Statutory manager freezes another Hubbard investment vehicle

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The government-appointed statutory manager over Timaru millionaire Allan Hubbard and part of his empire has frozen the assets of another investment vehicle, saying it has “added another complexity” to the investigation.

Tuesday, July 13th 2010, 6:26PM 3 Comments

Three weeks after their appointment, Richard Simpson and Trevor Thornton of Grant Thornton have frozen Hubbard Management Funds, another Hubbard-controlled investment vehicle, which shares some investors with Aorangi Securities, according to the first statutory managers' report.  

Investments in Hubbard Management are estimated to be worth about $70 million, though the report said the nature of the firm's accounting system meant that is was impossible to accurately calculate the value. Simpson and Thornton said investors in the vehicle could expect that the portfolio's value has fallen since March 31.

"Until we have a clear understanding of the status of Aorangi and Hubbard Management Funds, their assets and investments have been frozen in the interim and could remain so for some months," Simpson and Thornton said in their first report. "Becoming aware of Hubbard Management Funds (an investment management business controlled by Mr Hubbard), of which we were not aware at the time of our appointment, has added another complexity to our role." 

Last month, the government appointed statutory managers over some of Hubbard's interests on the advice of the Securities Commission after a complaint was made by an investor in Aorangi who claimed not to have been given a prospectus. Since then, the decision has polarised the investing community, with South Islanders rallying around the man who has propped up much of the region's economy, while others have bayed for blood in the wake of the finance sector's collapse several years ago.

Simpson and Thornton condemned Hubbard's paperwork, saying the lack was impeding their progress.

"The standard of the paper work for the entities is not what we would have expected to have found for business entities of this size and complexity," the report said.

The report also flagged the inconsistent management fee charged by Hubbard Management, with no formal disclosure document provided to investors before the investment.

In regard to Aorangi, the report said the level of investment and loans to related parties without registered security was concerning. The records showed Aorangi had total assets of $132 million, with some $96 million worth of investments from investors other than the Hubbards, and the managers said the company appeared to operate in a similar manner as a finance company.

"Investors should not expect any return of capital or interest in the short term," the report said. "We know this will be distressing for the people who have received regular payments from Aorangi. However, we need to fully understand Aorangi's financial position."

The next update is expected in the middle of August.

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