LM Investment Management - Lack of confidence

[ASICK]

Correction

Correction to my previous post .. I'd be surprised if advisors ARE found wanting.

Also I can't say enough about how sad it is to see investors in damaged funds cling to a hopeful unit price when the only entity to benefit from fund valuation is the manager (management fees are calculated by reference to funds under management, which includes debt): investors cannot benefit from unit price - investors only benefit from capital returns.

It was clear (at least to me) that the 100% LVRs on all LMFMIF loans was a maxed-out effort to present the highest possible unit price of $0.59 to investors. I'd bet that investors found comfort in a sustained unit value but that comfort will soon turn to alarm when assets are sold off at market prices.

If the word "firesale" comes up, don't forget to ask for a definition - then you'll be able to easily decide if assets are (or are not) sold at firesale prices - I don't think there's any escape, assets will be firesaled - there is simply no other way to recover the necessary cash to fund the scheme and to repay investors.

These damaged funds are truly a bonanza for some, but not for investors. In my opinion it's all about WHO can make WHAT from your collective misfortune - it's not about YOU, it's about THEM.

 

[No Trust]

Don't think too much about litigation - my guess is there's nothing to get from LMIML, especially since there's no directors' indemnity insurance. These "ambulance chaser" lawyers are only useful if there's a "pot of gold" at the end of the "rainbow". Funds like the LMFMIF were set up pursuant to laws "wide enough to drive a truck thru" so I'd be surprised if advisors won't be found wanting.

Taja, losing in the PFMF was enough for me - you're not alone with your losses.

GG is right about acceptance of loss. I get the impression that reality is starting to set in for many LM investors. It'll be good if the LM funds are wound up by a receiver - sure, they're big fee grabbers, but nothing like a manager gouging a fee based on a dream-like fund value which will be unlikely to be recovered by investors.

Receivers force reality on investors - see Equititrust:
http://www.smh.com.au/business/equi...rs-to-lose-close-to-90-pc-20130107-2ccqz.html

I'm sure if a manager was in control of Equititrust's fund then the report would be filled with optimism.

The only thing that matters now is how much is fed back into investors' pockets - nothing else matters.

Your right about managers optimism... That's why McIvor tried to hold on to the management of Equititrust funds in every way he could... It was a direct way of channeling funds into his pocket... Now he is a failed bankrupt from the dodgy Gold Coast with many more questions to answer relating to accounting inconsistencies identified by the liquidator...

 

[No Trust]

These guys are like pigs in a trough with loans to themselves, their companies from fund assets... and don't forget the ubiquitous pseudo phallic beach front homes for men with small financial pen#ses... Flamboyance does not equate success, this was discovered when McIvor was turned upside down by his own lawyer and was found to be a 2 bob millionaire... Bankruptcy soon ensued for unpaid legal fees as well as the major banks for the differential on the sale of luxury beachfront and waterfront mansions...

Lets wait and see how this one plays out, however it is clear to see that the initial investigations have all the hall marks of another spivy Gold Coast mortgage fund collapse...

Look out for some mortgagee sales as was the case when Equititrust collapsed...

 

[RODENT69]

I refer to my earlier Postings, #531, and later #539 this is a correction, with more info to come

In my earlier postings I referred to the First Capital Distribution for WFMIF Investors, which originated from LM as Capital Distribution. I am now advised that this payment from LM was only about 60% of the amount required to clear the Outstanding Income Distributions liability, previously accounted for by LM covering the period from May 2010 to Dec 2010

As such Trilogy paid an amount to cover all these months -This does not of course extinguish the outstanding liability. I understand that approx a further $1.2Mil is still required to extinguish that liability

The distribution rate in CPU of $0.01788 that I posted is most likely to be incorrect.

Investors in the WFMIF should followup with their FA, Platform etc to see what is being actually being received by each investor, and which months it covers, and work through the numbers ie Dollars received, CPU etc for yourselves.

