ING closes another fund and delays CDO fund meeting

ING has delayed a unitholder meeting originally scheduled to be held before March 31 to determine the fate of its two major collateralised debt obligation (CDO) funds.

Tuesday, February 10th 2009, 10:58PM

by David Chaplin

The news comes at the same time as the group has decided to close another fund managed on behalf of a group of advisers – the $6.5 million Private Portfolio Service (PPS) Diversified Trading Fund.

In a letter to unitholders sent this week, Helen Troup, ING NZ chief, said the company had received “valuable feedback” from investors and advisers about its proposals to wind up the Regular Income Fund (RIF) and the Diversified Yield Fund (DYF) and provide an immediate $100 million loan to investors.

“... it is now apparent that meeting that date is not realistic if we are to review, and potentially incorporate, the feedback we have received into the proposal, provide documentation to both you and advisers, and give you enough time to consult with your adviser regarding the details of the proposal,” Troup said in the letter. “We certainly share your disappointment in the performance of these two Funds and the challenges we have encountered in developing a proposal for you. However, please be assured that it is our priority to find a resolution that is in the best interests of all investors, taking into account the current market conditions.”

While no date has been set down for the meeting to decide the future of the RIF and DYF products Troup said investor and advisers would be sent “regular updates and information”.

ING froze the two funds in March 2008 after a rush on redemptions and plummeting unit prices. According to the latest ING figures, the DYF and RIF are valued at 26 cents and 19 cents respectively, compared to their values of about 80 cents and 70 cents when the funds were closed last year.

This week ING also said it would wind down the PPS Diversified Trading Fund (DTF) after a rash of redemption applications. The $6.5 million DTF invested into two underlying hedge fund products – the BT Global Return Fund (which in turn invested into a fund managed by US-based hedge fund giant Grosvenor – no relation to the NZ operation of the same name) and the Winton Evolution Fund, also a US hedge fund manager.

Last December ING closed the DTF product to new investors after BT froze the Global Return Fund. An ING spokesperson said ING would have had to start selling down its holdings in the Winton fund, which made up 60% of the DTF, to meet redemption requests.

“As this is unfair to all investors, DTF will be suspended, the assets sold and investors paid back on a pro rata basis,” ING said in a note to PPS advisers.

ING also said it was on track to wind up two other smaller funds that were exposed to the CDO market, the Credit Opportunities Fund and the Enhanced Yield Fund, which collectively were valued at about $35 million last month.

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