Hubbard funds over valued by 25%: Report
The statutory manager for Alan Hubbard and Hubbard Funds Management have released its second report and says investments in the funds business were over-valued by 25% (Full report attached)
Friday, August 27th 2010, 8:32AM
The statement from Grant Thornton says:
Around 300 investors in Hubbard Management Funds (HMF), an investment entity of Mr Hubbard which is in statutory management, have been told that the reported value of their investments at 31 March 2010 was overstated by at least 25%. This revelation is contained in the statutory managers' second report to investors.
In their report, Richard Simpson and Trevor Thornton of Grant Thornton New Zealand also warn that investors in Aorangi Securities Limited (Aorangi) may suffer a loss in their investments.
"As statutory managers, we are aware that this news will be a shock and a disappointment to the many people who have invested in these businesses operated by Mr Hubbard," said Mr Simpson.
"We are mindful that some people depended on a flow of funds from HMF and Aorangi for their day to day living and that the freezing of the funds under statutory management has created hardship for them. For those people, an emergency fund has been established."
"In the case of Aorangi, an underlying problem we are dealing with is that Mr Hubbard has allowed Aorangi to accept deposits of about $96 million from investors on call, but he invested those funds in investments or loans which are nearly all long term in nature."
"Much of the money is invested in minority interests in approximately 25 farms as well as in a charitable trust administered by Mr Hubbard and a number of other commercial entities, some of which are of poor quality. These investments do not generate sufficient income to pay the interest due to Aorangi's investors".
"Many of the farming businesses invested in are highly geared, the dairy farm sales cycle is currently at a low, and in the case of the charitable trust, many of the loans are interest free and some will not be recoverable."
"While we hope to be able to make a small repayment to the Aorangi investors in October 2010, Aorangi has only a small amount of available cash and it will take a long time before the investments can be realised."
"HMF has deposits of about $82 million and is invested in public company shares, venture capital funds and unlisted companies. The total value of HMF is at least 25% less than reported by Mr Hubbard to investors in the March 31 statements this year. The reason for this is that some of those statements included investments and cash balances, which did not exist. There are also likely to have been further losses in value in the fund since 31 March 2010 due to the weakness in the markets over that period."
"The investment profile is not consistent with what would be appropriate for a typical investor in HMF. There is a lack of blue chip investments and the composition of the fund's portfolio generally means that the fund is high risk in nature."
"We have many issues to still work through and we will have a further progress report to the investors at the end of September 2010", Mr Simpson said.
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