LM Investments defends decision to extend redemption time frame
LM Investments Australia (LM) has defended its decision to extend the redemption time frame on one of its funds amid reports of concern from a New Zealand mortgage fund.
New Zealand news websites have reported that investors from ING New Zealand have been affected by the decision to extend the redemption time frame on its LM First Mortgage Income fund, with ING requesting to withdraw funds late last year only to be advised of the new redemption time frame.
“ING is not privy to anything concerning the LM funds that the world is not,” said Peter Drake, chief executive, LM.
“We confirm that ING has been in receipt of the full facts regarding the fund and its management since the time ING first invested in the fund.”
A need to reduce debt levels amid challenging markets for mortgage funds has seen LM Investments tighten its belt and extend its redemption time frame from 30 days to one year.
However, while redemptions are delayed the fund is still paying income to investors, LM said.
According to LM, the unit price hasn’t been affected and still maintains its $1 unit price.
Drake said the “decline in global economic decisions and the lack of liquidity within the banking sectors saw us tighten our management strategies”.
The external financier of the fund has requested the group pay down its line of credit facility, in what Drake has described as a “relatively short time frame”.
“Our strategy is to pay down the line of credit facility as requested by the fund’s external financier, and once repaid … assess what is in the best interest of investors.”
Therefore, the fund has gone into protective mode by delaying the payment of investor redemptions in order to “protect the investment capital for all investors”, Drake said.
“We have extended our redemption timeframes to 365 days in accordance with the [Product Disclosure Statement] to further protect the investment capital.”
According to financial statements for the fund as of the end of February 2009, $134 million of loans were in arrears.
LM said the fund is closed to further investment.
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