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BOV property fund loses €50 million after Jersey firm enters into liquidation
Bank of Valletta chooses silence as ‘low-risk’ property fund gets depleted by €50 million.
6 August 2010, 12:00am
Matthew Vella
Matthew Vella
4 min read
Bank of Valletta are facing claims of having overlooked serious shortcomings in a property fund once valued in excess of €84 million, and which today has been depleted by major losses to the €30 million – of which only half are liquid.
The Multi-Manager Property Fund, which is managed by Valletta Fund Management, itself owned jointly by BOV and Insight, invested money in what should have been the best pick of real estate property funds from around the world.
Hundreds of Maltese retail investors are believed to have had their investments reduced to less than 25% of their initial investment.
The fund was portrayed as ‘a low-risk fund with low volatility’, giving good returns even when bonds or equities do badly.
A €17 million investment in the Belgravia European Property Fund has lost in excess of 90% and is today estimated at €1.3m, while other investments originally valued at some €47 million have fallen to €18.5 million.
A detailed judicial protest filed by Finco Treasury Management has revealed how BOV was not transparent with shareholders when it failed to disclose that the Belgravia fund’s directors were being criminally investigated for fraud by the Jersey police, and that its shares had been suspended by the Jersey Financial Services Commission.
Finco claimed that after becoming aware of the alarming events, VFM “misled investors and failed to inform them fully of all relevant developments in an honest and transparent manner.”
Indeed, a 2009 directors’ report by VFM limits itself to saying that Belgravia’s three funds “continue to be suspended however there have been a number of positive developments.”
Bank of Valletta, which as custodian had to monitor that the fund respects the prospectus investment restrictions, issued clean custodian certificates for three years in succession.
While fund rules limited the exposure of debts to 100% of the net assets, the Belgravia European Property Fund had a gearing of 1286%.
“BOV, as custodian of the fund, acted negligently without the necessary skill and care, and in flagrant breach of its obligations as it failed to supervise and monitor the funds’ compliance with the investment restrictions…” the judicial protest said.
Now investors in the fund will only be able to recover an estimated price of €0.26c for every share, when only two years ago the price was around €1.13 per share.
“In the light of all the information that VFM had in its possession, including the fact a criminal investigation was underway… VFM misled claimants when it led them to believe the property fund would be in a ‘position to liquidate its holding and inject liquidity into the fund’,” Finco’s judicial protest said.
Not even a set of “clean audited accounts” were presented by VFM to account for its Belgravia investments. Even Bank of Valletta, as custodian, failed to report this breach of the prospectus to the Malta Financial Services Authority.
Press reports since 2003 also gave a hint into Belgravia’s negative record, amongst them a number of failed businesses such as Glow Telecom, Unofon and Fix Telecom, and failed takeover bids for Newcastle and Notts County football clubs, which bids were not approved by he English FA in view of their lack of transparency.
BOV and VFM statement
In a statement, Bank of Valletta and Valletta Fund Management said that they have kept the developments of the Property Fund under constant review, and that they are fully aware of the performance of the Fund and of the developments concerning the underlying investments held by the Fund.
“The Fund has been adversely affected by the negative performance of the property markets and by other factors. However, VFM and Insight Investment Management (the appointed sub-Investment Manager of the La Valette Multi Manager Property Fund), have constantly been proactive in taking all the necessary legal advice and other measures to ensure that the interests of the shareholders of the Property Fund are fully protected.
“The Board affirms that the Property Fund shareholders are kept informed of developments on a regular basis, and the board of directors of the La Valette Funds SICAV plc, together with VFM, are committed to continue to communicate with shareholders of the Fund through the appropriate official channels, in order to keep them fully updated with further developments. “The relevant regulatory authorities have been kept fully informed of all these developments.”
BOV and VFM said it not be issuing any further public announcements.
Matthew Vella, a freelance journalist at MaltaToday, was formerly executive editor at Malt...
George Caruana •
Finco as the advisers who reccomended this funds should had the necessary skill and care to advise its clients to move out when the overseas property markets started to decline ( back in 2007), at that time the fund was still accepting redemptions. Moreover upon selling this fund Finco pocketed a good amount of commission, so as a sign of goodwill and lack of skill from their part, they should return these commissions to their investors.
Keith Goodlip •
BOV don't really give a toss, it's NOT their money which has gone down the tubes.
Alfred Falzon •
as usual caught napping!!!!!! well i doubt if it was ever awake....or is ~BOV a similar case of too big to fail but instead though too big to handle
Let me reveal one thing i doubt wheter mfsa has competent people to be able to analyse such financial strategies. A Bunch of accountants or lawyers who barely invested 1 penny of their money in the markets...let alone....
•
When people start being held accountable for their actions, maybe innocent people can stop paying for their mistakes. BOV is a government-controlled publically-listed company! Its management ranks are full of political puppets and cretins and the bank gets its marching orders from various ministries or the PN headquarters. It acts to the benefits of the mafia that runs the country and to the detriment of the shareholders. Their ex-CEO tried to limit meddling from the likes of Austin Gatt and got the sack.
This is not strike one or strike two or strike three for this bank. This is just another milestone in a history of shady dealing, screw-ups and mistakes and more will follow.
I feel sorry for some of the employees at this bank who are dedicated to their jobs and do it to the best of their abilities. I do not feel sorry for any investors who, through their votes or tacit silence, have kept the criminal regime that runs this country in power.
John Mifsud •
These are the people who are going to be managing the compulsory so-called 'second-pillar' pensions. Granted that the politicians, by their own admission, have frittered away the pension contribution levied on all and sundry, the exercise is looking more and more like a stratagem to bail out these people.
What does the MFSA has to say about all this?
Mark Fenech •
Hundreds of small shareholders, mostly pensionsers, who decided to invest in this fund to ensure that they would be able to retain their living standards by adding some return with their pensions.
But BOV after all the promises made that the 'property would never go down', found out that actually BOV/Insight had invested in very dubious funds and this against the provisions of the local fund itself.
These dubious funds, known as Belgravia, are full of question marks. These funds did not decrease because the market forces dictated that, but because there were illigal issues running thses Belgravia funds.
BOV should be fair with the local shareholders and admit their faults and return the capital to them.
Richard Demicoli •
Hopefully heads would roll after such huge losses. Incredibly, no one resigned from the major insurance company on the islands, where, of all places they invested heavily in Mafia infested Sicily. Respnsibility and seriousness demands it.
