Guardian Trust latest mortgage fund to strike trouble

New Zealand Guardian Trust has suspended new investments and withdrawals in one its funds, the Guardian Mortgage Fund.

Guardian Trust said it was moving to protect investors and expected that income distributions from the fund would continue.

Due to current liquidity difficulties in the market, the fund was currently operating below its target liquidity rate of 5 per cent.

"In such conditions this is not considered appropriate by the directors. In the interest of fairness among unit holders, the directors feel a cautious approach is necessary," the company said in a statement.

"Poor liquidity is a feature of today's markets," said trust managing director Sean Carroll.

"We need to manage liquidity requirements very closely in funds such as these, where the assets (primarily mortgages) cannot be converted to cash quickly.

"As is usual for Guardian Trust, we are taking a cautious and prudent approach. We will review the situation regularly and will update investors and the market as appropriate."

The Guardian Mortgage Fund was established in May 1986 and currently holds $249 million among 3700 investors.

The fund invests only in first mortgages, where advances are restricted to a maximum of 60 per cent of valuations across the commercial, retail, industrial, farming and residential sectors.


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