6 Jul 2012

Perpetual must work to regain investors' trust - advisor

7:28 am on 6 July 2012

A financial advisor says the country's largest corporate trustee, Perpetual Trust, will have to work hard to convince investors that it won't break the rules again.

Details about $28 million worth of loans made by Perpetual Cash Management Fund to Torchlight Fund, both owned by the the George Kerr-controlled Pyne Gould Corporation, have been made public after Perpetual lost a court battle to keep it secret.

While some in Perpetual questioned the initial $18 million loan in February, that didn't hinder more funds being advanced.

The transactions are being investigated by the Financial Markets Authority (FMA), as corporate trustees are not allowed to make related party loans.

A High Court justice said the transactions showed a lack of judgement by Perpetual, and the FMA added it showed a lack of understanding of its role as a trustee of funds.

About $15 million has been repaid at the Authority's request since April and about $13 million is still outstanding.

Perpetual says in order to ease any concerns the FMA may have, Torchlight has agreed to repay the outstanding $13 million back to Perpetual early.

But financial advisor Chris Lee says that may not be enough to regain investors' trust.

He says it's important that Perpetual is now transparent and tells its investors how and why this happened, why it won't happen again and prove that the money has been repaid.

Mr Lee says Perpetual will have to convince investors that although the company is now 73% owned by George Kerr, it remains a public listed company with rules about what it can do with trust money and it will not infringe these rules again.

He says investors with trusts or estates being managed by Perpetual should go to an independent financial advisor, find out what it is they should ask and learn about their money and what Perpetual's been doing.

"Before they decide whether they withdraw their money from Perpetual, they need information from Perpetual, they need to ask the right questions and if the answers are satisfactory, they'll then be in a good position to decide whether or not they stay with Perpetual or whether they move to another organisation".