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Hubbard Management Funds value down $7.15m

Tuesday 8th March 2011

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The value of Timaru businessman Allan Hubbard's investment management business Hubbard Management Funds (HMF) fell by $7.15 million in the four months to the end of January, statutory managers of the fund say.

Among the main reasons for the decline were a loss of nearly $1.1 million on shares of Pike River Coal after the fatal disaster at the West Coast mine, and a loss of $815,000 on shares in Pike River's main funder, NZ Oil and Gas.

There was also a loss of $3.53 million on reconstruction of the Mercer Group and a loss of $1.95 million on Olympus Pacific.

The sixth statutory managers' report from Grant Thornton said the impact of the declines could have been worse had 400,000 shares in NZOG and 446,386 shares in Pike River Coal not been sold shortly before the Pike River disaster.

HMF's holdings in Olympus Pacific were also reduced by 534,683 shares so that stock was not as dominant in the portfolio.

By taking those actions, investors were saved from a loss of more than $675,000, the statutory managers said.

Since the end of January, HMF had invested $1 million back into Mercer Group, following research and talks with Mercer directors and executives and Hubbard. As a result, HMF's holding in Mercer Group was about 17.75%.

Despite the decline in value during the four months to January, the valuation of HMF at January 31 was slightly ahead of the value at the start of the statutory management in June 2010, at $48.75 million, the report said.

Some shares were subject to possible claim by third parties, in competition with HMF investors, and those shares had not been included as part of the portfolio value while issues were resolved.

The statutory managers said they expected to rescue shares worth more than $2 million in the next month or so.

They were working on an application to the High Court to determine the entitlement of investors to assets of HMF, and to determine how those assets were distributed to investors.

That action had been needed as insufficient shares were available to provide investors the investments indicated on their March 31, 2010 statements.

It was realistic to expect the application to be filed during the next six months, with efforts being made to make that time period shorter, but it would be 2012 at the earliest before any form of distribution was made.

The statutory managers' reconciliation as at March 31 2010 indicated investments that were not allocated to investors and some valuations that in their opinion were incorrect, the report said.

Once all adjustments and corrections were processed, the shortfall of assets compared with the sum of the investor statements was estimated around $31 million.

"In our opinion, investors will suffer a considerable loss compared with what was shown on their statements as at 31 March 2010."



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