Oct 262008

Yes, I can feel a certain sympathy for self-funded retiree, Greg Russell, however what he does or doesn’t choose to do with his business or his investments can hardly be laid at the feet of the government.

Mr Russell chose to invest with a private mortgage fund – East Coast Mortgage Trust – of his own volition and hopefully in the full and complete understanding of the prospectus governing the issue of units in that trust. As with all such investment funds which operate under the regulatory supervision of ASIC, and governed by a duly authorised, registered and supervised Responsible Authority Holder, in the case of ECMT, Lismore Management Corporation Ltd.
Hundreds of such investment trusts exist on varying levels throughout the country. Some are small, some quite large. The purpose being to provide an avenue for investment by people like Greg Russell, in a marketplace that individuals alone simply cannot enter for reasons of cost, efficiency and ultimate return for risk. The administrators of these trusts make their money through management fees applied against the investors funds, which makes the claims of no entry or exit fees somewhat superfluous, as fees are collected along the way, with each issuance of monthly or quarterly dividends. The capital guarantee of these funds lies within the regulatory structure governing the administration of such schemes. One presumes Mr Russell understood the risks of this investment before he entered into it, the sureties embodied within the one he chose, and terms and conditions of lodgement of his funds, which would include the right of the responsible authority holder to freeze fund redemptions at any time. Every such mortgage investment fund maintains that right as a part of the product disclosure statement. I notice ECMT has withdrawn its PDS from its website during the current economic dramas, but I’d be very surprised if such powers were not part and parcel of its prospectus.
The bottom line in this issue being one of willingness – or in Mr Russell’s case, unwillingness – to accept responsibility for ones actions and choices. He chose to invest in a mortgage fund. If he was unaware of the redemption freeze provisions, then that’s his lookout, not the government’s. If, as I suspect he is, aware as any astute investor should be, of the redemption freeze provisions, then why is he bleating to a biased rag like the DT? Because, dear reader, the story, as I suspect you’re well aware, has nothing whatever to do with poor Mr Russell’s hard economic times or his being hard done by. It’s to do with his ideology matching that of the DT’s editor, and slapping a government for doing the only thing a government could do. Provide an essence of protection because the majority was demanding it. Mr Russell………you’re in a minority.

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