ING closes more funds

Fairfax Media

FROZEN: ING New Zealand today announced it was closing two more of its funds - one of which had been styled "low-to-medium risk" - citing the ongoing global credit crisis.

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ING New Zealand today announced it was closing two more of its funds - one of which had been styled "low-to-medium risk" - citing the ongoing global credit crisis.

And ING also announced today that the company's shareholders had approved a $100 million loan to two ING funds that froze $521 million of investors' money in March. The loan would "provide investors with cash immediately" ING said. The two affected funds are the ING Diversified Yield Fund (DYF) and the ING Regular Income Fund (RIF).

These two funds plus the two that were earlier frozen were all invested in loan assets, including the so-called collateralised debt obligations (CDOs) that were the original cause of the global credit crisis

The $100 million loan to the DYF and RIF funds would be made available as a part-payment to the affected investors if they approve a proposal that ING will be putting to them to wind the funds up "over an extended period of time".

The non-recourse $100 million loan would be made available to the funds at "favourable commercial terms", and would have to be paid back before investors started receiving any more cash from assets sold during the wind-up, ING said.

"Given the funds have been suspended for 10 months and these assets we believe still have value, we think we should take time - balancing that with how can we assist unitholders in the meantime," ING New Zealand chief executive Helen Troup said

ING is not alone in experiencing problems. A number of other managed funds providers have also frozen funds this year. Between frozen funds and finance company failures, something in the region of about $6 billion of investors' money is estimated to be tied up.

The new funds being closed by ING today are the $27 million Enhanced Yield Fund (which was billed as having a low-to-medium risk profile) and the $8 million Credit Opportunities Fund (medium to high risk). The two retail products were marketed together as the 90 Day Plus Range.

These two funds will be wound up.

"In the new year, unitholders in the two funds will be asked whether they wish for the funds to be wound up as soon as possible given current market constraints, or over time on a managed basis with greater flexibility over when the assets are sold," ING said.

Regarding the two funds frozen since March, the DYF and RIF, Troup said she could not give a timeframe for return of money.

"It would be pretty safe to say more than two years and we would hope that the markets would return in the range of four, five, six years."

A unitholder meeting will be held before 31 March 2009 where unitholders will be asked to approve changes to the Funds’ trust deeds to allow this managed wind up to occur.

"The cash option that ING will be proposing is aimed at helping investors as we sell assets over an extended timeframe. It does not reflect the level of any final returns to investors," Troup said.

Asked whether ING believed DYF and RIF investors could get all their money back, Troup said it was a difficult question to answer given the timeframe that might be involved. To a BusinessDay suggestion that perhaps all the original investment would not be returned, she said: "I think that is the risk. These are market risk assets and we can't predict where the future's going to be at this point."

Assuming the Trustee accepts the recommendation, all the details about the proposed wind up options including the relevant terms and conditions would be provided as part of an information pack and sent to investors over the coming months. The information would include a third party report to help investors make an informed choice.

Investors and advisers would be sent communications next week advising them of the current status of both the DYF and RIF funds and the process expected to be followed from here.

Asked about whether there might be problems with any other ING funds, Troup said: "What I can say is that none of our other funds are under review at this point. We are not in discussion with any other trustee on suspending any fund at this point."

"...We will act in the best interests of each fund given the individual circumstances. In today's market all funds managers are watching every fund closely. This is not the time to be making guaranteed statements," she said.

"With the uncertainty and the bank guarantee and these changes, we do the best that we can at the time - again keeping in mind these funds are not a reflection of ING the company. They are a reflection that the world has changed and it has affected any assets with an underlying investment in loans.

"...And the credit market is currently under strain."

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