KEY POINTS:
Investors in troubled NZX-listed investment product PINs are questioning why it is still being managed by the same people who were in charge when it got into difficulty.
Australian fund manager Absolute Capital Group, a firm jointly owned by the Australian arm of Dutch bank ABN Amro and the staff of Absolute Capital launched the Packaged Income Note in New Zealand in 2005 and another in 2006.
The products were designed to give income on a regular basis through investing in a range of assets such as loans, bonds, asset-backed securities and collaterised debt obligations and returning the original capital investment at the end of a seven-year period.
Both products also featured a capital guarantee - the first by ABN Amro itself and the second by Barclays.
But last year they were hit by the credit crunch and in November Absolute Capital went into voluntary administration and administrator McGrath Nicol was appointed to sort out the mess.
It tendered out the management of the products and awarded it to ABN Amro, which has since re-hired the fund managers and employees who worked for Absolute Capital to continue running the products.
An Auckland investor, who did not wish to be named, said he was angry and frustrated that the management of the investment had been given back to the people who had failed to make the right investment decisions in the first place and that ABN Amro continued to be paid to manage the product. He has $50,000 invested in the 2006 series.
Earlier this month the 2005 series went into liquidation after six of the funds it invests in froze redemptions, including another of Absolute Capital's investment products - the Absolute Capital Yield Strategies fund.
And 2006 investors have been told their product may face the same fate. In a letter to investors the trustee for the PINS notes series 2006-1 New Zealand Permanent Trustees said as a result of the continued deterioration in the general markets the investments in the portfolio were likely to be sold. But any sell off would not affect the obligation by Barclays Bank to pay 100 per cent of the initial investment back at maturity in 2014.
The investor said the situation left him in a difficult place as the value of the money would be eaten away over the years while any potential interest could be gobbled up by management charges. The investment had been expected to pay 9.25 per cent interest per annum.
A spokesman for administrators McGrath Nicol said the administrator had sought expressions of interest for managing the products but only ABN Amro came forward.
The company fee was 0.8 per cent of the funds under management, the same as received by Absolute Capital, and would continue unless there was a sell off, he said.
A spokeswoman for ABN Amro confirmed the former fund management team and administrators had been hired by ABN Amro but said it was not its place to comment on the product as it was not the issuer.
The liquidation of the underlying assets does not affect the ability to trade the notes on the NZX debt market. But investors face a big loss if they sell. The 2005 series is trading at $64 per note and the 2006 series at $60 per note, both down from the original value of $100 per note.
