Hubbard fund investors face 'considerable loss'

Allan Hubbard File photo

Investors in Hubbard Management Funds, one of Timaru business Allan Hubbard's firms under government-mandated management, face a "considerable loss" and won't receive any payout until next year at the earlier.

The fund lost $7.2 million to be valued at $48.8 million in the four months ended January 31, according to statutory managers Richard Simpson, Trevor Thornton and Graeme McGlinn of Grant Thornton.

That leaves investors facing a shortfall of some $31 million.

Since the last report in November, the managers obtained a High Court order letting them actively manage the fund, and they are working towards securing a second order that will let them determine how to distribute the assets among investors.

"The court hearing and submission processes could take several months after this, and as a result the earliest any form of distribution will be in 2012," they said in a statement.

"In our opinion, investors will suffer a considerable loss compared with what was shown on their statements as at 31 March 2010, and because there are not enough shares to give investors the investments that were on their statements, we need assistance from the courts to determine the entitlement of investors to the assets of HMF."

The portfolio only became known when Hubbard's Aorangi Securities was frozen by Commerce Minister Simon Power last June after an anonymous complaint that an investor invested money with a Hubbard vehicle without being shown a prospectus.

The HMF portfolio lost $2.9 million on the collapse in value of Pike River Coal Ltd. and New Zealand Oil & Gas Ltd. after the December explosions closed the mine, and a further $3.5 million on the restructuring of Mercer Group. It also lost $2 million share price volatility of Canadian-listed Olympus Pacific Minerals.

Since the report, the fund pumped in a further $1 million into Mercer to shore up its investment in the company.

The managers are closely watching the performance of long-term investments in private equity and venture capital funds, which appear likely to deliver returns that are "well above average."

A separate report on Aorangi Securities will be released later this week.