Investors lose 13 per cent in closed ASB trusts

Mark Rowley. Photo / Richard Robinson

An Auckland couple whose investment with the ASB has shrunk by 13 per cent say they are angry the bank is closing down 10 trusts without giving them a chance to recoup their loses.

But the ASB says it will offer investors the ability to transfer their money to other investment funds at no extra cost where they can make future gains at a more competitive tax rate.

Mark and Paulette Rowley invested a lump sum with the ASB in October 2007.

"They showed me these trusts and showed me graphs about how well they had done in previous years. They had done 8 or 9 per cent. We went for a fairly conservative mix," Mark Rowley said.

But just one month after investing the value of the Rowley's investment began to drop after the trusts were hit by the global financial crisis.

"Since that time it has gone up and down like a yo-yo."

The most recent statement shows the initial investment has fallen by 13 per cent in the nearly three years the Rowleys have been invested in the trusts.

"I'm 55 - I don't need the money right now - so I thought - it will eventually come back up.

"Then the next thing I know I get a letter saying they are going to shut it down."

The Rowleys were just one of a number of investors who received letters last month telling them about the closure of 10 ASB investment trusts.

In its letter the ASB said it had assessed its investment product range and decided some were no longer "delivering to best meet our customers' needs and investment goals".

Rowley said when he invested in the trusts he believed he was putting his money into a medium to long-term investment.

"It certainly wasn't for three years. I just think it is really rough."

Another investor said the fund he had put money in - the Emerging Market Shares Trust - had an investment timeframe of 12 years or more.

"Closing the fund, with three months' notice and in the midst of an epic slump in world markets, does not really meet my needs and goals," he said.

But ASB chief executive for relationship banking Stewart McRobie said by closing down the trusts the bank was acting in the best interests of investors because they were not portfolio investment entities (PIEs).

"We are closing legacy products that haven't been sold since 2007.

"New funds introduced under the PIE regime do not charge a capital gains tax."

Investment returns on the older trusts were being taxed at 33 per cent but new PIE funds were taxed at individual's PIE rates.

"We are giving investors options."

McRobie said it was difficult to talk about investors in general because each individual's situation was different.

Some had invested in cash type funds which were very similar to bank deposits.

"No one would have lost money in those."

Those who invested in share funds would be offered the option to reinvest their money in a similar investment without being charged an entry fee.

The entry price would be the same as the exit price of the old fund.

The trusts are to be closed by the end of September.