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A group of financial advisers is calling on ING New Zealand to "stand behind" two funds it wants to wind up.
In March, ING announced it was suspending withdrawals from its ING Diversified Yield Fund and the ING Regular Income Fund, which then together had $521 million under management. As at November 30 that figure had fallen to $273.5m.
Last week ING NZ said it wanted to wind down both funds, subject to approval by the funds' trustees and unit-holders. It envisages a managed process under which assets are sold over a period, which could be as long as four to six years.
A member of the group of advisers calling on ING to stand behind the funds, Paul Markham, today said investors risked getting back only 15c in the dollar.
When ING sold those products to advisers, it described them as low to moderate risk, Markham told Radio NZ.
"These so-called low to moderate risk investments have now fallen in value by 60-70 per cent, and falling further."
ING is proposing to lend the funds $100 million so they can give affected investors some cash upfront.
"They charge interest on that, and that will give investors back about 15c out of every dollar they originally invested," Markham said.
"It will then take about five years for ING to gradually sell off toxic investments. The first thing they'll do then is to grab their hundred million dollars back and all the accrued interest, and then if there's anything left over the residual will then go to investors," he said.
"So it's possible that investors may only get back 15c in the dollar."
Mr Markham said the number of advisors involved in the group was growing rapidly after it was publicised.
On Friday members of the group met ING chief executive Helen Troup, the trustee of the funds, and ING NZ chairman Mike Smith.
"Our argument to ING is, `look, you sold it as a low to moderate risk investment. You must stand behind your product'," said Markham.
"We're calling out to them to `please, stand behind your product, restore confidence and trust, and your tarnished brand'."
Another adviser involved in the group, Malcolm Eves, told The Dominion Post the group believed investors should reject ING's proposal for the two funds.
ING should stump up and repay the amount investors had put into the funds, which the group estimated would be about $700m, he said.
The funds invested in senior secured loans, bonds, and so-called subprime loans.
ING previously said that less than 10 per cent of the assets of each fund was in the subprime sector, often referred to by the financial press as toxic debt.
ING said it was still finalising details of its proposal for the two funds and getting feedback, and would not discuss details of private conversations and meetings with advisers.
More information would be available in the New Year.
- NZPA
