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OnePath closing troubled mortgage fund

OnePath is closing its troubled mortgage fund. This fund has $45 million invested in it and has 761 members. Around $11 million of the fund is invested in the Australian-domicilied LM Mortgage fund.

Thursday, 28 July 2011

LM froze its funds in 2009 causing trouble for PPS (and other investors). PPS split its mortgage fund into two sub funds (A and B Units) to ensure the frozen LM investment was quarantined from the majority of assets in its mortgage fund.

"We consider the ongoing uncertainty around the LM Fund, to which the B units relate, is unsatisfactory. More than two years have passed since the suspension of the LM Fund, with the Mortgage Fund receiving no cash payments from the LM Fund in this period, and we continue to have no certainty from the LM Fund‟s manager as to when any repayment from the LM Fund will be made," OnePath says.

It says the uncertainty is "unsatisfactory" and that full payment of the LM funds is likely to be some years away.

OnePath plans to purcashe the B Units at full face value, and convert them to A Units and then wind up the fund.

Boyle acknowledges most fund managers have already closed their mortgage funds and OnePath is one of the last to do this.

He says mortgage funds have reached the end of their lifecycle and there is no demand for them.

"We currently see no future for this type of product."

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