LM investors' fears for payout

Investors fear the first payout from the LM First Income Mortgage Fund could be in jeopardy after LM Investment Management called in administrators last night.

Wednesday, March 20th 2013, 4:05PM

by Susan Edmunds

The fund has been frozen since 2009 with $100 million of 2750 New Zealanders’ money inside it but the first payout to investors was expected this month.

Last night LM Investment Management issued a statement saying it was voluntarily going into administration, blaming an ongoing feud with rival fund manager Trilogy.

John Park and Ginette Muller of FTI Consulting's Gold Coast office have been appointed as administrators.

Founder Peter Drake said fund manager Trilogy had waged a 10-month campaign against LM. Trilogy took over one of the feeder funds for the frozen fund but not the main fund itself.

David Jansen, a New Zealand-based financial consultant for Trilogy said the move had come as a surprise.

He said part of the problem could be the complexity of LM’s assets.

While most fund managers do not have assets beyond cash in the bank and some office furniture, LM had built up economic interests in a wide range of assets, some related to the funds themselves and some not.

“The administrator has to pick through what this all means.”

LM claims to manage A$3 billion of “realisable” assets but Trilogy has raised the issue of LM having been relying on director valuations for some time.

Jansen said it was possible the move into administration had come about because of some uncertainty around those valuations.

Both the chief financial officer and a portfolio manager are believed to have left over recent months.

Mike Shaw, an adviser who has been representing investors in the frozen fund, said it was hard to know what administration would mean for investors. “I’m wondering if it’s a prelude to receivership. Boards don’t make decisions like these unless they smell a problem.”

He said investors were wondering what would happen to the planned distributions. “I’m just waiting to hear from the administrators.”

The board of LM Investment Management said it was acting in the best interest of investors in LM Funds. It was not liquidation or receivership and neither LMIM nor any of its funds was in liquidation or receivership.

Since the fund’s 2009 closure, LM’s prime focus has balanced selling fund assets, whilst maintaining, enhancing and positioning the assets it controls, ready for sale.

Drake said the administrators would be working with senior LM investment personnel to optimise investor outcomes and funds would continue to be run as normal.

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