An investment fund has appointed receivers after it was found that its performance was unlikely to meet investors’ expectations.
The board of Cherry Fund Limited (CFL), which is a member of Banksia Securities Limited, have appointed receivers McGrathNicol just days after Banksia itself went into receivership.
According to a McGrathNicol statement, the receiver was appointed after CFL conducted an urgent review of its forecast cash flows for the next 12 months and found that it was “unlikely to meet the anticipated level of redemption requests by investors during that period, as a consequence of the decision to appoint a receiver to BSL”.
CFL, which offers fixed interest investments in mortgages, owes approximately $10m to investors.
“We are now reviewing CFL’s business and mortgage portfolio which we are doing with the support of the executive team at The Banksia Financial Group,” said receiver Tony McGrath.
“We are also working with the executive team at The Banksia Financial Group to ensure that the group’s remaining investment fund Banksia Mortgage Fund can continue to trade uninterrupted.”
The Banksia Financial Group chairman Peter Keating added that the group deeply regretted “the need for the actions we have taken late last week and today, but we have done so in the best interests of all parties with an interest in the Banksia business”.
“The Banksia Board is working cooperatively with McGrathNicol to achieve the best possible outcome for our investors, employees and shareholders,” he added.
ASIC has announced that an official taskforce will review Banksia, and the regulation of unlisted debentures.
“The failure of Banksia, an unlisted debenture company that has operated a mortgage financing business across a large part of regional Victoria, will affect the lives of many everyday Australians. ASIC wants to take a closer look as it is another area of retail-funded shadow banking,” said ASIC chairman Greg Medcraft.
“At the moment there are laws around disclosure and, to a limited extent, the conduct of debenture issuers. But we need to lift the regulatory intensity to make sure that investors are confident and informed.”
“The taskforce will review the extensive work we’ve done to date around the regulation of the unlisted debenture sector. The taskforce’s work may involve making recommendations to Treasury about law reform given we have pushed the existing conduct and disclosure regime to its limit.”
“We will also work closely with Banksia receivers and managers McGrath Nicol to try and get the best result for Banksia investors and retail clients who Banksia provided credit to. Importantly, we’ll also continue to remind debenture trustees of their obligations as gatekeepers to protect investors and monitor debenture investments - particularly bad loans and liquidity problems.”
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Financial group in receivership, investor funds at risk