this month as scheduled.

"Under the control of the voluntary administrator, future capital distributions are planned to proceed," she said.

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The company said the sales process to cash-up the remaining assets in the fund would proceed as normal.

It also said the unit price of the fund - which has slipped from A$1 to A59c since it was frozen - was not expected to be impacted.

However, the concern for investors now is that if receivers or liquidators end up being appointed, a fire sale of the assets, some of which are still in development, would likely not realise their full value.

The sell-down had previously been due to take place over the next two years, allowing time for finishing properties and a possible upturn in the property market.

- BusinessDay.co.nz

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