Repayments will continue : Aussie fund manager

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An Australian fund manager has called in voluntary administrators but says this will not disrupt capital repayments to Kiwis who invested about $119 million in one of its mortgage funds.

Thirteen hundred New Zealand investors had money in the Currency Protected Australian Income Fund run by Queensland-headquartered LM Investment Management.

This fund acted as a feeder into LM First Mortgage Income Fund, which had a number of commercial Australian property investments but was frozen in the wake of the global financial crisis.

Around 500 Kiwis had also invested directly into the First Mortgage Income fund and at the time of the freeze in March 2009 New Zealand investors had about A$95 million ($120 million) in total with LM.

The fund's unit price has fallen from A$1 to A59c since the freeze.

Although LM said yesterday that events over the "past couple of weeks" had meant the fund manager was in "imminent jeopardy of being unable to meet creditor obligations", it claimed the appointment of voluntary administrators yesterday would not change anything for investors.

"This is not liquidation or receivership, and neither [LM Investment Management] nor any of the funds are in liquidation or receivership," LM's statement said.

"Regular periodic capital distributions for investors have commenced and will continue."

A spokesperson from LM yesterday said around A$4.5 million was distributed earlier this month to those in the First Mortgage Income Fund, which has 6000 investors.

While around A$2 million was distributed to the Currency Protected Australian Income Fund this was allocated to margin positions, a spokesperson said.

"The allocation of capital to the margin position is simply a management of cash-flow, which ensures investors' currency position remains unaffected by AUD movements. As currency investments are repaid, all margin requirements will be refunded to the LM Currency Protected Australian Income Fund and investors will in turn receive all capital distributions in full."

According to Australia's ABC News, the Australian Securities and Investments Commission is investigating LM for "potentially false and misleading statements" following an investigation into the fund manager by the network's Four Corners programme.