Re: Octaviar MFS Premium Income Fund PIF
.....The difference being that I did not try to mislead!!!
.....The difference being that I did not try to mislead!!!
I know JH gives the impression at members meetings that she is running the PIF for nothing until management fees kick in but WC are able to take all expenses out of the fund. They do not have to wait till they have paid us our 3 cents, and on top of this were given $3,750,000 to help run the fund. It’s likely WC are charging the PIF charge out rates which earn WC a margin so no need to feel sorry for WC. The .7% they will get in management fees is pure cream as even the tax they pay on it can come out of the fund.
John, in your post #2967 you also commented inline. Don’t be so petty.
On top of the $16,091,892.00 management fee paid to MFS in 2007 they also received $821,250.00 in Administration costs as well as any surplus in the fund after all costs were met. I think JH was pretty safe in saying WC would not be taking any of the surplus anytime soon! SeamistyI was of course aware that the published fees are 0.7% per annum however as Dora has pointed out that represents Fees before costs.
I based my analysis on the average of a range of these type of funds I have invested in over the years
However I am more than happy to stand corrected and be enlightened in this matter
The average expense rate for personal superannuation funds was 2.12 per cent at the end of 2006 down from 2.30 per cent in 2004, according to Rice Warner's recent Superannuation Fees Report published on behalf of IFSA.
Rice Warner quotes increased average balances and strong market performance as the key drivers of the reduction in fees over the past two years. Some super funds charge lower fees on higher investment balances, which would reduce the average fee paid.
The average expense ratio is split across administration costs (0.80 per cent), investment management costs (0.77 per cent) and adviser costs (0.55 per cent). Advisor costs are based on sample data of commissions actually paid from several financial institutions.
The types of fees charged on personal super varies from fund to fund and will depend on the investment options you choose amongst other things. So, it's important to compare fund fees before you invest. Look at things like contribution fees, adviser commissions and management fees as these can all add up over time.
I would much prefer WC at the helm charging 0.7% per annum(inclusive of GST) of the gross assets under management, which will not take place until unitholders have received their 3cent divvy than what Citi Pacific are paying!!!:::: The parent has just booked $71 million in "fund management" fees for the year to June, even though investors in its funds can't get their money back and receive no distributions::::: and this was based on 1 billion dollars of original investment, I have no idea what the current valuation is worth. Do your sums and dry your eyes, at least we have a RE who is working on keeping the PIF as a going concern, lets all hope it is not temporary.SeamistyHi seamisty,
Your interpretation may be correct however you have not addressed the major issue brought up by Jadel namely the outrageous fee of over $40 m to manage 32 mortgages and dispose of them in a 5 year (approx) period. Not bad hi?? I am sure many would have gladly taken that on and, even after paying the appropriate people to manage it, could have made a handsome profit!!
I was of course aware that the published fees are 0.7% per annum however as Dora has pointed out that represents Fees before costs.
I based my analysis on the average of a range of these type of funds I have invested in over the years
However I am more than happy to stand corrected and be enlightened in this matter
The average expense rate for personal superannuation funds was 2.12 per cent at the end of 2006 down from 2.30 per cent in 2004, according to Rice Warner's recent Superannuation Fees Report published on behalf of IFSA.
Rice Warner quotes increased average balances and strong market performance as the key drivers of the reduction in fees over the past two years. Some super funds charge lower fees on higher investment balances, which would reduce the average fee paid.
The average expense ratio is split across administration costs (0.80 per cent), investment management costs (0.77 per cent) and adviser costs (0.55 per cent). Advisor costs are based on sample data of commissions actually paid from several financial institutions.
The types of fees charged on personal super varies from fund to fund and will depend on the investment options you choose amongst other things. So, it's important to compare fund fees before you invest. Look at things like contribution fees, adviser commissions and management fees as these can all add up over time.
Can one of you legal eagles please answer this question:
If the class action that is seeking to determine when the PIF became insolvent and persisted in trading....(maybe April 2007) succeeded, would all investors who bought into the PIF post that date be paid out in full?
If this is so, what if they had sold their shares? That would be a double whammy to the PIFinvestors left behind, because the new share-holder would be entitled to their $1/unit, if it ever gets to there, and the original investor would also get paid out!
Scary stuff....or am I wrong here? What is their chance of succeeding here; I know Jenny is defending it vigorously, BUT!!
As there is now so much criticism of Wellington's supposed fees, it is interesting that you have omitted to mention that their estimate for "other management costs" is just .32%. This is inclusive of GST and is for the TOTAL other costs for managing the Fund.
Admittedly this is an estimate, but one could assume that if this is exceeded substantially it would be grounds for dismissing the RE without the 2% compensation.
When you compare this with the fees you have quoted above, a total of just 1.02% p.a. paid monthly and based on the value of the fund for the prior month seems extremely reasonable to me. This is particularly so when you take into account the antagonism which is forthcoming from a section of unit holders and resulting extra expense .