 

[Taja]

For those who don't know/follow, FTI has posted their "meeting notes" from the meeting on 2nd April on their dedicated website .. http://www.lminvestmentadministration.com/notifications However these are only presentation notes and do not reflect the actual discussions. I have asked if actual minutes of that discussion will be posted too and await response. I would be very curious to see the list of the FAs who took part in their (to me, highly questionable) role as "creditors".

 

[Taja]

For information, I got a reply to questions I had posed to FTI about the voluntary administration process:

- can you share the register of LM investors (to allow investors to communicate between themselves more effectively)? Answer: "No - for confidentiality reasons."

- is it not odd that FAs are being treated as "creditors" by virtue of the commission agreements with LMIM? Answer: "I ensure you that there is no preferential treatment being afforded to creditors over investors. The previous creditors report was posted on the website for all to view."

- will you be posting a record/minutes of the actual discussions which took place at the 2nd April meeting? Answer: "We will continue to communicate through this website throughout the administration but will not be posting further information on the creditors meeting at this time."

Any thoughts from Forum members?

No doubt wiser people than me will not be surprised at any of this.

 

[ASICK]

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10875236

$0.55/unit? no way.

I reckon FTI brings it down to somewhere near $0.40/unit.

 

[ASICK]

http://www.afr.com/p/business/property/lm_administrator_slams_rival_OvPk8HokarwRb2YpPoNUFM

"The administrators of collapsed mortgage and property fund group LM Investment Management, FTI Consulting, have said that rival funds group Trilogy Capital Group should not run the $740 *million in LM funds."

and the rest, for at least the moment, is for subscribers.

For what it's worth, I agree wholeheartedly with FTI.

Receivers might make a great fee but it's work performed - managers on the other hand, make a percentage of funds under management (FUM) - and this management fee can really amount to many times any receiver's account.

 

[No Trust]

I agree the fund needs to be put out of its misery not prolong the misery to investors... I would say however that ASIC via the Supreme court should appoint an independent receiver / Liquidator to the funds to ensure complete transparency.

Even if there is a perception of conflict of interest, this is enough to pass the legal test to ensure transparency on behalf of all investors. Given the ASIC investigation this is now essential in terms of ensuring the investors interest.

 

[ASICK]

LM MPF

http://www.lminvestmentadministration.com/notifications

Some interesting facts indeed.

See page 116:
http://u.b5z.net/i/u/10199052/f/John_Park_Affidavit_-_05.04.2013.pdf

Nearly $27m of management fees paid/prepaid !!!!
Other operating expenses about $29m !!!!

Unbelievable !!!

BIG losses coming LMMPF members' way.

 

[ASICK]

Phew!

I haven't read all the material, but it looks like (as far as the MPF goes) ASIC will not oppose court appointment of FTI as receiver to the LM MPF.

http://u.b5z.net/i/u/10199052/f/Philip_Pan_Affidavit_-_05.04.2013.pdf

Perhaps it'll be likewise for the LMFMIF.

Looks like Trilogy's out of the race.

 

[Taja]

Dear ASICK -

Thanks for the regular updates and thoughts on the process - as well as the scepticism in regard to things like Unit values and how these tend to be talked up unrealistically by interested parties. It all helps us steel ourselves for the eventual outcome and be ready for the painful worst.

One painful aspect is simply the long waiting period ahead of us to get to that outcome .. I assume it won't be before July since FTI have asked for an extension until then, and may be much later than that.

Regards.

 

[ASICK]

Dear ASICK -

Thanks for the regular updates and thoughts on the process - as well as the scepticism in regard to things like Unit values and how these tend to be talked up unrealistically by interested parties. It all helps us steel ourselves for the eventual outcome and be ready for the painful worst.

One painful aspect is simply the long waiting period ahead of us to get to that outcome .. I assume it won't be before July since FTI have asked for an extension until then, and may be much later than that.

Regards.

Good evening Taja,

I think it's much better to understand the real possibility of a very low return from your respective investments. If the outcome is better, then so be it - but there is no point living in "la la" land with a manager making millions off fees calculated by reference to funds under management (FUM) which value is simply not achievable by investors.

