24/10/2008 - 08:34

Freeze on funds is responsible: AXA

24/10/2008 - 08:34

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The decision to freeze customer funds was not easy but prudent due to current economic conditions, AXA Asia Pacific chief executive Andrew Penn says.

Freeze on funds is responsible: AXA

The decision to freeze customer funds was not easy but prudent due to current economic conditions, AXA Asia Pacific chief executive Andrew Penn says.

The mortgage fund management company is one of a number of investment houses, including Perpetual Investment and Australian Unity, that have frozen billions of dollars of investor funds to curb customer withdrawals.

The move follows the government's guarantee of bank deposits, which excludes funds held with investment companies.

Mr Penn said today the decision was a tough one but would benefit all customers in the long run.

"We, as a responsible entity, must make the right decision in relation to investors in the fund," Mr Penn told ABC Radio.

"And it's always a difficult decision in a sense that it's important to consider everybody's respective position.

"But we wanted to act early and act prudently in the context of what is a quite volatile environment, which is what we've done."

Meanwhile Perpetual is urging the federal government to take speedy action to quell fear and uncertainty in the investment funds sector over a flight of cash to the banks.

The fund has suspended redemptions for its monthly income and mortgage funds after the government's bank deposit guarantee scheme prompted a exodus of funds across the wealth management industry.

Affected fund managers spoke to federal Treasurer Wayne Swan last night and further meetings will be held today, Perpetual's group executive of income Richard Brandweiner said.

"We need things to happen quickly just because of the fear and uncertainty that unfortunately is in the market," he told ABC Radio today.

"We are trying to work together with the government and the industry and some of our peers to try and find a solution."

Mortgage funds, such as Perpetual which had been in business for 42 years, had served people well for many years as an alternative investment to banking, Mr Brandweiner said.

But the government guarantee of bank deposits had left people uncertain about what was secure and what wasn't, he said.

"There was a big pickup in redemptions in the last few days in response to what has been going on out of the government guarantee and other issues in the market.

"We have got to protect the interests of all our investors and we have got to protect their income and capital. What we were forced to do was to hold off on paying redemptions at the moment."

Income and capital was unaffected, but investors could only seek redemptions each three months.

Withdrawals during recent months had been very substantial and involving millions of dollars, forcing the mortgage funds to take action.

"These investments ... are incredibly secure investments and have been so for over 40 years," Mr Brandweiner said.

"But the issue is that with the government guarantee in place, there is uncertainty about what is secure and what's not secure any more."

 

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