Investors in the £118m Connaught Income Series 1 fund have slammed the asset manager for not notifying them when it discovered bridging lender Tiuta, which used the vehicle as a funding line, had suffered “significant trading losses”.
Last month, Money Marketing revealed investors in the Ucis fund, which was suspended in March, could face losses of 50 per cent. A decision to wind down the fund was made in June. Independent adviser Duff and Phelps says Connaught stands to recover between £46.5 and £53.2m of the £105.5m used to fund Tiuta.
On 8 April 2011, Connaught sent a quarterly report to IFAs stating the risk of equity loss was “low”. However, it failed to mention that Tiuta had informed Connaught in February 2011 that it had suffered significant losses.
Connaught says it posted an updated report on its website on 28 April 2011 which admitted it was made aware of Tiuta’s losses in February 2011 but it was satisfied the fund was “appropriately secured”. The firm has confirmed it did not send the updated report to investors or IFAs.
Connaught declined to comment on why it did not flag up the new report.
Last month, Money Marketing revealed Tiuta made a pre-tax loss of £37.8m in the 18 months to 30 September 2011.
An investor, who wishes to remain anonymous, says: “We would have expected Connaught to notify us if the risk profile in the investment had changed. It looks to us very much like a rather ham-fisted attempt by Connaught, long after the event, to cover its back and make it look like it notified us of the risks at the time, when in fact it did not.”
Yellowtail Financial Planning managing director Dennis Hall says: “If anything significant happens with a listed fund, you have to tell the stockmarket. Being an unregulated fund these rules do not apply. Enough fingers have been burned using these vehicles.”
A Connaught investors’ meeting is being held this week to vote on recovery options.