"High risk – high return” – these are some of the words used by experts to describe the investment strategy of Hubbard Management Funds.The critique of Allan Hubbard's market punts comes in the third statutory mangers report release
"High risk – high return” – these are some of the words used by experts to describe the investment strategy of Hubbard Management Funds.
The critique of Allan Hubbard’s market punts comes in the third statutory mangers report released this afternoon that notes court action will prevent any short-term repayments to investors.
The report said the value of HMF since statutory managers were appointed on June 20 has increased from $42.5m to $49m – mostly because of foreign exchange rate movements.
Independent investment advisers asked by statutory managers to look over the fund said the portfolio “appears to have been assembled on an ‘ad hoc’ basis and does not appear to have a pre-determined guidance structure or asset allocation methodology.”
The report said 24%, or $13.8m, of the total HMF portfolio is invested in unlisted stocks.
Advisers said more than half of these unlisted investments were considered “high risk” and noted: “The portion that our advisers consider high risk contains investments in emerging health care and technology companies where the products marketed are in an early stage of development without wide market acceptance.”
The HMF portfolio is heavily weighted toward small companies in resource sectors, and statutory managers said the size of the entities involved makes realising value difficult “as there is a limited demand for the shares.”
Millions of HMF funds were invested in related-party entities connected with Mr Hubbard. The report said $7.8m was invested in Aorangi Securities, nearly $1m in south Canterbury bonds and preference shares, and $10.7m in Southbury Group notes, deposits and shares.
Statutory managers said the estimated cash realisations of these investments, totalling $19.6m on paper, was likely to be only $1.1m.
Some HMF investments have recorded security charges against them totalling $7.57m. Statutory managers have cautiously written off this figure off, but note legal action is being taken to secure maximum returns for investors.
Issues delaying the making of any repayments to investors include disputes over whether HMF was a pooled vehicle or composed on individual accounts and questions over whether a sales strategy should seek to maximise returns or speed up realisations.
