KEY POINTS:
ANZ bank has paid out more than $200,000 to an elderly woman whose life savings are tied up in a credit crunch-affected ING fund.
The 87-year-old, who is in poor health and whose only other income is her pension, put the money into the ING Diversified Yield Fund
on the advice of her ANZ financial planner.
The fund, and its companion Regular Income Fund, had exposure to the US sub-prime mortgage market and were indefinitely frozen in March because of the effects of the global credit crisis.
The deal is one of a number of settlements the Herald is aware the bank has reached with people who invested through their ANZ financial advisers. ANZ owns 49 per cent of ING New Zealand. In another case, a family has been paid out a substantial portion of the $90,000 investment their late father made in the Diversified Yield Fund.
With the funds frozen, the family had been unable to settle their father's estate.
Both deals came after the involvement of the Banking Ombudsman.
The deceased man's son-in-law believes without his help the settlement with the bank would not have occurred.
The ombudsman's office says complaints about the ING funds currently make up more than half of its caseload. ANZ was a heavy seller of the investments, and other banks also sold them.
The ombudsman has identified bank customers suffering financial hardship as a result of the freeze on their funds, and helped arrange some relief on a goodwill basis.
In some cases this has come in the form of interest-free loans from the banks in question.
Numerous cases are yet to be settled. Auckland man Murray McNabb and his partner have $80,000 tied up in the Regular Income Fund, and are waiting to hear back from the ombudsman. "We wanted this money to pay off a mortgage. Now we're going to have to refinance the mortgage at 2 per cent higher than what it was."
In its assessment of her investment needs, ANZ characterised the 87-year-old as a "defensive" or conservative investor. In May Steven Giannoulis, general manager of marketing at ING, told the Herald the two funds were at the higher-risk, higher-return end of the ING range of investments.
Financial planner Jeff Matthews, of Spicers Wealth Management, said the advice ANZ gave was poor. "They weren't trying to solve someone's [investment] problem, they were just pushing product."
The ING funds invested in CDOs and CLOs, now notorious financial products which bundle various types of debt into a tradeable security.
With the credit crunch the market for these products all but disappeared and ING was forced to suspend redemptions from its two funds, leaving 8000 investors unable to access a collective $521 million.
When ING announced the freeze in March the unit price for the DYF was 81.05c and the RIF was at 70.5c, down from their $1 issue price.
Last week the unit prices were down to 62.35c and 55.45c respectively - almost half the original price.