CDOs by the sea

I bypassed the sandwiches, cakes and scones with cream and jam assembled on a table in the foyer and, after a brief word with ING's marketing manager, took my seat at the end of row two. The view outside set the mood perfectly.

The murky waves looked as though they were about to crash through the huge glass bay windows of the Napier War Memorial conference centre, which sits right on the edge of the stony Marine Parade beach. There was nothing but grey skies over Hawke's Bay on this miserable winter afternoon.

But the real misery was on display inside the room where about 200 investors in the so-called ING 'frozen funds' sat to hear the sad story of how their money had evaporated and also to vent their fury at the highly-paid executives who they blamed for its disappearance.

The 20-minute primer on how collateralised debt obligation (CDO) funds work, presented by David Jansen, the portfolio manager who made the day-to-day decisions on what to with the ING investors' money, was only interrupted a few times ("how much of your money was in it?").

"The market has assumed default rates over the next three to four years at Depression-era levels," Jansen told a stunned and quite possibly uncomprehending audience, adding that he thought it wouldn't be that bad, maybe just a long recession.

It probably isn't much comfort to those who have lost a fair chunk of their life savings that they're merely shouldering a small part of the estimated US$15 trillion decline in global asset values over the last 18 months, no matter how true.

I found Jansen's educational talk technically of interest but the investors were clearly here for the bloodletting.

Helen Troup, ING NZ chief, did her best to empathise but no talk of "sharing your pain" was going to keep things calm. What followed was over an hour of outrage, ignorance, pathos, bemusement, yelling, grandstanding, pointed questions, erratic microphones and some top-rate emceeing from Brian Edwards.

At the end of it investors were still left with some tough decisions to make: accept the not-too-bad ING offer and waive all rights to sue ING, ANZ, any of their associated corporate entities and financial advisers, or; hang on to the investments and chase whoever they can expensively through the courts.

About half of those present appeared willing to accept the ING proposal. Those considering the lawyer route were given no encouragement by the Securities Commission, which issued a release  saying there was nothing untoward about the ING offer.

"Investors should seek independent legal and/or financial advice if they do not understand the proposal or are unsure which option to take," the Commission statement says - which many of them could argue is what got them into trouble in the first place.

However, just to clarify any confusion about what constitutes 'independent' advice the release says: "In this case 'independent' means an adviser who does not stand to benefit from the release from legal claims."

Most of those investors shuffling out into the bitter southerly looked as though they were finished with advice.

 

David Chaplin

 

Pictured: ING investment manager David Jansen at one of this week's investor meetings. Photo/ Alan Gibson.