Aug 2011 Frozen Funds ASIC Info Wrong

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INFORMATION SHEET 142

Information sheets provide concise guidance on a specific process or compliance issue or an overview

of detailed guidance.

Page 1of 2

Estimated frozen funds under managementThe term frozen fund refers to a registered managed investment scheme, which wasoriginally marketed on the basis that investors had an ongoing or periodic right to redeemtheir investments on request, but which has since suspended that right. This informationsheet provides an update of the estimated frozen funds under management (FUM) in theseschemes.

If you are an investor in a fund that has been frozen, our information sheetInformation forinvestors in frozen funds (INFO 111)provides details on your rights and how you can getyour money back, the duties that responsible entities have to investors, and our role.

Current frozen fund estimates

Based on the most recent data available to ASIC (at March 2011), we estimate FUM that areconsidered frozen have declined to $18.76 billion from a high of $25.36 billion in November2009: see Table 1.

Table 1: Estimated frozen funds under management (FUM)

Type of fund March 2011 November 2009 November 2008

Total no. of

schemes

Total frozen

FUM ($b)

Breakdown of total frozen FUM Total

no. of

schemes

Total

frozen

FUM ($b)

Total

no. of

schemes

Total

frozen

FUM ($b)Restructured

or being

wound up ($b)

Remaining

FUM ($b)

Mortgage funds 63 $10.8 $3.9 $6.8 63 $14.8 63 $16.8

Property funds 13 $3.9 $0.3 $3.6 13 $4.9 11 $3.7

Cash-enhanced

funds

10 $4.0 $1.8 $2.310

$5.6 6 $2.0

Hedge funds 1 $0.06 $0.06 1 $0.06 1 $0.06

Total 87 $18.76 $6.0 $12.76 87 $25.36 81 $22.56

pgs 13 ASIC Frozen Fund publications

pgs 49 Investor Letters

pgs 915 Media reports
http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/info111-information-for-investors-in-frozen-funds.pdf/$file/info111-information-for-investors-in-frozen-funds.pdfhttp://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/info111-information-for-investors-in-frozen-funds.pdf/$file/info111-information-for-investors-in-frozen-funds.pdfhttp://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/info111-information-for-investors-in-frozen-funds.pdf/$file/info111-information-for-investors-in-frozen-funds.pdfhttp://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/info111-information-for-investors-in-frozen-funds.pdf/$file/info111-information-for-investors-in-frozen-funds.pdf


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ESTIMATED FROZEN FUNDS UNDER MANAGEMENT

Australian Securities and Investments Commission, July 2011Visit our website: www.asic.gov.au

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Since November 2009, frozen FUM have declined through periodic withdrawal offers,$127 million of hardship redemptions and asset write-downs. Of the current total frozenFUM of $18.76 billion, funds worth $6.0 billion have been restructured with memberapproval or are winding up their schemes.

We estimate that $12.76 billion1

Figure 1 summarises estimated frozen FUM from November 2008 to March 2011.

remains frozen and inactive in 42 mortgage funds, 11

property funds, 6 cash-enhanced funds and 1 hedge fund.

Figure 1: Estimated FUM: November 2008March 2011

* Note: As at March 2011, funds with $1.8b FUM in cash-enhanced funds (4 funds), $0.3b in property funds(2 schemes) and $3.9b in mortgage funds (21 schemes) have restructured or are winding up their schemes (whichrepresents $6.0b of the total frozen FUM at March 2011).

Where can I get more information? Go towww.asic.gov.au.

Phone ASIC on 1300 300 630.

Important noticePlease note that this information sheet is a summary giving you basic information about a

particular topic. It does not cover the whole of the relevant law regarding that topic, and it isnot a substitute for professional advice. You should also note that because this informationsheet avoids legal language wherever possible, it might include some generalisations aboutthe application of the law. Some provisions of the law referred to have exceptions orimportant qualifications. In most cases your particular circumstances must be taken intoaccount when determining how the law applies to you.

1

This number is derived by removing schemes that have been restructured through membersapproval, are in the process of winding up, or have advised ASIC of their intention to wind up(approximately $165 million).

$22.56b

$16.8b

$3.7b

$2b

$0.06b

$25.36b

$14.8b

$4.9b

$5.6b

$0.06b

$18.76b*

$10.8b*

$3.9b*

$4b*

$0.06b

0 5 10 15 20 25 30

Total frozen FUM

Mortgage

Property

Cash-enhanced

Hedge

FUM ($b)

Type

offund

FUM: March 2011

FUM: November 2009

FUM: November 2008
http://www.asic.gov.au/http://www.asic.gov.au/http://www.asic.gov.au/http://www.asic.gov.au/


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Extracted from ASICINFO 111


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http://www.macquarie.com.au/dafiles/Internet/mgl/au/docspa/factsheet/equinox6trustequinoxasiaasia2

selectoppquarterlyreport.pdf


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http://www.colonialfirststate.com.au/prospects/HFA_suspensionoffunds.pdf

CERTITUDE/HFA 23 December, 2008

ASX/MEDIA ANNOUNCEMENT


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MQ Portfolio Management LimitedABN 55 092 552 611AFSL 238 321

No.1 Martin Place Telephone 1800 025 513Sydney NSW 2000 Facsimile (61 2) 8237 4347GPO Box 3423Sydney NSW 2001

MQ Portfolio Management Limited ABN 55 092 552 611 (RE) is not an authorised deposit-taking institution for thepurposes of the Banking Act (Cth) and its obligations do not represent deposits or other liabilities of Macquarie BankLimited ABN 46 008 583 542 (Macquarie) or any other Macquarie Group Company. Macquarie does not guarantee orotherwise provide assurance in respect of the obligations of RE.

