Hubbard Management Funds investors get their money back, without interest
By Paul McBeth
Sept. 1 (BusinessDesk) - The 300 or so investors in Hubbard Management Funds have been repaid the $35.6 million capital they initially invested after a five-year statutory management, where the administrators had to pick apart "poor accounting records" that inflated the fund's value.
Statutory managers Trevor Francis, Richard Simpson and Graeme McGlinn of Grant Thornton have wrapped up their administration of the fund, which they assessed had a value of $47.7 million in June 2010 when they took control of the portfolio, less than the $82.8 million value that deceased Timaru financier Allan Hubbard ascribed to the fund in March of that year. For their part, the statutory managers were paid $4.5 million in fees and disbursements on the HMF portfolio, with a further $2.6 million going towards legal fees, $1.1 million to other third party disbursements, and $1.2 million on GST.
"The statutory managers had to follow an exhaustive and slow process of reconstructing the financial records of every investor, back to the launch of the fund, to separately establish what assets the fund actually owned, unravel related party transactions and loans, seek court direction on the methodology to determine what investors were entitled to, and take time to sell assets to achieve the best possible outcome for the investors," they said in a statement.
In effect, investors who may have had funds invested with HMF for extended periods of time have had their original capital returned, but without earning any return.
Former Commerce Minister Simon Power appointed the statutory managers of deceased Hubbard and his wife Jean, and various entities, in mid-2010. The HMF entity emerged from their investigations into Aorangi Securities, another Hubbard vehicle. The appointment controversially left out Hubbard's primary entity, South Canterbury Finance, which ultimately cost the taxpayer an upfront bill of $1.7 billion when it failed, triggering a claim against the deposit guarantee scheme established by the government amid the 2008 global financial crisis.
Aorangi Securities' administration was completed last year with a 99 percent recovery, worth $101.2 million, for 400 investors. Across the entire Hubbard administration, the Grant Thornton managers racked up fees totalling about $10.5 million.
Earlier HMF distributions overpaid investors by about $2.2 million, and left 203 investors entitled to the capital pool established by a 2012 court ruling.
Complicating the reconciliation exercise for the managers was that HMF's biggest investor, who had a close relationship with Hubbard, was given HMF statements covering their entire position with the Timaru businessman, including transactions not only in HMF, but also Aorangi, Southbury and South Canterbury Finance and other investments.
A further $9.9 million was needed to meet contractual calls on capital on investments, and settle claims with third parties, which meant there was a net loss of $5.7 million on the $51.9 million generated from investment sales.
"Virtually all HMF investors have incurred a shortfall from what was reported to them by Mr Hubbard on statements," the managers' report said.
The managers have applied to have their appointment terminated, which will hand back the nominee companies under administration to their shareholders.