KEY POINTS:
Investors in another troubled ING fund are being told to get their money out now or face the potential of a freeze.
Ratings company Morningstar has downgraded the ING Credit Opportunities fund from investment grade to "avoid" and is telling investors who want to get their money out
to apply now as there is a minimum wait of six months.
Morningstar analyst Sallyanne Cook says the risks to the fund have intensified because of continuing dysfunction in the credit markets.
The $13.7 million fund invests in other credit opportunities funds as well as collateralised debt obligations - the same type of investments that have already seen two of ING's other funds freeze.
In March, ING stopped investors from taking their money out of its Diversified Yield and Regular Income funds and more than six months later they remain frozen.
Cook says the other problem with the Credit Opportunities fund is that its investments are leveraged - the fund manager has borrowed money from the bank to increase its ability to invest and those loans are now being called in.
"The leverage in the underlying products means there is pressure from the banks lending to those things to liquidate assets.
"Our big concern, and there is already a six-month wait on redemptions, is that ING will end up having to freeze the fund and investors may not see their money for three or four years."
The fund has already posted substantial losses.
Last month it lost 14 per cent and Cook says the situation deteriorated in November.
Launched two years ago, the fund was designed to give investors a return of 2.25 per cent a year above the 90-day bank bill rate. But in the past year it has returned minus 28.66 per cent.
ING says it is reviewing the fund and will let investors know if there is any change in its status.
SUSTAINABLE SUPER
The $13.6 billion New Zealand Superannuation Fund may have been hit hard in the investment stakes but at least it is still up there in the sustainability standards.
The latest report from the United Nations Principles of Responsible Investment shows the super fund has moved into the top 25 per cent of those measured for three out of the six principles.
Next month the fund is expected to pull out of investments in companies involved in cluster bombs and it is also in the process of deciding what to do about investments in nuclear-related companies.
Previously it has pulled out of investing in companies which involve landmines, whaling and tobacco.
Replacing fund managers and former owners Simon Botherway and Paul Glass was always going to be a tough assignment for Brook Asset Management but its appointments seem to have met with industry approval.
Slade Robertson is to join the firm as senior portfolio manager from BT Funds Management while Andrew Mortimer is coming on board as senior research analyst from First NZ Capital, where he was director of equity research.
Morningstar senior research analyst Chris Douglas, who last week put the Brook Alpha Strategy on hold and downgraded the Tasman fund from recommended to investment grade in light of the departures, says he will review the recommendations on Brooks' funds in February after meeting the new staff members.
Douglas said Slade had a solid background working at BT funds management and Challenger.
"From a retail perspective he has been a quiet achiever."
Glass and Botherway officially finish up at the end of the year.
SHRINKING TALENT
The departure of Glass and Botherway is a sign of more talent stepping out of New Zealand's already small fund management industry.
Former Brook chief investment officer Andrew South left the firm this year to travel and has yet to come back.
Former Fisher Funds chief investment officer Warren Couillault is still on a restraint of trade agreement that ends in February next year.
Another manager yet to resurface is former Tower head of equities Wayne Stechman. He left Tower after nearly 20 years with the company in November last year and had planned to take a summer off before returning to the workforce.
Morningstar senior research manager Chris Douglas says the number of experienced managers who have left the scene is worrying. "The loss of all these guys has a real impact."
Douglas said that in Australia many money managers were looking to cut staff but that was unlikely to be necessary in New Zealand.
The difference in the size of the two industries has never been so stark than at the recent ASFA Association of Superannuation Funds of Australia annual conference in Auckland where more than 1500 people attended.
TOP JOB
But it seems there is no shortage of people interested in the new role of Commissioner of Financial Advisers. The Ministry of Economic Development reports 27 applicants and is expected to put recommendation to new Commerce Minister Simon Power by December 5.
THE VIKING OPTION
Investors in the IMP Diversified Income Fund face a tough choice on Thursday whether to take up shares in the listed Viking Capital (now called IRG) or let the investment fund go to the receivers.
IMP, which is chaired by former finance minister Ruth Richardson, received approval for a moratorium in June after its primary source of funding dried up.
Since then IMP has managed to pay investors back 37c in the dollar, better than some frozen financing groups, but has now defaulted on its trust deed because of the default of a $4.6 million loan made to livestock technology company ICP Bio, which has since gone into receivership.
Intellectual Capital Partners, which runs the IMP fund, owns a 7.38 per cent stake in IRG and instead of paying out cash is asking investors to take over the shares. It seems a poor deal for investors but one where the only other alternative is receivership.
While IRG is listed on the New Zealand stock exchange, it is a fairly small company with not much in the way of trading on its shares. They last traded at 7c, down from a year high of 8c and up from a low of 5c. The thought is that it will be easier for small parcels of shares to be traded rather than trying to sell the big lump sum.
Richardson says it is not unusual for a fund in a distribution situation to convert an equity position into shares rather than giving out cash.
She says that allows individuals to make up their own mind to sell the shares.
"Shares distributed to investors rather than held as one block of shares by IMP would more likely yield better value and liquidity."
But in this market the majority of investors would probably prefer cold hard cash over shares in an almost illiquid company caught up in a volatile stockmarket.
It seems IMP investors have been caught between a rock and hard place for some time.
Most were formerly advised by Vestar and are likely to have money tied up in other frozen finance companies.
Former Vestar chief Kelvin Syms and former Intellectual Capital Partners director Tony Hannon also had strong links cross-investing in each other's businesses.
IMP was always designed to be fairly high risk with a small number of loans to higher risk businesses but
that does not seem to have been
made clear to Vestar clients, who viewed it as a low-risk income earning product.