"...............source Explanatory Memorandum section 7.1
Hi John,
You're right, WC did give an estimated figure of 0.32% of gross value of the assets of the Fund for the ongoing costs of managing the Fund.
They stated in the EM that "as at May 31 2008, the value of the assets of the Fund was $413mil. Based on this amount, the RE forecasts the total other costs for managing the Fund to be $1.32mil. Included in this amount are accounting, audit, custodian & compliance committee costs."
In 2006 the management costs of the Fund (excluding finance costs) were $2.2mil. As at June 2006, the gross assets of the Fund (as per Balance Sheet) were valued at $886.7mil. Therefore, management costs were 0.25%
In 2007 the management costs of the Fund (excluding finance costs) were$7.7mil. (there was a huge increase in fees & commissions). As at June 2007, the gross assets of the Fund (as per Balance Sheet) were valued at $395.7mil. Therefore, management costs were 1.95%.
What will the valuation of gross assets of the Fund be at June 2009 ? In regards to the management costs, commissions will obviously be down, but custodian, registry, accounting, auditing, insurance costs should remain pretty much the same as 2007. Legal fees will certainly be higher.
WC's estimates and forecasts are way out of the ball park !
Interesting to note your comments re: grounds for dismissing RE without the 2% fee.
............ I think you are a year out........ surely that should be 2007 and 2008 - not 2006 and 2007 ----------- and although you mention "a huge increase in fees" you don't mention a huge decrease in RE's fees!
Thank you for the correction JohnH, you're quite right I am a year out (I've lost a year somewhere ! LOL).
However, I have not mentioned RE fees and these fees have not been taken into account in my calculations, as the RE fees bear no relevance to "other management costs" - this is what your post was referring to.
Also the decrease in fees is due to the fact that during these years, RE fees were performance based.
Getting back to the point - in 2008 "other management costs" were 2.2%. For WC to forecast 2009 "other management" would be 0.32% is very hard to believe !
Well, as Jadel says let's hope that they are correct!
Hi John, thanks again for your reply.
I just cannot subscribe to the "cross your fingers & hope" method of financial analysis and financial management.
In my opinion, it is crucial that financial management, analysis and planning should be based on factual information, and after looking at facts, it is too hard to believe that WC's forecasts and plans are achievable.
On another topichttp://www.nsxa.com.au/ftp/news/021720763.PDF
...
I think this next one is saying WC have spent the entire $3mill in 4 months and yet the the above document says they only expect yearly expenses to be $1.32 mill. I suppose the forums (in which I consider I was mislead) were not cheap.View attachment 25708
The explanatory memorandum says:In the event the Call Option is exercised, the purchase price payable by Wellington capital for the acquisition of Octaviar Investment Management will be equal to:
*A multiple of four times the actual profit of Octaviar Investment Management for the 12 months period following the acquisition; plus
*the value of the net tangible assets of Octaviar Investment Management at the end of that 12 month period.
The judge asked WC on Sept 17 why they wanted to retire WIM and WC said the only reason they would give is to simplify operating arrangements within the Wellington group. Perhaps it slipped their mind that they could be saving millions of dollars by ensuring WIM didn’t make a profit or even exist by the end of the financial year.It is the intention of WIM to retire as RE of this fund and another two funds and to cease to be a licensed RE once all relevant steps have been taken to appoint WC as RE to three of the current funds and the winding up of the other two has been finalised….
Section 601FL of the Corp Act provides that if a RE of a registered managed investment scheme wants to retire, it must call a Unitholders’ meeting to explain its reasons for wanting to retire and to enable Unitholder to vote…”
But also looking at the alternatives, or more importantly the lack of tangible alternatives, - better the devil we are about to know than the devil we don't.
Hi JohnH,
Hate to disagree again (& I hope you see this as a discussion rather than an argument, as I am sure we are both after the same outcome), but I believe the "devil we don't know" would be an independent RE or Administrator - and of course this was not an alternative presented by WC.
That is, a company that has no ties or relationship with MFS/Octaviar, McLaughlans Solicitors, McCullough Robertson Lawyers, or any Financial Advisor companies (I attended the first WC forum on GC where Paul Manka was a part of the team that stood up to give a speech).
A truely independant entity that Unit Holders can feel confident in, in believing that the management of the PIF will be conducted in the best interests of Unit Holders (no one else). I'm sure that the fees charged by an Administrator over 3 - 5 years would be comparible (possibly less), that what we're looking at now. On top of this, an Administrator would not have listed the Fund and people who are now experiencing extreme financial hardships would be able to redeem part of their investments under the new ASIC rules.
Comments are still being made about the lack of alternatives, the alternatives were always there, it is up to Unit Holders to agree to want to pursue them and accept them.
Hope this makes sense.
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