East Coast blames GFC, govt
INVESTORS are "responding calmly" to the latest local mortgage trust to come unstuck in difficult economic times, with many accepting that the days of such funds are numbered.
East Coast Mortgage Trust chief executive Scott Collis announced that the $150 million fund would wind down and close its doors after a "difficult few years" following the global financial crisis and the Federal Government's controversial decision not to guarantee trust deposits.
He said investors were "reacting well" to the announcement which the trust hopes will see 90% of capital returned to them.
"It is early days of course, but we felt that our investors wanted and deserved a clear direction and by and large that's how it's been received - relatively calmly with an understanding of the wider economic issues that are driving the decision," he said.
Semi-retired accountant, Frank Knudson, described it as a prudent decision in a peculiar situation, and, despite having a proportion of his and his wife's superannuation funds invested with East Coast, was sympathetic to its woes.
"They're in a bad position because they've had a few big loans where people have fallen foul of the economic crisis," he said.
"If the economic conditions were fine (and) it was just a case of (investor) mismanagement there wouldn't be a problem because I know the (loan valuations) weren't high.
"I think they've done the right thing by keeping people informed of the situation - I think they've attempted to the best of their ability to maximise returns to investors but falling outside the government loan guarantees has left them vulnerable to this.
"I've dealt with them for the past 15 years and I couldn't speak more highly but in my opinion, this sort of trust, under the current environment of government regulations, is not (sustainable)."
Mr Collis agreed, saying many trusts were in the same boat.
"It's difficult to see a future for this sort of model that has operated well for a long time - the world's changed and we've got to be real about that," he said.
"But it's not about walking away, there's a lot of work to do yet. It was an extraordinarily difficult decision for a business of this age but we think it was the right decision."
In May last year, the Northern Rivers' largest mortgage trust, Mayne Investments Ltd, froze funds because of nearly $30m in outstanding loans and ceased distributions for the first time in its 42-year history.
Nervous investors wait on quarterly capital repayments at a mere seven cents per unit.