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Trustee closes mortgage fund

Tuesday 29th July 2008

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Guardian Trust has decided to suspend new investments and withdrawals in its $249 million mortgage fund to protect investors.

The move is driven by liquidity issues. Currently the fund is “operating below its target liquidity rate of 5%.”

“In such conditions this is not considered appropriate,” the company says in a statement. “In the interest of fairness among unit holders, the directors feel a cautious approach is necessary.”

While a freeze has been imposed the fund is planning to continue distributions to its 3,700 investors.

This fund, established in May 1986, is a very conservative vehicle. It invests only in first mortgages, where advances are restricted to a maximum of 60% of valuations across the commercial, retail, industrial, farming and residential sectors.

The fund has performed well, over the years, in managed fund surveys and awards.

Managing Director Sean Carroll said, “Poor liquidity is a feature of today’s markets. We need to manage liquidity requirements very closely in funds such as these, where the assets (primarily mortgages) cannot be converted to cash quickly.

“As is usual for Guardian Trust, we are taking a cautious and prudent approach. We will review the situation regularly and will update investors and the market as appropriate.”

COMMENT: We've seen it all before but it still hurts

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