Who would have thought that Trilogy could have made about $20m in fees (1.5% management fee, .12% fund expenses) while investors only received (to date) $0.0875/unit? - with only $0.0075/unit of that received since 1 July 2012 (and no further payments likely prior to 30 June 2013).

I guess those in the wholesale fund will be somewhat pleased that Trilogy will only receive 0.5% FUM management fees on what I believe will be a rapidly reducing value in that fund's assets.

I don't think anyone should be surprised to see a substantial drop in fund values at the hands of the administrators/receivers given that FTI is not making its money by reference to FUM, but rather for services provided - mind you, that's not going to be cheap either. There's heaps of $$$ for the whichever entity gets control.

There's always an incentive for managers to report as high a unit price as possible, even if that means all LVRs equal to 100% - receivers will only provide members with values that are realistically achievable. No one should be surprised if there's quite a substantial variance between the two.

 

[sht4branes]

Hi,

FTI have adjusted the unit price to $0.55 for the LMIF. It was in LM's best interest to inflate the funds under management so they could receive as large fees as possible. If FTI are paid for a fee for service, what does this $0.55 figure mean in reality?FTI don't have any moral hazard in valuing fund assets so if 0.55 is an accurate number, it's a positive. We haven't lost everything.

If the unit price means nothing,why publish it? Probably deluded but if I get out with 55cents in the dollar, I would be delighted. There seems to be a lot more pessimism in the thread since LM called in the voluntary administrators. The administrators have got to be a good thing as LM are no longer in control of the fund. Things are on the up!

However, I do have sht4branes.

 

[No Trust]

We heard the same thing on the Equititrust Thread, may be a bit early to be optimistic, my view is that there are more surprises in store...

 

[ASICK]

Hi,

FTI have adjusted the unit price to $0.55 for the LMIF. It was in LM's best interest to inflate the funds under management so they could receive as large fees as possible. If FTI are paid for a fee for service, what does this $0.55 figure mean in reality?FTI don't have any moral hazard in valuing fund assets so if 0.55 is an accurate number, it's a positive. We haven't lost everything.

If the unit price means nothing,why publish it? Probably deluded but if I get out with 55cents in the dollar, I would be delighted. There seems to be a lot more pessimism in the thread since LM called in the voluntary administrators. The administrators have got to be a good thing as LM are no longer in control of the fund. Things are on the up!

However, I do have sht4branes.

I'll remain the sceptic, $0.55/unit, no way.

sht4branes, I don't think any of us think you've lost everything, but a number of us think you (like us) have lost most of your investment.

be careful about reliance on unit price - it's capital return that you should count.

 

[RODENT69]

A few numbers to chew on re the first Capital Payment to investors in the WFMIF

As ASICK rightly says Trilogy would take 0.5% of FUM -- However in reality this numerically small % translated into Trilogy actually taking 15.60% of all the monies they received as the Capital Payment, where it is believed the FUM value is around only $55 Mil ( FUM figure not yet confirmed) still waiting for the 2012 Audited return!!

What started out as a Capital Payment to Investors (when it left LM) Trilogy used to pay down the outstanding Income Distribution liability (less their Fees and Costs) This liability was for 8 monthly Income Distribution payments covering the period May 2010 to Dec 2010. There is still approx 40% remaining of this liability for a value of approx $1.2 Mil

 

[ASICK]

Trilogy

A few numbers to chew on re the first Capital Payment to investors in the WFMIF

As ASICK rightly says Trilogy would take 0.5% of FUM -- However in reality this numerically small % translated into Trilogy actually taking 15.60% of all the monies they received as the Capital Payment, where it is believed the FUM value is around only $55 Mil ( FUM figure not yet confirmed) still waiting for the 2012 Audited return!!

What started out as a Capital Payment to Investors (when it left LM) Trilogy used to pay down the outstanding Income Distribution liability (less their Fees and Costs) This liability was for 8 monthly Income Distribution payments covering the period May 2010 to Dec 2010. There is still approx 40% remaining of this liability for a value of approx $1.2 Mil

Ah.. the more you have to rely on Trilogy, the more you get to know about Trilogy.

