KEY POINTS:
Investors have been pulling their money out of mortgage trusts and property funds in droves over the past three months so perhaps it's not surprising that four funds have been forced to put a stop on withdrawals.
AXA's Mortgage Backed Bonds is the latest to pull redemptions - in this case just for institutional investors.
On Friday AMP Capital Investors pulled redemptions for its $420 million New Zealand Property Fund.
It follows that of Guardian Mortgage Trust, which has $249 million, the $60 million Totara First Mortgage fund and the $250 million Canterbury Mortgage Trust. Fund monitoring and research firm FundSource says close to $300 million has been pulled out of mortgage trusts and property funds in the past three months alone.
Investor sentiment is driving the rush to pull money out and mortgage trusts just aren't designed to stand up to high levels of redemptions.
They only carry a certain level of cash and once that is used up have to start selling off loans or asking borrowers to pay the money back in order to pay out their investors.
In the current property market the trusts aren't likely to get a good price for their loans or find many borrowers able to refinance elsewhere and repay them.
While it won't make investors happy it makes sense to stop withdrawals for now. But it's anyone's call as to when they will be able to open them up.
Many are asking what it will take to return confidence to investors. Some say the election. But others suggest it could just be time.
IRONING OUT WRINKLES
Those hoping to take advantage of the ability to divert some of their KiwiSaver contribution towards the mortgage may be waiting for some time yet before the issues surrounding it are worked through.
The mortgage diversion function was supposed to kick in by July 1 - KiwiSaver's first anniversary - but complications around an unwieldy clause in the scheme's regulations has seen banks put off accepting mortgage diversion applications.
The New Zealand Bankers Association were hoping to have it resolved by the start of August but talks are still continuing between it and the Inland Revenue over a rejig of the regulations.
The problems relate to a clause which specifies that mortgage diversion is not available for mortgages that secure obligations under a revolving credit contract.
This was designed to stop people from diverting funds to their mortgage and then being able to redraw on them.
But because secure obligations also include those with credit cards and overdrafts it excludes the majority of those with a mortgage.
Bankers Association spokesman John Bishop says it met the IRD last week and is in the process of working through the details.
"We are optimistic it will be sorted soon but the exact timing is not in our hands."
The drafting of the regulations is up to the IRD. Once finalised they will go back to the ministers - Michael Cullen and Peter Dunn - to approve before going to Cabinet and receiving the seal of approval from the Governor-General.
Luckily the changes won't have to go back to Parliament which will limit further holdups.
PLAYING IT STRAIGHT
With the number of finance companies which are now in trouble over related-party deals one would have thought any businesses left in the investment industry would be going out of their way to be upfront about relationships at the moment.
So it came as a surprise to see the way Mike Pero Mortgages announced its move into KiwiSaver. In a company statement last week chief executive Sandra Pigram said it was moving into KiwiSaver to increase the range of services it offers and because "choosing the right KiwiSaver scheme can be daunting, difficult and time-consuming" it had "searched the market for an easy to understand product with numerous benefits".
But one wonders how far Mike Pero had to "search" when it ended up selecting a company which is owned by a certain person who also happens to be a director and shareholder of its parent company.
According to Pigram it only chose Huljich Wealth Management's KiwiSaver scheme because it was easy to use and had the backing of Don Brash and John Banks.
No mention was made of Peter Huljich's connections to Mike Pero.
It makes good sense for Mike Pero to act as the distribution arm for the Huljich funds - that's one reason why providers ING and BT Fund Management have such high numbers - they have links to the high street banks which most New Zealanders are familiar with. But why not just play it straight?
Or maybe it is as Pigram says and its decision to select the Huljich funds was not related to ownership - after all it did not spell Huljich correctly in its release.
OZ RETIREES UNHAPPY
Australians close to retirement are not feeling so lucky after finding the value of their superannuation funds have taken a major tumble after super funds had their worst year since compulsory savings were introduced in 1992.
The Australian newspaper reported that thousands of could be forced to postpone their retirements to make up for the money lost over the last year.
Figures from industry analyst SuperRatings reveal the median balanced fund, which is the most commonly used, lost 6.39 per cent for the year to June.
The best performing of any balanced fund was a 1.7 per cent loss while the worst suffered a 15.9 per cent loss.
It is a stark contrast to last year when the super industry reported median growth of 15.7 per cent.
While KiwiSaver funds have also taken a battering over the last year at least we have the cold comfort that our super funds remain small and much of the money invested in them has come from the Government's coffers rather than our own. Annual reports due to be sent out to all KiwiSaver investors by the end of August at the latest should reveal the exact figures.
