KEY POINTS:
Watching the downward trajectory of the ING CDO funds has been one of my sad duties over the last 18 months. I was hoping the announcement from ING this Wednesday would discharge me from that duty.
No such luck.
I was compelled to check the unit price just
now for the two main CDO funds issued by ING in New Zealand - the Diversified Yield Fund and the Regular Income Fund, whose acronyms, DYF and RIF, conveniently rhyme.
For the record, the DYF and RIF unit prices currently stand at about 40 cents and 32 cents, respectively, down from highs of about $1.09 at the end of March last year. Check out the decline and fall of the DYF and RIF here - it's a history of the credit crisis nicely bundled up in a series of numbers.
ING can rightly claim it wasn't the only investment manager to be caught out by exposure to CDOs - New Zealand Funds Management, Absolute Capital's PINs, Macquarie's Fortress Notes, Credit Sails, to name a few others - but it was the biggest.
At their peak the RIF and DYF collectively managed about $850 million of New Zealand retail investors' money. ING marketed the funds as an alternative to 'safe' fixed interest funds and finance companies (in hindsight that last comparison is probably accurate), selling truckloads to retirees through its associated banking chain, ANZ, and via independent financial advisers.
ING froze the RIF and DYF earlier this year to prevent a complete run on the funds (they were valued at $520m at the close) but that was only ever going to be a stop-gap measure.
This week ING bowed to the inevitable, admitting there were "ongoing difficult market conditions" with an offer to wind down the RIF and DYF and threw in a, frankly insulting, sop to investors of a $100m loan upfront. That's right, a loan at "favourable commercial terms".
ING is charging investors interest to give them their own money back.
Still, ING has 'deferred' collecting its management fee on the funds until everything is sorted. Over the two years to the end of June 2007, ING earned about $18m in fees from the RIF and DYF.
No wonder people love fund managers.
David Chaplin
Photo:AP