Independenttraded policies broker Australian Policy Traders (APT) has put forward an offer to rescue investors wanting to exit AM Corporation’s troubled Diversified Traded Policies (DTP) fund.
AM Corp’s DTP fund was wound down to a fixed term five-year fund earlier this year following liquidity problems after a run on the fund from investors wanting to exit.
Investors were then given the option to exit the fund, but were warned they could be hit with a 10 to 15 per cent discount to their unit price.
APT has now entered the ring with its offer of a five per cent cash subsidised exit strategy to investors who choose to exit the AM Corp fund and invest instead in a direct traded policy known as Traded Endowment Polices (TEPs) from APT. The five per cent cash rebate applies to 10 year TEPs, with 2.5 per cent offered on five year TEPs.
The offer will apply to investors wanting to take advantage of the DTP fund’s upcoming redemption window on August 9, 2002, as well as the previous June 7 redemption window.
According to APT managing director Brad Traynor, the distinct advantage of a direct traded policy investment for investors is owning the actual policy, rather than being part of a fund.
Additionally, direct policies can be sold back to the life companies at any time or re-sold back to the secondary market.
As part of the deal, APT is in discussions with AXA’s Summit Personal Super/Pension Master Trust for investors to roll over from the AM fund into Summit and buy direct TEP’s through that structure.
APT expects its offer to be available for the next three to four months.
Traynor says APT has been bidding up to $100 million on AM’s DTP fund since April on behalf of institutional investors in order to generate market liquidity. But he says there has been little, if any, response from AM Corp.
“AM has refused to supply basic information for us to tender and thereby offer unit holders the liquidity to get out of the fund. There is no guarantee that we can maintain this institutional bidding indefinitely,” Traynor says.
