Investors in the distressed Wellington Income Fund have approached Castlereagh Capital to take control of the fund and eject its management team.
The PIF Action Group, which represents 27 per cent of investors in the fund, stated in a letter to investors that it believed the continuing poor financial performance of the fund would be improved with the replacement of the current responsible entity and manager, Wellington Capital. It added that Castlereagh had the necessary combination of experience, independence and skill to produce the best outcome for investors.
The action group sent investors an information booklet that outlined reasons as to why it believed Wellington was unsuitable. The reasons included the assertion that Wellington failed to help fund members pursue claims for up to $400 million (over 50 cents per unit) against the fund’s former auditors, responsible entity and some of its directors. The group stated there was also no explanation regarding the 74 per cent discount between the trading price of units and their value as reported in financial statements, and why no strategy had been articulated to reduce the shortfall. There was also inadequate explanation as to why Wellington recently sought to raise $33 million in an environment where it had advised half of the assets of the fund or in excess of $120 million were to be taken to market later in the year; and why Wellington raised $11.3 million from unknown third party investors without unit holder approval, and was doing so at a 70 per cent discount to the value of the fund.
“The issuance of units at a discount of more than 74 per cent without our consent, and in breach of the Constitution and the Corporations Act, astounds us,” said PIF Action Group president, Charles Hodges.
Castlereagh chairman Ian Ferrier said that if appointed, Castlereagh would focus on reducing the substantial discount to net tangible assets of the fund and develop viable turnaround strategies for its assets. Ferrier noted that many of the investors were retirees and a timely and value-maximising strategy was crucial.
