Manager of funds removed
ABOUT 600 investors’ funds — worth more than $13 million — are under new control after a Dunedin fund manager overseeing three investment funds was removed.
Accounting firm KPMG has been appointed as the temporary manager of the funds by the Financial Markets Authority.
It is the first time the authority has executed this power.
Fund Managers Otago (FMO) was removed from its role as manager of the three mortgage trusts — two of which were already being wound up — because it failed to improve its performance to a level that satisfied its licensed supervisor, Trustees Executors Ltd.
It is also the first time Trustees Executors has removed a fund manager.
The failures were in relation to governance, compliance, solvency and regulatory breaches.
There is no suggestion of any kind of criminal activity but the authority said it would consider if any further action was needed against FMO ‘‘in due course’’.
‘‘At this time, our focus is prioritising investor interests and ensuring the transition to the temporary manager proceeds as intended,’’ a spokesman said.
The NZ Mortgage Income Trust (No 2) fund, with its 600 investors, began to be wound up yesterday and no investors are now able to withdraw their money.
The Otago Daily Times understands a large proportion of those 600 investors are in the South.
As at March 31 this year, that fund held $13.4 million worth of assets.
Of the other two funds being wound up, the NZ Mortgage Income Trust fund had 1553 investors with assets worth $5.7 million, while the Capital Mortgage Income Trust fund had 97 investors with investments of $1 million.
KPMG will also take on the role of winding up those funds.
FMO chairman John Gallaher said he was not able to comment and directed inquiries to Trustees Executors.
Trustees Executors general manager of corporate trustee services Matthew Band said the appointment of KPMG ensured all investors would be treated ‘‘fairly and equally’’.
‘‘KPMG Restructuring Services will be contacting investors to communicate its process for the winding up of this fund.’’
Funds will be paid back to investors during the windup based on the amount of funds held, expected future cashflows and the timeframe from the last distribution.
A final distribution will be paid to investors once KPMG has been able to realise the assets of the three funds.
The timeframe for doing so will depend on how long it takes for KPMG to sell the assets — believed to largely be in property.
Trustees Executors had worked closely with FMO for an extended period of time to try to fix its failures.
‘‘FMO has been unable to improve its performance to the standard that we expect from a licensed manager, and that which is required under the FMCA [Financial Markets Conduct Act],’’ Mr Band said.
He said his organisation was obliged to monitor the funds in the best interests of all investors.
Authority supervision director James Greig said the decision to remove FMO showed safeguards were there to be used if investors’ interests were not being served.