OnePath closes $179m superannuation fund

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OnePath has decided to close its $179 million Private Portfolio Service (PPS) Superannuation fund as well is the PPS Mortgage trust which invests in the troubled LM morgtage fund.

Thursday, July 28th 2011, 7:19AM 1 Comment

The superannuation has just under 2000 members and the money invested is then invested into separate PPS funds. One of these is the mortgage fund which is being closed.

OnePath genral manager funds management, David Boyle, says the super fund has reached the end of its life cycle and the amount of money in it has been decreasing for some time. The fund also lost a significant investor recently and that has contributed to the decision to close the fund.

He says fund managers have to have products and services that are appropriate for the market environment and meet the demands of investors and advisers.

The PPS Superannuation fund doesn't do that, he says.

OnePath continues to have other super fund options under its SIL and MFL brands.

Boyle says this move isn't an omen for the super fund sector.

"I don't believe it's the beginning of the end."

OnePath is working with the Financial Markets Authority on the closure and expects to have the process completed by November.

The fund is being closed and money returned to investors, as opposed to investors being offered transfer options.

All the money in the super fund comes via the adviser distribution network, rather than directly from investors. Boyle acknowledges there is a risk OnePath will lose some of the money  but believes OnePath has some good alternative investment solutions.

As well as closing the super fund, OnePath is closing its troubled mortgage fund. This fund has $45 million invested in it and has 761 members. Around $11 million of the fund is invested in the Australian-domicilied LM Mortgage fund.

LM froze its funds in 2009 causing trouble for PPS (and other investors). PPS split its mortgage fund into two sub funds (A and B Units) to ensure the frozen LM investment was quarantined from the majority of assets in its mortgage fund.

"We consider the ongoing uncertainty around the LM Fund, to which the B units relate, is unsatisfactory. More than two years have passed since the suspension of the LM Fund, with the Mortgage Fund receiving no cash payments from the LM Fund in this period, and we continue to have no certainty from the LM Fund‟s manager as to when any repayment from the LM Fund will be made," OnePath says.

It says the uncertainty is "unsatisfactory" and that full payment of the LM funds is likely to be some years away.

OnePath plans to purcashe the B Units at full face value, and convert them to A Units and then wind up the fund.

Boyle acknowledges most fund managers have already closed their mortgage funds and OnePath is one of the last to do this.

He says mortgage funds have reached the end of their lifecycle and there is no demand for them.

"We currently see no future for this type of product."

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