Lawyer: Plan detrimental to some Hubbard investors

The lawyers for the estate of the late Allan Hubbard has argued in the High Court in Christchurch that the statutory managers' approach to distributing funds to investors in Hubbard Management Fund would benefit some investors to the detriment of others.

Grant Thornton, the statutory managers appointed in June 2010 to run the financial affairs of the Hubbards, several charitable trusts and Hubbard Management Fund (HMF) and Aorangi Securities, is seeking the direction of the court on how to distribute the proceeds of HMF.

Andrew Butler for the estate of Hubbard said Hubbard had built a fund currently worth about $45 million while current investors had put in a net $13.5m into it. The fund invested in shares.

The $13.5m was the amount of capital put in by all 300 investors less their withdrawals over the fund's life, Butler said.

''We have here a fund that is not a ponzi scheme.''

The fund held real assets and created real investment earnings, he said.

''It is not a failed investment fund. How can it be when they have $45m to be distributed to people.''

Most investors had paid more capital into the fund than they have taken out, said Butler, though more than 180 investors had withdrawn from the fund ''significant returns''.

About 80 had taken out more cash in the fund than they had invested.

Butler is proposing that each investor is paid their net cash. The significant amount of money left would be enough to pay each investor 10 per cent compounded return on their capital over the time they were in the fund.

Butler said Hubbard would have wanted investors to get out at least what they put in and the statutory managers' approach would be of greater benefit to some investors at the cost of others.

He gave examples of that. If all the shares were sold and the fund cashed up, under the statutory managers' method an investor who had $11,600 net cash would get $153,000, while another investor with net cash of $1m would receive get $671,000.

Statutory managers Grant Thornton are arguing that HMF is essentially a collection of individual share portfolios run by Hubbard. Investors owned whatever shares were on their investment statements and investors who found themselves with shares that did not exist, or smaller holdings, should take the loss.

Peter Whiteside, counsel for a group of about 75 investors is arguing that the fund is a ''global'' one which pooled investors' contributions and the proceeds should be returned on that basis.

The hearing was to finish yesterday.

The Timaru Herald