New rescue plan for LM Investment funds

A new rescue plan is being launched for investors in beleaguered funds run by Australian manager LM Investments.

Tuesday, October 9th 2012, 8:29AM

Yesterday another fund manager, Trilogy Funds Management, said it had been approached by a group of LM investors to make a bid to take over running one of the key funds.

Trilogy says under a proposal it would become the Responsible Entity for the LM Currency Protected Australian Income fund.

This fund is largely made up of New Zealand investors and is a feeder fund controlling around a quarter of the unites in the LM First Mortgage Income Fund.

The Income fund had investments of around A$418 million in mortgages in Australia.

Another meeting has been called to replace LM Investments as the manager of the other key feeder fund.

Trilogy Group chairman Rodger Bacon says the company was approached by a group of New Zealand investors to call meetings to replace LM Investments as the Responsible Entity of the currency fund.

“Following this initiative two Australian institutions joined forces to support calling meeting of the Wholesale Fund. All investors want LM out; they want openness, a simple, professional wind-down of the funds and return of their capital.”

Bacon says Trilogy’s proposal is straightforward.

“What we suggest is an orderly wind-down, but no fire sale, of the Main Fund’s assets and then capital distributions to investors in the Main Fund and through to the two feeder funds.”

“It is easy to understand why unitholders have become so embittered with LM. The Main Fund has been frozen for close to three years, the value of its units has fallen from $1 to 73c, and 89% of the loans are in default.

He also alleges LM Investments is in breach of ASIC regulations around updates on asset protection and that the company has taken out an “extraordinary” level of fees.

Meetings to replace LM Investments as the Responsible Entity of the two feeder funds will be held in Sydney on November 1 with a meeting on the Main Fund to be held later next month.

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