The trustee of three investment funds has dumped their manager for poor performance, forcing the Financial Markets Authority to step in.
Dunedin-based Fund Managers Otago was removed from managing the funds by the Trustee Executors group.
Trustees Executors said it had been working with Fund Managers Otago “closely and continuously” on issues involving governance, solvency of the manager, and regulatory breaches.
“FMO has been unable to improve its performance to the standard that we expect from a licensed manager, and that which is required under the FMCA [Financial Markets Conduct Act],” Trustees Executors’ head of corporate trustee services Matthew Band said in a statement.
The sacking of Fund Managers Otago forced Trustee Executors to find a substitute manager for the funds, and the Financial Markets Authority has appointed KPMG Restructuring Services as the temporary manager. It is the first time it has used that power.
Two of the affected schemes – Capital Mortgage Income Trust and the NZ Mortgage Income Trust – have been closed for several years and were being wound up.
The third scheme, the NZ Mortgage Income Trust (No 2) Fund, has now been closed and will also be wound up.
About 2250 investors are involved in the three funds, that had funds of just over $20 million at the end of March.
Two of the funds made modest losses in the past year.
Band said KPMG would be in touch with investors in the just-closed fund regarding the winding up.
The Financial Markets Authority director of supervision James Greig said the case showed financial market regulation working as it should for investors.
“Supervisors are the frontline regulators for managed investment schemes, and their oversight is designed to ensure fund managers meet their obligations and take appropriate action when managers do not meet those obligations.”