09 Mar 2012 8:20 PM:

 Hi Guys

An interesting thread.  We often use the LM Managed Performance fund in our investment portfolios that we hold for clients.  I think it has been said but worth repeating that you should never place all your capital into just one fund.  I contacted LM about this thread and I thought it would be interesting to post their reply below so you have answers from the horse´s mouth so to speak.

LM is authorised by ASIC (Australian Securities & Investment Commission) as a Responsible Entity. Its obligations as a Responsible Entity are to ensure that fund assets are clearly identified as fund assets, and held separately from assets of LM and of any other LM fund. A third party custodian for the LM Funds, The Trust Company (est. 1885) hold and safeguard the fund assets that are mutually owned by all the fund's investors.  If LM were to go "bankrupt" the funds and their assets remain with investors in the fund owning the assets by way of unit trust.

 

Currency exposure is mitigated by the use of Forward Foreign Exchange contracts. Investors investing in EUR or GBP are not exposed to the movement of the Australian dollar.

 

I note Rod has included a link to floods in Queensland, this article is over 14 months old. The floods in Queensland were in January last year.  Yes many of the assets of the MPF are in Queensland, however this is a very large state, (England can fit into the state of Queensland 12 times!) None of the assets of the funds were affected by the floods.

 

All properties within LM funds are fully covered for damage which may occur in this type of incident / natural disaster, including insurances to cover potential loss of earnings. It is part of our due diligence process to ensure adequate insurances are in place over the property at all times. There is a renewal monitoring process also in place whereby unless we are provided with copies of certificates of currency by our borrowers in a timely manner we can contact the underwriters directly to check or pay any insurance as necessary.

 

The inevitable recovery from the floods and the rebuilding has in fact presented opportunities for our funds. Reconstruction has begun on roads, rail, residential and commercial buildings to name a few areas, which for many investors may present an opportunity to invest and prosper from.

 

An investment in an LM fund is an investment in one asset class and should form only part of a diversified investment portfolio.  LM does not solicit or accept investment direct from the public. An investment into an LM fund must come via a Financial Intermediary following a comprehensive due diligence process and financial analysis.

 

“Liquidity Issues”

The LM Managed Performance Fund is currently AUD$308 million in size. 

It extends finance and participates actively in property development profit across the Australian property market.  It secures its position via debt securities/loans across its assets.  As an income fund, the debt securities/loan agreements take into account all the fund’s entitlements to ensure that they come back into the fund as interest only so that it is a competitive income return that is passed to the investor and not a capital gain.  It is a transparent structure that sees any profit to which the Fund is entitled flow back into the fund as interest.

 

The fund’s debt securities/loans are secured across property with a current “on completion of development” value of AUD$1.36 Billion.

Proactive management of the assets in collaboration with the borrowers is important to achieving and protecting that value.   The cash flow has to be managed to meet all the fund’s commitments.   Yes, to assist cash management of the fund, if necessary, the fund is able to make investor redemption payments over longer than usual timeframes.   It is important to note that income continues to be earned on the investment until the date of payment of the redemption. 

 

Property is not immediately liquid and a development property may not have reached a stage of completion satisfactory for its sale.  So generating cash for the fund through the sale of an asset is not always immediately viable as it may not be in the best interests of protecting long term value for investors.  

 

Slowing redemptions payments is a measure that protects fund performance and value for investors. 

 

The Fund’s assets are sound and are progressing through various development stages as expected. Investors within the fund continue to earn income at the published rates.

Thread: HIGH INTEREST INVESTMENTS

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