Trilogy Funds Management - an alternative RE?
http://www.financialstandard.com.au/news/view/23168892
"Overseas Demand Replacement of LM as RE"
We should keep in mind that these articles about Trilogy are not from the ether - they're media releases. When Trilogy ran for the PFMF they used Shed Media:
http://www.shedmedia.com.au/portfolio-item/trilogy-funds-management/
Both of LM and Trilogy will probably use media companies.
A couple of excerpts from the Financial Standard "article":
"... All these investors want LM out; they want openness, a simple, professional wind-down of the funds and return of their capital," said Bacon."
"The proposal to unitholders suggests an orderly wind-down (but no fire sale) of the Main Fund's assets and then capital distributions to investors in the Main Fund and through it to the two feeder funds - the Wholesale Fund and Currency Fund."
Of course, these are words investors love to hear: "orderly wind-down" - "no fire sale" - "capital distributions", but there is a stark reality, and that's the once dubbed "fire sale" from the growth days is the norm in the current market - there's no great competition for probably all of the assets in funds like the LMFMIF and PFMF - just about every sale is a fire sale - to my mind, a simple fact of life - and it won't matter a hoot who's the manager - it'll depend solely on market demand, something that does not exit at this time.
Balmain Trilogy defined a fire sale so it's very easy to see if Trilogy made any fire sales (yes, they said no fire sales in the PFMF too!) - here's the definition:
http://www.moneymagik.com/fire_sale_defined.mp3
Here's an example of an offer and subsequent sale:
http://moneymagik.com/the_entrance_in_one_line.php
What do you think? Was that a fire sale? (as defined by Balmain Trilogy)
Here's an example of offering up the fund's most valuable asset:
http://moneymagik.com/martha_cove_ad.php
How about this one? Contemporaneously with the highlighting of the ad on
www.moneymagik.com, the ad was withdrawn.
Fund value (including capital returns to investors) is a reflection of asset value and actual sale values. The PFMF lost 51% in the 2012 financial year - overall since Trilogy took over the PFMF in July 2009, the fund has lost 56% of the value started with - City Pacific lost 52%. As a % of starting value, Trilogy lost MORE than City Pacific (yes, I know the value lost under City was greater, but if the positions were reversed, it's my view that City Pacific would have still performed better).
Then there's the capital distributions - ah! the punters loves this - we heard all this crap from Trilogy when they run for the PFMF - while there's a number of media releases (which I'll find an post here in due course) spruiking hope, I've complied the following as a record of Trilogy spruiks while RE of the PFMF:
http://www.moneymagik.com/yardy_yardy_yah.php
The LMFMIF (like the PFMF) has debt - and when things go pear-shaped, debt has as least three nasty aspects to it: (1) the lender exerts control over the fund, (2) the lender stands first in line, and (3) the interest on debt is nearly always higher or much higher than one could earn with the same value of money.
Punters want capital repayments, so will want to be paid out in preference to the debt, and sometimes the lender will permit this with quite strict conditions - if this happens, it's my view that the RE would be quite pleased - because if the debt is paid down first, punters will be screaming for the return of capital, that means a rapidly reducing fund value, the very value on which the RE's fees are calculated.
On the other hand, if punters are paid out first (at the start), the RE isn't pressured by members to write down the debt, and there's a nice little fee earner in that that static value of facility debt. Of course, I say "at the start" because sooner of later the lender will become increasingly concerned and exert its right to have more and more of monies derived from sales directed to the repayment of the facility (in preference to repayment to members) - I think there will always be such a time.
Here's an exchange between an investor and Andrew Griffin at the Sydney Info session in November 2010 about repayment of the bank debt - listen to how Griffin justifies paying investors ahead of the bank:
http://www.moneymagik.com/show_of_hands.mp3
You'll hear investors clapping after Griffin's spiel - I couldn't imagine that any business-minded person in the current climate would clap to support maintenance of debt - but there you have it.
In over THREE YEARS as manager of the PFMF, Trilogy returned only $0.0875/unit and even at 1.62% fee (1.5% management fee + .12% fund expenses) racked up about $17m in fees (investors were repaid only $78m) - as a %, the management fee represented 22% of the return to investors.
Trilogy represented $0.04/unit every April and October with additional payments in between:
http://www.moneymagik.com/re_cash_balance.mp3
(Andrew Griffin of BT at the Sydney Info Session in November 2010)
Trilogy is down to paying member $0.0075 every six months. The payments are listed here:
http://www.moneymagik.com/yardy_yardy_yah.php
Then there was the representation about the 'targeted' $295m to be repaid by 31 October 2012:
http://www.moneymagik.com/295_million.mp3
(Andrew Griffin of BT at the Sydney Info Session in November 2010)
The $295m did not include the majority of Martha Cove (valued at about $86m as at 29 February 2012):
http://www.moneymagik.com/disgorge.mp3
(Andrew Griffin of BT at the Martha Cove Info Session in April 2011)
Note the words, "get rid of", "disgorge".
