170 investors file new judicial protest against Bank of Valletta over property fund

Bank of Valletta are facing renewed 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.

This is the second judicial protest filed by a group of investors, after another firm, Finco Treasury Management, first filed a protest on 4th July in respect of 72 investors registered in its name. Now the new claims have intensified pressure on Bank of Valletta to answer to accusations that it invested money without the necessary due diligence.

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.

The fund was portrayed as ‘a low-risk fund with low volatility’, giving good returns even when bonds or equities do badly. But the 170 investors say their investments have been reduced to less than 25% of their initial investment.

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.

BOV has already been accused of not being 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.

Bank of Valletta, the custodian of the fund, issued clean custodian certificates for three years in succession. The judicial protest states that two of the Belgravia funds have to date not published any audited accounts, which means BOV could not have had in their possession “clean audited accounts” of the funds in which they invested, “which is further evidence of the lack of due diligence on the part of the SICAV and VFM as well as Insight as sub-advisor of VFM.”

“BOV, as custodian of the Fund, acted negligently without the necessary skill and care, and in breach of its obligations in so far as it failed to supervise and monitor the Fund’s compliance with the investment restrictions.”

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 a statement issued when the first judicial protest was presented, 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.”