Trilogy filed the PFMF's return with ASIC on 15 March 2013, yet to date, Trilogy hasn't released that return to PFMF investors - typical of Trilogy to leave investors without information.

Rodent, my comment re: .5% FUM was more about being better than 1.5% FUM and therefore more in line with what receivers might charge.

I'd be guessing that Trilogy held back a chunk for future fees - after all, the manager shouldn't go without.

And yes, don't keep thinking that Trilogy's .5% will remain .5% of what you guys get back - it doesn't quite work like that. Trilogy'll do much better than that.

Keep in mind that PFMF members will only see $0.0075/unit return from 1 July 2012 to 30 June 2013 - we've learn not expect too much from Trilogy, regardless what Trilogy spruiks.

Read all about it !!! :
http://www.moneymagik.com/info_letter_re_pacific_first_mortgage_fund.pdf

 

[RODENT69]

ASICK I refer to your last posting #578

As we know you are not an investor in any LM funds HOWEVER Piper alderman are asking "Investors" their views on prospective replacement RE's for LM. From the article at the weekend in AFR I would not be surprised if they think Trilogy is suitable, of course that's not desirable

Perhaps you might consider sending your summary notes / Link as per the last item in your posting to make it clear why many informed investors would not ever want Trilogy as an RE.

I don't know if other LM investors agree with what I am proposing here, or even if you agree? but I will be submitting a personal note to P.A. clearly indicating that I would not want Trilogy ever as the RE for all of the LM funds


Rodent69

 

[ASICK]

ASICK I refer to your last posting #578

As we know you are not an investor in any LM funds HOWEVER Piper alderman are asking "Investors" their views on prospective replacement RE's for LM. From the article at the weekend in AFR I would not be surprised if they think Trilogy is suitable, of course that's not desirable

Perhaps you might consider sending your summary notes / Link as per the last item in your posting to make it clear why many informed investors would not ever want Trilogy as an RE.

I don't know if other LM investors agree with what I am proposing here, or even if you agree? but I will be submitting a personal note to P.A. clearly indicating that I would not want Trilogy ever as the RE for all of the LM funds


Rodent69

G'day Rodent,

Darn, that meddling Piper Alderman. I was quite surprised that Piper Alderman were asking financial advisors to hold their proxies at the creditors meeting, what good could they do other than obfuscate the process?

Perhaps the lawyers would want an entity as manager that'd be more likely to do business with them? I'm sure FTI would be quite capable of running any proceedings on their own - that might not come as good news for Piper Alderman, no business, no money.

I'd like to think that Piper Alderman might be moved by:
http://moneymagik.com/info_letter_re_pacific_first_mortgage_fund.pdf

But like entities on this file:
http://moneymagik.com/crap_file.php

I don't think the issue for Piper Alderman is concern over Trilogy's past performance, I think it's more about making money off your problems. Piper Alderman probably wants to be the first lawyer to get "a foot in the door", but with FTI at the helm, I'd guess that's unlikely to be the case.

My views on Trilogy are clear:
http://moneymagik.com/three_part_trilogy_funds_management_tragedy.php

In particular why I wouldn't want Trilogy anywhere near any interest of mine (especially a litigation interest): http://www.moneymagik.com/litigation.php

All links are to public (disclaimed) documents - if anyone wants to send them anywhere, then they may.

Rodent, I would caution you to be careful dealing with (pushy) lawyers like Piper Alderman. If there is a wad of $$$ out there somewhere, then it'd be much better if a receiver is able to pursue it with your own (fund) money rather than give 30% - 40% away to a litigation funder thru the likes of Piper Alderman.

FTI will be well resourced to take care of all litigation - right now with the pending court applications, I'd say there's some "bent noses" down at Piper Alderman and Trilogy.

It was pleasing to see the article about FTI not wanting Trilogy anywhere near the LM funds (although I couldn't read the whole article) - I guess the article really set the stage for Trilogy's and Piper Alderman's respective roles as spectators.