This article is from the Australian Property Journal archive
DISGRUNTLED unitholders in mortgage funds managed by Gold Coast-based LM Investment Management are calling for Trilogy Funds Management to takeover as the responsible entity.
LM is the RE for the LM Wholesale First Mortgage Income Fund (wholesale fund), the LM Currency Protected Australian Income Fund (currency fund), both of which are “feeder funds” of the LM First Mortgage Income Fund, which is the main fund.
The wholesale fund and currency fund hold 20% and 24%, respectively, of the main fund, which, at 31 December 2011, had gross assets of $418 million. Other unitholders hold the remaining 56% in the fund.
Trilogy Group chairman Rodger Bacon said the company was initially approached by a significant group of investors, mostly from New Zealand, to call meetings to vote on a change of the funds’ RE.
“Following this overseas initiative, two Australian institutions joined forces to support calling these meetings. All these investors want LM out; they want openness, a simple, professional wind-down of the funds and return of their capital,” Bacon said.
Bacon said Trilogy is well placed to bring about the RE change with institutional investors holding more than 48% of the units in the Wholesale Fund supporting resolutions to remove LM as the RE.
The meetings to vote on the proposal will be held on 1 November in Sydney.
He says Trilogy’s proposal to unitholders 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.
“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 $0.73, and 89% of the loans are in default,” he continued.
“There has been no update of the asset position (RG45) for more than a year – a clear breach of ASIC regulations.
“At the same time LM has taken out an extraordinary level of fees. In 2011 alone this amounted to 2.5% of funds under management in the main fund and over 2.4% in each of the two other funds (that is almost 5% in total for each feeder fund). Trilogy has committed to a fee of 1.5% a year of the main fund and ultimately nil fees for the feeder funds,” Bacon concluded.
Property Review