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MQ Capital Pty LimitedA Member of the Macquarie GroupABN 31 061 160 558

No.1 Martin Place Telephone 1800 025 513Sydney NSW 2000 Facsimile (61 2) 8237 4347GPO Box 4294Sydney NSW 1164

MQ Capital Pty Limited ('MQCAP') is not an authorised deposit-taking institution for the purposes of the Banking Act(Cth) 1959, and MQCAPs obligations do not represent deposits or other liabilities of Macquarie Bank Limited ABN 46008 583 542. Macquarie Bank Limited does not guarantee or otherwise provide assurance in respect of the obligationsof MQCAP.

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CommentaryComment

Tony Boyd

Published 7:37 AM, 31 Dec 2008

An im enetrable hed e

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The freezing of redemptions by several fund-of-hedge-funds that invest in offshorefeeder funds has exposed a glaring anomaly between the Australian and USregulatory systems.

The anomaly means that Australian investors into offshore feeder funds managed byWestpac's BT Investment Management and HFA Holdings cannot access theirmoney while US investors can cash out at will.

The anomaly raises a number of questions that are not being answered by the fundsinvolved, even though at least one of them blames the media for its problems.

The questions that cannot be put to the managers because they don't want tocomment are as follows:

Are Australian investors frozen out of vehicles that invest in international fund-of-hedge-funds being treated fairly and equally if the feeder fund is continuing to payredemptions to non-Australian residents?

Will the proportion of illiquid investments in an international feeder fund grow as apercentage of total assets if non-Australian residents are allowed to redeem theirholdings?

Are the details of illiquid assets held by international feeder funds, including theamount and type of assets that are ill iquid, provided to Australian funds that invest in

them?

The latest fund to be engulfed by the redemption freeze sweeping the industry is theBT Global Return Fund, which is managed by Westpac subsidiary BT InvestmentManagement.

It follows the suspension of redemptions for Australian residents by MacquarieEquinox Trusts, DWS Strategic Value, Goldman Sachs JB Were Multi-StrategyFund, Select Gottex Market Neutral Fund, the Credit Suisse/Tremont indexStrategies Fund and the HFA Octane Funds and HFA Diversified Funds.

BT Investment Management was unwilling yesterday to say anything beyond theshort statement released on its website on December 19.

That statement said that redemptions had been suspended following receipt of anotification that underlying manager Grosvenor Capital Management had takenaction to segregate a proportion of the less liquid assets in the Grosvenor MasterFund in which the BT Global Return Fund invests. Grosvenor has not suspendedredemptions in the Grosvenor Master Fund.

BT did not say or would not admit that based on its limited public disclosure therehas been a run on redemptions in the BT Global Return Fund.

Assets at the end of September were $1.2 billion, according a document on the BTwebsite. But the latest report on the fund for November said funds undermanagement were $922 million.

In other words, a quarter of the fund was withdrawn in a month, though of coursesome of this disparity could also be due to falls in asset values. Attempts to clarifythis with BT yesterday were unsuccessful.

However, the fund's annual report shows that in the year to June 2008, the level ofredemptions rose more than threefold on 2007 to $326 million. That caused a $67.8

million decline in net assets attributable to unitholders. The BT Global Return Fund

HFA/ CERTITUDE/ BT


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monthly reports give a breakdown of the style of investment being used but nonames of the hedge funds managing the money. The freezing of redemptions will have an impact upon many BT funds becauseabout $217 million of the fund is sourced from 30 different BT funds.

This cross investment by one fund manager in its own array of products is a featureof the industry that may cause corporate governance concerns and trigger conflictsof interest.

BT's unwillingness to discuss the fund is in keeping with the attitude taken by itscompetitor HFA Asset Management. Its managing director Robert White has refusedto answer calls from Business Spectator. Mr White says he did not receive themessages that were left with his office and with his public relations representative.

However, HFA this week succumbed to pressure from financial planners for greaterdetail about why its suspended redemptions in three funds with assets of about $1billion.

HFA sent a seven page letter to advisors yesterday by email providing more detailabout the suspension of redemptions. It was in a question and answer format.

The letter said that HFA Asset Management had not seen a material spike inredemptions from retail investors and as such its suspension of redemptions was nota consequence of a run on the three funds that invest in the Lighthouse DiversifiedFund.

Whilst the Lighthouse Diversified Fund has not suspended withdrawals it isimplementing a change in its withdrawal payment policy which will result inredemptions being satisfied by a combination of cash and an 'in kind' distribution ofinterests in a special purpose vehicle established by the Lighthouse DiversifiedFund, which will hold interests in certain designated, less liquid investments, themanager said.

This sheds some light on the problems and may be what is happening in the fundthat underpins the BT Global Return Fund.

HFA said that under the Corporations Act it had to suspend redemptions once thefund was not able to provide redemptions in cash. This contrasts with the situation inthe US were investors in the Lighthouse Diversified Fund have access to aproportion of their cash.

Although this goes some way toward explaining the anomaly it is not crystal clearwhether Australian investors will be worse off compared to investors in otherjurisdictions.

A broader message from the latest local developments in the hedge fund liquiditycrisis is that lack of transparency is accepted as part of the industry's way of doingbusiness.

Both Grosvenor Capital Management and Lighthouse Investment Management havewebsites that are the equivalent of a blank screen. No information is availablewithout a password.

The secretive attitude is undermining the efforts by some hedge fund managers topresent themselves as open and transparent investment managers.

HFA Asset Management managing director Robert White has responsed to thisarticle in The Conversation .

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Aug 2011 Frozen Funds ASIC Info Wrong

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