Provident Capital rating withdrawn over financial concerns
SQM Research (SQM) has withdrawn its rating of the Provident Capital Monthly Income Fund due to concerns over the manager's financial position.
This follows two months on from SQM down-grading the fund in April from 3.75 stars to 3.25 stars with a watch for a rating change.
"This withdrawal of the rating and the report is a direct result of ongoing deterioration in the manager's financial position … and a lack of satisfactory communication from the manager on the current status of the responsible entity managing the monthly income fund," SQM stated.
"While SQM Research still has the opinion that the Provident Capital Monthly Income Fund is in an acceptable financial position, the ongoing decline in the financial health of its manager cannot be ignored," SQM stated.
April's downgrade followed Provident Capital's half-yearly report which was released 19 March 2012 and revealed a loss of $9.1 million for the six months ending December 2011, according to SQM.
This represented a significant change from $0.8 million profit for the six months to December 2010, and $1.2 million profit recorded in the 2011 financial year, SQM stated.
The loss was driven by impairment expenses, with the company writing off $14.9 million in the six months to December 2011, and SQM said the company was at an elevated risk of further impairment expenses if the property market deteriorated further.
SQM was also concerned by concentration within the loan book and a high proportion of arrears being older than 180 days.
SQM managing director Louis Christopher said the fund would be likely to survive in the event of a wind-up of the company, and that the best scenario for the fund would be for a new manager to take it over.
Recommended for you
Shaw and Partners has merged with Sydney wealth manager Kennedy Partners Wealth, while Ord Minnett has hired a private wealth adviser from Morgan Stanley.
Australian investors are more confident than their APAC peers in reaching their financial goals and are targeting annual gains of more than 10 per cent, according to Fidelity.
Digital advice tools are on the rise, but licensees will need to ensure they still meet adviser obligations or potentially risk a class action if clients lose money from a rogue algorithm.
Zenith Investment Partners has lost its head of portfolio solutions Steven Tang after 17 years with the firm, the latest in a series of senior exits from the research house.
