Major wealth managers, including Colonial First State (CFS), Axa Australia and Australian Unity, have been forced to contact advisers after Direct Share Purchasing Corporation (DSPC) made unsolicited offers to buy frozen mortgage fund units at a 20 per cent discount.
“We have been advised that DSPC has offered to buy units in [the CFS Mortgage Income Fund] for 80 cents per unit, paid as a lump sum,” CFS general manager of distribution Marianne Perkovic told advisers and investors in documents obtained by InvestorDaily.
“We have been advised that this offer will not be made to all fund investors and may be the first in a series of offers.”
CFS suspended its $852 million Mortgage Income Fund in October 2008 and decided in February 2010 to terminate the product and return all proceeds to investors via quarterly payments by 2014.
“The offer may be for an amount less than the total amount investors could expect to receive from us over time,” Perkovic said.
“CFS is concerned your clients may accept this offer without understanding the ramifications.”
Perkovic also warned that DSPC, run by Australian businessman David Tweed, was known for “having made offers considered to be below value to investors in other companies on previous occasions”.
In the past, Tweed, through his other firms, has made unsolicited offers for shares of companies including Commonwealth Bank of Australia, ANZ, AMP and Axa at a significant discount to their worth at the time.
A CFS spokesperson said the company had urged investors to speak to a financial adviser prior to accepting any unsolicited offers.
Australian Unity head of investments David Bryant confirmed DSPC had approached the company and requested its unit-holder register.
“I can confirm that we were approached through DSPC and again, because of the Corporations Act rules around these sorts of issues, we have no [choice] but to provide the unit-holder register,” he said.
“And we have subsequently written to our investors and advisers that they might receive an offer.”
“We are not aware at this stage of our investors or advisers having received an offer or contact from either DSPC or Tweed.”
Australian Unity’s Wholesale Mortgage Income Trust offers monthly withdrawals and had $465 million as of August.
DSPC also requested access to Axa’s unit-holder registry information, an Axa spokesperson confirmed.
“Axa has written to its clients to make them aware of the offer,” the spokesperson said.
“Axa’s Australian Monthly Income Fund has not experienced any losses on its loan portfolio and we remain confident that we will provide unit holders access to their full account balance within the next four years, should they wish to exit the fund.”
“Therefore, discounted offers such as this may not be in a client’s best interests.”
It is understood DSPC requested the unit-holder register of Challenger’s Howard Mortgage Fund.
It is believed it had not contacted Challenger’s unit holders, but Challenger had warned advisers and investors that Tweed might approach them with an unsolicited offer.
ASIC in 2006 banned Tweed from permanently providing financial services, stating that he was not of “sufficient fame and character”.
Almost $15 billion was frozen in mortgage funds as of July, according to research house Morningstar.