However, just weeks away from the target date, Trilogy is $216.20m short of the $295 - and Martha Cove isn't included - However, the WHOLE fund is valued at about $108m now ($115m ($0.13/unit * 887m units) - $6.6m repayment to investors after 30 June 2012) - That's less than the $110m Griffin spoke to as being most (not all) of Martha Cove in April 2011 !
Trilogy hasn't spoken to the $295m in OVER ONE YEAR now - so much for openness. I would think there's probably thousands of investors out there that still haven't clicked to the reality that they're not going to get the spruiked $295m by 31 October 2012 - still many who don't realise that, under Trilogy, the fund has lost 51% over the past year - and why? well, because they don't have the return yet - and as of yesterday, just like the LMFMIF, Trilogy hadn't filed the PFMF's 2012 return with ASIC.
As of April 2011 the future, according to Griffin, looked like this:
$295m repaid to investors by 31 October 2012 + $110m for Martha Cove
Total $405m
The real world seventeen months later:
as at 10 October 2012, a fund value of about $108m + about $77.6m repaid to investors
Total $185.6
So, the "orderly wind-down", while sounding like some clinic, methodical, value-maximising process is a lot of crap - it's really "getting rid" or "disgorging" assets - and some of that might include sales "in one line" - and, if it's anything like our experience in the PFMF, there'll be a lot of spruiks, and there'll be many, many disappointments.
Then may be the lure of "litigation" -
http://www.moneymagik.com/litigation.php
In the case of the PFMF, at 1 September 2010 it was "more than $300, more than enough", in November 2010 reduced to "a hopeful $100m", on 7 December 2010, "could exceed $100m", "perhaps even more", by April 2011, "an utopian result of $100m", and by April 2012 an actual claim for $60m against five ex-directors of Citypac.
Since then, they seem to have discovered that one of the directors had died two years ago - he was discontinued against, but Trilogy wasn't "open" about that discontinuance. Now we have Phil Sullivan alleging that there's no insurance because, among other things, Trilogy pay the premiums on run off policy.
It's all on
http://www.moneymagik.com - have a read.
Then there's Trilogy's Healthcare REIT - After spending nearly $500k of investors money, Trilogy gladly accepted $3,555,000 from new investors for units at an issue price of $1.00 per unit (3,555,000 units) when those units had a current value of only $0.63 (2009).
Trilogy did better in 2010 when it receipted $129,600 for unit with an issue price of $1.00 (129,600 units) when those units had a current value of only $0.60 - The massive and immediate loss of $1,315,350 suffered by the new investors in 2009 mitigated the loss for the fund in 2009 (hence only a $0.03 drop).
http://www.moneymagik.com/analysis_REIT.php
Then there's the Dee Why fiasco - have a read of all the facts on the Dee Why fund and the Heathcare REIT on:
http://www.moneymagik.com/
An investor in that fund sent us a heap of documents - I'm sure that members will find the published documents to be more than interesting - MDRN Investments Limited (now known as Trilogy Funds Management Limited) sure had some interesting associations back in ol' days - like Laton Capital and Laton Corporate Finance - have a read, I'm sure you'll be intrigued.
and Philip Ryan's breach of trust at:
http://www.moneymagik.com/trilogy1.php
The front page is quite long and the comment about the two funds, Philip Asley Ryan, the genesis of Trilogy, and how Trilogy became manager of the PFMF is further down the front page.
I fully realise that much of this is circular, but I think it's necessary to continually remind investors of these REs' pasts. When these "raiders" (for want of a better word) come to the fund, they don't come with full disclosure, they come spruiking all the things investors want to hear, "no fire sales", "orderly wind-down", "return of capital" - but it's all about fees for them - it's business, plain and simple.
Be careful - the spruik and reality may very far apart indeed. I think if Trilogy is the option, then it's better to try to come to a deal with LM - let them get the fund out of the mess they've put it in - let LM give you want you want - and if they don't, get together and seek a court order to wind up the fund.
Sadly, if all the foregoing isn't enough, there's more to complain about Trilogy - sometimes I wonder how it's possible - but to date, every time I think I've reached all there is to write about, another issue of interest arises - such is life when one is minded to delve into Trilogy Funds Management Limited.