Investors had their superannuation wealth tipped into Shield, First Guardian funds without consent
Victims say financial advisers put their money into Shield and First Guardian without their knowledge, risking $1bn of wealth. Others were allocated to James Hird’s Euree, a top performing fund which has honoured all redemption requests.
Financial advisers tipped clients into the Shield and First Guardian Master Funds without their knowledge, listing one set of investments on statements of advice before switching investor money into the two funds which have since collapsed.
New clients of Venture Egg, a Melbourne financial adviser operating under the licensed Interprac network, were sent statements of advice confirming their super savings would be put in a variety of investments including vanilla ETFs such as Vanguard’s Australian Shares High Yield ETF.
But large portions of savings were transferred out and placed into Shield, First Guardian and other funds, sometimes within weeks of a client transferring from an APRA-regulated super fund.
This was done in some cases without the client’s direct consent or knowledge. Other times, it was done without the client understanding their investment switch.
The same Venture Egg advisers also put client money into James Hird’s Euree Asset Management, again, without direct consent and despite statements of advice recommending other investments.
ASX-listed Sequoia Financial owns Interprac. It also has a 20 per cent stake in Euree, a multi-asset fund whose CEO is former Essendon footballer Hird. Interprac managing director Garry Crole is also a director of Euree.
Venture Egg founder Ferras Merhi told The Australian he asked Interprac to put Shield and First Guardian on their approved product list after he had spoken to the fund managers. He could not recall if he asked Interprac to put Euree on Interprac’s approved product list.
Mr Merhi allocated $1.5bn of client money into various funds over a period of years; about $400m apiece went to Shield and First Guardian, while a further $100m went to Euree, he said.
Euree, founded in 2023, appears to have $100m under management across its three funds. The Australian is not suggesting any wrongdoing by Euree or Interprac. A spokesperson for Euree said it had been a top performing fund since inception and that all redemption requests received had been honoured, and would be honoured going forward.
Interprac clipped the ticket on advice given to clients by Venture Egg advisers, taking 5 per cent of the fee, Mr Merhi said. The Australian has sighted the Venture Egg statement of advice of one victim that states the fee paid to Interprac was 10 per cent.
From ETFs to Shield, First Guardian and Euree
Claire* (not her real name) met with a Venture Egg adviser in July 2023. He advised her to move her $266,000 super savings from QSuper to NQ Super and recommended investments including Vanguard Australian Shares High Yield ETF and Betashares Nasdaq 100 ETF.
In September that same year, $100,000 of her savings was transferred to Shield Master Fund and a further $50,000 to First Guardian.
Claire has no record of notification or request from her adviser, nor Venture Egg’s recommendation, that she move her savings into Shield and First Guardian.
“Venture Egg decided to invest my super in both funds without my consent or knowledge,” Claire told The Australian.
A few weeks later, in December, she was emailed by Venture Egg asking that she consent to the adviser making changes to her portfolio.
“I called them up and they said it was all routine and was just to ‘balance things out’. I had no idea there were any new investments in there; they didn’t explain anything,” she said.
It was only when she received a statement confirming her holdings at the end of the financial year that she realised the December change request had been to invest a portion of her savings into two of Euree’s funds. The inception date for both funds is listed as August 2023.
When she started getting significant event notices about Shield being frozen and its reporting by the media, Claire sought Venture Egg again.
“They kept assuring me the significant event notices were just a minor problem with some wording in a PDS that needed to be fixed and then the funds would be unfrozen,” she said.
Venture Egg’s negative consent model
Another client, John* (not his real name), had a similar experience, whereby his Venture Egg statement of advice, dated June 2023, listed a number of widely used ETFs he was told his super savings would be invested in. These included the Betashares Global Energy Companies ETF and the iShares Global Healthcare ETF.
Alongside these ETFs, his adviser recommended that he put part of his super into the Shield Master Fund. Out of the $166,000 John moved across from his industry super fund to NQ Super, $66,000 went into Shield.
Some time later, John realised a portion had also been invested into First Guardian and Euree.
Venture Egg emailed John records of advice regarding these investment changes but the 43-year-old teacher didn’t see them. Venture Egg went ahead and rolled him into First Guardian and Euree anyway.
Venture Egg’s Mr Merhi told The Australian he operated a negative consent model, meaning if clients didn’t reply to investment change requests they were assumed to give consent.
“Basically, if you’ve emailed and you’ve given a significant amount of time for the client to respond, and then the client doesn’t respond, then consent by acquiescence, where basically you get to make the changes that you see fit for the client,” Mr Merhi said.
The Australian spoke to a number of advisers who disputed negative consent, saying that clients needed to give informed consent before any investment changes are made.
Two sources, speaking on the condition of anonymity, told The Australian they had seen evidence numerous Venture Egg clients were moved into Shield, First Guardian and Euree without their knowledge or direct consent.
First Guardian and Shield Master Fund’s collapses have left 12,000 investors locked out of a combined $1bn of their own wealth. Both funds are in liquidation and under investigation by the corporate regulator.
The Federal Court has imposed orders freezing the assets of the funds as well as their directors and Mr Merhi. Mr Merhi was paid millions of dollars by First Guardian’s responsible entity, Falcon Capital, to market the fund.
Interprac cut ties with Venture Egg in June, while Mr Merhi’s other advice business, Financial Services Group Australia, entered into liquidation in May.
