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Shepherds admits bleak future as contract is lost

Boutique fund manager Shepherds admits the future is bleak after losing the contract to run the 27m Cayman Islands-based Shepherds select funds.

This only leaves Shepherds’ Tep business, which has registered heavy losses in the past two years, and Shepherds foun-der Michael Abraham admits the future is bleak, with the firm likely to be a one man-band at best by the end of the year.

As reported in MM last week, most of the $40m assets in Shepherds’ Cayman Islands-listed traded life fund have been frozen by US receivers after MBC, the market-maker through which Shepherds bought 85 per cent of its policies, was put into receivership.

Shepherds has been fighting a legal battle to free its assets and has secured $8m from receivers which had been held in a ringfenced fund to pay the premiums on the policy holdings. Coupled with $1.7m on deposit, Shepherds has secured almost $10m back for investors.

Although no longer working for the Cayman-domiciled fund, Abraham remains a director on its Isle of Man feeder fund and remains hopeful that the remainder of investors’ money can be returned. MBC, a licensed market-maker, was hit with fraud charges last May by US regulator the Securities & Exchange Commission a year after Shepherds started placing business with the firm.

Abraham says a class action is trying to free the remainder of the clients’ money, which is held in policies still frozen by the Florida receivers, but should be safe given that it is ringfenced. There is sufficient cash to pay the policies up to August 2007 beyond the average life expectancy and about 176 policies held have since matured, paying death benefits but these remain ringfenced.

Abraham says: “The future for Shepherds is bleak. I do not know how the receivers can freeze policies sat in trust but our lawyers have put forward a motion to free them.”

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