The board of Connaught Asset Management is proposing to wind up its income fund series two, which is currently suspended from trading on the Channel Islands Stock Exchange.
Money Marketing’s sister publication Mortgage Strategy understands Connaught has also taken the decision to wind up its income fund series one fund. The income fund series one has assets of around £118m , while series two has assets of around £20m. Both funds are unregulated collective investment schemes.
There is also an income fund series three, which funds agricultural lending and has roughly £26m in assets, although this fund is not affected.
The board of directors met yesterday to discuss an auditor’s report into the future of the income fund series two, resulting in the decision to wind up the fund.
Bridging lender Tiuta is backed, in part, by both funds. Connaught will now take over the lender’s loan books associated with the funds. It aims to return investors’ money as the loans redeem.
Connaught announced in May that it had contacted investors to tell them the fund was unable to pay their scheduled quarterly interest payments after bridging lender Tiuta told the asset manager it would be late paying its own interest payments.
It was looking to resume normal dealing on the fund by May 14, after it had drafted in BDO LLP to conduct and audit of the income fund series two. However, the firm’s board of directors agreed at a meeting on May 21 to continue the suspension of the net asset value of the fund and the issue and redemption of units in the fund.
The FSA issued a warning to people who have invested in the two funds from Connaught in May 2011. The regulator said it believed the way they have been advertised could be misleading. Connaught changed the literature after the announcement.
Connaught chairman Mike Davies was the compliance officer of Tiuta, which pulled out of regulated mortgage business in May last year, between August 2008 and July 2010.
In light of the proposal to wind up the series two fund, the annualised interest rate payment to unit holders scheduled for July 2012 will not be paid.
The administrator will be returning any subscription monies received and held by it pending the next dealing day to applicants.
Earlier this week, Tiuta announced that it was launching a number of new products after securing a new funding line from a central London investment fund.