by David Chaplin
However, the two ING CDO-related funds dwarfed these comparable products having collectively raised about $850 million from New Zealand investors.
Together the ING Diversified Yield Fund (DYF) and the Regular Income Fund (RIF) have dropped in value by almost $320 million since last June.
According to the funds' financial statements as at June 30, 2007, the DYF was valued at $592 million, with the RIF priced at almost $250 million.
Steve Giannoulis, ING head of marketing, said yesterday the DYF was worth $353 million and the RIF $167 million.
Giannoulis said after a run on redemptions over the last few months the funds could no longer pay out investors without jeopardising the remaining unit holders as it no longer had enough cash to meet requests.
In the June 2007 financial statements the DYF was reported as holding $80 million in cash and the RIF $23 million.
With cash running dry ING would now be forced to start selling the funds' assets to meet redemptions.
In a letter to investors sent yesterday, ING said it would be hard to find buyers for the funds' underlying CDO assets "in the current illiquid market".
"Second, as a 'forced seller', if the better quality assets were sold at uncertain or 'quick sale prices' below their true value, the overall quality of the Funds' assets would suffer, penalising investors who remained," the letter says.
"Third, the extreme lack of liquidity and sentiment in credit markets is making it increasingly difficult to reliably value the assets."
According to the ING website, the DYF unit price had sunk to 0.81 with the RIF hitting a low of 0.7. The halt on redemptions in both funds was made effective from March 13, the ING letter says.
"Pending withdrawal requests that were due to be paid on 15 March will not be processed; there can be no exceptions to this," the letter says.
Giannoulis said the DYF and RIF trust deeds allowed the trustees to halt withdrawals as long as the economic and financial conditions prevailed with no time period when the funds must be wound up.
The DYF closed to new investors in January 2006, but the RIF was still receiving funds as late as last week, but is now no longer accepting investments.
"The RIF will continue to distribute income on a quarterly basis as normal, but reinvestment to buy additional units will not be accepted. Distributions will be paid to investors as cash," the ING letter says. "To the extent that income is available to be paid from DYF at 30 June, the current intention is to pay this out to investors as cash, rather than for it to be reinvested as bonus units."
ING said it would "defer" the management and trustee fees while the two funds remained in limbo.
"Fees will be accounted for in the unit price but not deducted, leaving the money invested in the Funds," its letter to investors says. "Advisers will, however, continue to receive monthly trail commission."
In the year to June 30, 2007, ING collected just over $8.3 million in fees for managing the DYF and a further $2.6 million from the RIF.
| « Dyer dumped as NZ Super 'restructures' | Sovereign takes regulation bull by the horns » |
Special Offers
© Copyright 1997-2024 Tarawera Publishing Ltd. All Rights Reserved