ASIC lifts stop orders on two La Trobe Financial products
The corporate cop has lifted interim stop orders it imposed on two La Trobe Financial funds a week ago, but the freeze on a third fund is still in place.
The Australian Securities and Investments Commission has lifted interim stop orders imposed on two La Trobe Financial products less than a week ago, but a third freeze order remains in place for the lender’s US private credit fund.
As flagged earlier by The Australian, the stop orders were lifted after the Melbourne-based private lender tightened its target market determinations (TMDs) for the funds which have assets of about $10.5bn. TMDs outline who a financial product is suitable for and how it should be distributed.
La Trobe has also confirmed it will reopen its online investor portal after a six-day shutdown that locked out its investors and saw redemption requests only accepted over the phone.
The broader market will now be on watch for any knee-jerk reaction from investors denied access to their holdings for close to a week. ASIC’s heavy-handed move on La Trobe, one of the most established lenders in the industry, comes amid rising concerns about the private credit sector.
The stop orders on the private lender were painfully timed: La Trobe is currently being shopped around by its owner, global asset manager Brookfield, in a deal that could value it in excess of $2.5bn.
Under instructions from ASIC, as well as the changes to its TMDs, La Trobe will now have investors fill out a questionnaire that will assess their suitability for the products before investing. It has also halved the appropriate investment level into the funds, again under ASIC’s directions.
“La Trobe made amendments to the TMDs which addressed ASIC’s concerns including reducing the percentage of investors’ investable assets considered to be appropriate for investment in the products from 50 per cent to 25 per cent, and the introduction of distribution conditions, including a questionnaire used by La Trobe to identify whether investors applying for interests in the products are in the revised target markets,” ASIC said on Wednesday.
“As a result, La Trobe can recommence dealing in interests in the products.”
La Trobe chief executive Chris Andrews said the firm had worked constructively with ASIC in recent days.
“The stop orders didn’t relate to the funds’ performance, liquidity, advertising or the product disclosure statements. We champion transparency and welcome the opportunity to improve our TMDs for the benefit of investors. We also look forward to further engagement with ASIC as they continue with their review of the private credit industry,” Mr Andrews said.
“Now that this matter has been resolved we will be re-opening our investor platform, La Trobe Direct, and thank our investors for their patience.”
The regulator imposed the interim orders on La Trobe’s flagship 12-month term account, its two-year account, and its US Private Credit Fund, last Thursday.
The Australian understands it will now be a longer process to address ASIC’s concerns with the US private credit fund.
Issuing the stop orders last week, the regulator cited concerns over deficiencies in the TMDs applied to some of the investment products. A stop order prevents offers being made, effectively freezing inflows into the fund.
ASIC said it was taking the action to protect consumers and retail investors from investing in products that may not be suitable for their financial objectives or situation.
After a series of frantic back-and-forth negotiations between La Trobe and ASIC in recent days, the asset manager agreed to strengthen its assessment of products’ suitability for investors and put in place better assessment processes for prospective investors.
TMDs have been required by law since 2021 to ensure products are designed and distributed to the markets they are intended for, so investors don’t invest in products that don’t match their appetite.
ASIC’s move to lift the orders will allow funds to once again flow into the products, pending investor appetite, once La Trobe restores access to its online portal.
La Trobe Financial manages just under $20bn in assets for more than 120,000 investors attracted to its higher-yield offerings. The asset manager is a key player in the private credit market, which has been under fresh pressure in recent months as the regulator homes in on deficiencies across various offerings.
Before the stop orders were put in place, Canadian pension manager Brookfield had short-listed at least three parties in its sale process for La Trobe. But at least one of the final bidders in the auction had stopped working on the acquisition as La Trobe was hit with the ASIC freeze.
Bain Capital is now understood to have left the contest for the lender, setting up a two-way battle between Warburg Pincus and CVC.
ASIC has been increasingly worried about poor behaviour in the private credit sector, thought to represent more than $200bn of investor capital in Australia.
On Monday, the corporate regulator sounded the alarm on the dark side of the market, warning that retail investors were vulnerable to being ripped off by inadequate documentation and conflicts of interest.
Know more? Email odowdc@theaustralian.com.au
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