AMP Capital is set to close one fund and rejig the investment strategy for three others that were caught up in a 2008 property-related freeze-out.
According to the February 9, 2015, version of the AMP Investment Fund (AIF) prospectus, which covers 23 AMP Capital products, as at April 16 this year the group will close down the Balanced Fund while converting the Conservative and Growth Funds to “invest in line with our responsible investment parameters”.
All three funds were exposed to the AMP Capital NZ Property Fund (NZPF), which froze redemptions in 2008 after its investment in a related company, AMP Capital Property Portfolio (APP) struck “liquidity issues”.
APP, which invested in a portfolio of New Zealand direct property, represented 95 per cent of NZPF assets as late as July 2014. After missing its first two-year repayment deadline in 2010, APP established a new “redemption queue”, which paid out all requests by January 2012.
In July last year AMP Capital sold its $1 billion direct property portfolio to Canada’s Public Sector Pension Investment Board with about $230 million of the proceeds due to flow to the NZFP following settlement of the deal in November 2014.
NZFP will now invest in a “passively managed low tracking error portfolio tracking the NZX Property Index and the S&P/ASX 200 A-REIT Index”, the fund’s December 1, 2014, amended prospectus says.
However, the NZFP – along with APP co-investors AMP Life NZ Investments and the New Zealand Superannuation Fund – could still be on the hook for further payouts after agreeing “to guarantee (on a several, not joint, basis) certain of the vendor’s obligations under the Agreement, and indemnify the purchaser if those obligations are not met by the vendor”.
The guarantee extends for 18 months after settlement.
AMP Capital could “depending on the circumstances” indemnify the NZPF against any claim under the guarantee, the December property prospectus says. However, AMP also provided the purchaser with a “comfort letter” agreeing to freeze NZPF redemptions if repayment request would see the fund’s assets fall below $50 million.
As at December 1 last year the NZPF reported $140.5 million under management, down from $235 million in March 2014. At the same time, the to-be-closed Balanced Fund shrunk from $1.2 billion in March 2013 to $19 million in December 2014. The Conservative and Growth funds (both due to be relabeled under the Responsible Investment Leaders banner) reported funds under management of $9.9 million and $5.4 million respectively in December last year, down from about $720 million and $880 million as at March 2013.