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Posted inFRENELUXAlternatives

Luxembourg-domiciled “scam fund” suspends redemptions

The directors wrote to investors last month, in a letter seen by Expert Investor‘s sister publication International Adviser, stating that as they had not received the proceeds of the two investments by the due date of 30 November 2016, they had decided to act.

“The Columna Commodities Fund finds itself in a situation preventing it from liquidating its investment positions and the Board of Directors of the fund has decided to suspend the calculation of the net asset value of the sub-fund, as well as the issue, redemption and conversion of shares in the sub-fund,” it said in a letter to investors.

The Columna Commodities Fund is a sub-fund of Luxembourg-domiciled LFP I SICAV SIF SA.

Non-repayment event

The directors of the Sicav, which include Julien Renaux, Mark Stephens and Luc Leleux, and the fund’s alternative investment fund manager (AIFM), Luxembourg Fund Partners, told investors the problems for the fund began when they had asked the investment adviser, YAS Investment Management, for repayment of the investments as part of a portfolio rebalancing exercise.

The investment portfolio of the Columna Commodities Fund is described in the fund’s prospectus as mainly the receivables from profit sharing loans issued by companies in the commodity sector like traders, miners and refineries.

The specialised fund has a minimum investment of €125,000 or a currency equivalent (£110.000, $133,000) but it had a much lower entry level for investments via life companies, Sipps and Rops of just €10,000 or equivalent (£8,700, $10,600).

Only one asset

However, according to a source from an IFA company which looked into the fund, Columna’s major asset was a loan to a Global Hill Corporation Ltd that matures in 2025.

Global Hill Corp was incorporated in Hong Kong on 5 September 2013 as a private company and is still believed to be in existence, though the Hong Kong companies register has no address for it.

The Columna Commodities Fund accounts for 2015 show that it had made a $28.5m loan to Global Hill Corp, which represented 89.59% of its assets.

The accounts show that total net assets of the fund at 31 December 2015 were $31.8m.

“All the guff about the different investment strategies seems to be complete nonsense, basically all the money has just been loaned to a Hong Kong company that doesn’t seem to do anything,” the source said.

“I can’t believe any life company would sign off on this fund if they’d seen their documents – the marketing material seems to be complete fabrication with respect to the reality of the situation.”

Performance slide

Indeed in the November 2016 factsheet for the fund, which was launched in August 2013, the managers indicated they had been actively allocating capital towards new “commodity finance transactions in oil and rice”. It had been expected that these new assets would provide a welcome increase to the fund’s monthly returns which had been negative in September and October 2016.

Overall, this document shows the fund’s performance for the year to October 2016 had been a gain of 12.12% net of all fees and charges compared with a 25.9% gain posted for the whole of 2015.

Remediation to be defined

The directors said they had informed the Luxembourg supervisory authority of the financial sector, the CSSF, of the suspension.

“The Board of Directors of the Fund, together with the AIFM, is considering this measure as a prudential action and is doing everything in its powers to preserve the interests of the investors in the Columna Commodities Fund.”

“The Board of Directors of the Fund, together with the AIFM, are taking advice from legal counsel in this respect, in order to define the most efficient remediation plan and related actions,” the letter to investors said.

Part of the Mark Allen Group.