KEY POINTS:
Another mortgage fund has been forced to suspend payouts to its 2400 investors.
The Totara First Mortgage fund, which has $60 million invested, yesterday announced it would freeze redemptions while it decided what to do with the fund.
The suspension is the second this week and follows the decision by the Canterbury Mortgage Trust, New Zealand's second-largest mortgage trust, to freeze 5000 investors' funds worth $250 million.
Totara chairman Mark Hopkinson said the decision was made due to concerns about the recent substantial increase in redemption requests.
"If redemptions were allowed to continue at their current rate, the resulting cash depletion would be likely to disadvantage remaining investors, particularly if the fund's assets were to deteriorate because of market conditions."
Hopkinson said the fund would continue to pay quarterly interest payments and a decision would be made in the next month whether to close it or keep it running.
The fund has first mortgages over commercial property in New Zealand and has $20.5 million in cash.
It was only sold through the Money Managers financial advice group and was set up around two years ago.
Money Managers is also in the process of winding up its First Step investment funds which ran into problems in 2006 after large numbers of investors began pulling their money out.
Totara brings the total number of troubled financing companies to 26 in the past two years.
