Shield Master Fund: Macquarie admits failures in $321m payback deal

Following weeks of negotiations with ASIC, Macquarie has agreed to pay $321m to thousands of investors whose super savings were tipped into the collapsed Shield Master Fund in 2022 and 2023.

ASIC deputy chair Sarah Court said it was an ‘important outcome’. Picture: John Appleyard

Macquarie will pay $321m to thousands of investors whose super savings were tipped into the collapsed Shield Master Fund through its platform, after admitting it broke the law by failing to place Shield on a watch list for heightened monitoring.

The Australian Securities and Investments Commission has commenced proceedings in the Federal Court against Macquarie and has accepted a court-enforceable undertaking from the banking giant that it will pay 3000 investors all of the money they put into the collapsed Shield fund.

ASIC is not seeking a civil penalty in the case despite Macquarie admitting to contravening the Corporations Act.

“This is an important outcome that stems the significant losses that threatened thousands of members’ retirement savings after they used Macquarie’s platform to invest their super in Shield,” ASIC deputy chair Sarah Court said on Thursday.

“Many members thought their funds were safe when they used Macquarie’s super platform to invest in Shield.”

Shield, a property-focused investment fund under investigation for allegedly mishandling superannuation money, was put into liquidation last year leaving 5800 investors at risk of losing their retirement savings.

All up, investors had put $480m into the fund from 2022 until ASIC shut it down in 2024. Of that amount, $321m was invested into the scheme through Macquarie’s platform.

Ms Court said the action should send a clear message “that there is an obligation on trustees to make sure the funds that are available on their platforms are appropriate. They’ve got trustee obligations; they’ve got licensee obligations”.

All eyes are now on Equity Trustees, the other superannuation trustee that allowed the Shield fund onto its platforms and is now being sued in court by ASIC. Equity Trustees’ share price plunged 8 per cent on Thursday, while Macquarie’s stock fell 1.2 per cent.

By Thursday afternoon, Macquarie had already emailed some of the affected investors to notify of the refund and had begun making payments.

“Macquarie’s decision to devote resources to achieve this outcome recognises Shield’s unique circumstances, notably the scale of the issue, its material impact on many investors and their limited access to recourse from the many different entities which played a role,” the banking giant said. “The approach of providing immediate certainty and an improved outcome for investors benefits all parties.”

Macquarie will pay the $321m to investors upfront and will then look to recover a portion of the payout through the distributions expected from Shield liquidators in the coming months and years. Payments will be made to investors by September 30.

At this stage, liquidators hope to eventually return between $200m and $400m of the $480m investors put into the fund from 2022. The first $100m is expected to be distributed in the coming months by joint liquidators Jason Tracy and Glen Kanevsky of Alvarez and Marsal.

But there are many more investors in the fund facing significant losses. While Macquarie came to the table to negotiate with ASIC in a bid to avoid facing further penalties through court action, negotiations between ASIC and Equity Trustees have so far been unsuccessful.

Investors put about $160m of superannuation money into Shield through Equity Trustees platforms over a period of about six months in late 2023.

ASIC is now suing Equity Trustees in Federal Court over alleged due diligence failures in putting Shield onto the NQ Super and Super Simplifier platforms. (Equity Trustees is the trustee for both the former NQ Super and Super Simplifier.)

But, the regulator is examining how it can squeeze some compensation from Equity Trustees through litigation.

Shield was offered on Macquarie and Equity Trustees’s platforms from early 2022 until the corporate regulator halted investments in February 2024.

Over those two years, Shield grew from nothing to $480m in assets, all driven into the fund by a small handful of advisers. For the first year and a half, from February 2022 until June 2023, all of the Shield investment money went on to Macquarie’s platform only.

Macquarie fast-tracked Shield’s addition to its platform after financial advisers promised to get at least $30m into the scheme in the first year. In reality, advisers put in more than 10 times that over a 16-month period.

Advisers only started sending investor money to Equity Trustees-hosted platforms NQ Super and Super Simplifier once Macquarie halted investments into Shield in mid-2023.

Macquarie stopped the fund flows following an alert from ASIC in May 2023 seeking information on Shield fund flows.

Equity Trustees stopped accepting investor money into the fund six months later, in December 2023. But, the superannuation trustee likely knew something was amiss from October 2023. This was when it stopped accepting applications into the fund from certain advisers.

Shield was put into liquidation late last year and both the fund and its responsible entity, Keystone Asset Management, are under investigation for allegedly misusing investor funds. Shield investor money was mostly allocated to the Advantage Diversified Property Fund, a vehicle which made loans to various companies associated with property developer Paul Chiodo.

This money funded projects in Fiji, Italy, Port Douglas and Melbourne, according to the regulator. At the time, Mr Chiodo was a director of Shield’s responsible entity, Keystone Asset Management, and its investment manager, CF Capital.

Liquidators were last reported to have control of $200m worth of Shield assets, including $188m sitting in a Bell Potter account.

About $30m of Shield investor money is stuck in an escrow account in Italy, originally to be used as part of Mr Chiodo’s grand plan to purchase a hotel in Venice.