CAPE TOWN – The Guernsey Financial Services Commission (FSC) on Friday successfully applied to place three fund vehicles with ties to Belvedere Management under administration. The Guernsey court granted the application to place the Global Mutual Fund PCC Limited, Worldwide Mutual Fund PCC Limited and Universal Mutual Fund Limited under the care of an independent administrator.
The three fund companies are all managed by Lancelot Management; a Guernsey registered collective investment schemes manager. Its sole shareholder is RDL Management, a Mauritian-domiciled company owned by David Cosgrove and Cobus Kellermann, and part of the Belvedere Management group. Cosgrove serves as a director on the boards of all three funds.
The FSC also approached the court to place the Trinity Global Fund and Lancelot Management itself under administration. Those applications will be heard at a later date.
The action by the FSC comes just over a month after the OffshoreAlert website claimed to have exposed Belvedere Management as “one of the biggest criminal financial enterprises in history”. It fingered Cosgrove and Kellermann as the masterminds behind what it alleged is an extensive and elaborate fraud involving a number of different funds domiciled in Mauritius, Guernsey and the Cayman Islands.
With regards to the three Guernsey fund companies, a statement on the FSC’s website reads in full:
“The Guernsey Financial Services Commission, acting to protect the interests of investors and pursuant to powers granted to it under the Protection of Investors (Administration and Intervention) (Bailiwick of Guernsey) Ordinance of 2008, today made an application to the Court to have administrators appointed to a number of Guernsey authorised investment schemes.
“As a result of that application, the Court appointed Grant Thornton Limited as the Administrator of the Global Mutual Fund PCC Limited, Worldwide Mutual Fund PCC Limited and Universal Mutual Fund Limited.
“As part of the same proceedings, applications were also made for the appointment of administrators to the Trinity Global Fund and Lancelot Management Limited. These applications will be determined by the Court at a later date.”
The three fund vehicles placed under administration all consist of separate cells, or sub-funds, which may be run by different asset managers. The three investment companies themselves provide the structure for these funds to operate.
The funds also appoint custodian banks and independent auditors. In all three cases, the fund custodian is Deutsche Bank. BDO audits the Global Mutual Fund, while the Universal Mutual Fund and the Worldwide Mutual Fund are both audited by Saffery Champness. Both BDO and Saffery Champness are amongst the 15 largest auditing firms in the world.
The latest audited financial statements available on the three funds show that in all cases both the auditors and custodians were satisfied that the funds were managed in line with the relevant legislation and that the accounts were properly prepared.
However, in its submission to the court, the FSC appeared to raise serious concerns about the way the funds were managed, including “systemic failings in corporate governance and the application of regulation, code and principle”.
If it is found that there has been fraudulent activity in these funds it would raise serious questions about the oversight the auditors and custodian banks should have played.
Moneyweb approached Saffery Champness for clarity on past audits, but managing director in Guernsey, Nick Batiste would only to say that: “Saffery Champness is a professional firm which does not comment on its clients or their affairs”.
All three funds do display patchy records. According to its latest financial statements, the Worldwide Mutual Fund was already in the process of being liquidated. Its two largest sub-funds had already been de-listed and suspended, presumably due to lack of liquidity.
The Global Mutual Fund houses the Strategic Growth Fund, which was suspended in February 2013. This is the fund about which the DeVere group has raised concerns, claiming that it had been struggling to get out the $50 million of client money invested in the fund.
One of the cells in the Universal Mutual Fund is the Ascenta Special Situations Resource Fund, which according to Bloomberg is 30% down over the last year. The latest fact sheet available for the fund, which dates back to November 2013, shows that while it made a gain of 56.63% in 2010, it produced returns of -27.51% in 2011, -14.36% in 2012 and -27.87% in 2013.
Apart from Kellermann’s connection to Lancelot Management, there is an additional South African link to this story. The Trinity Global Fund, which is the fourth vehicle that will be the subject of a later court application, houses the NeFG Global Diversified Fund. This fund is run by Vanderbijlpark-based firm New-economy-Financial-Group.
Moneyweb has approached NeFG for clarification, but it understands that the underlying funds in which the NeFG fund is invested are all blue chip funds and client money is therefore accounted for. As such there should be no losses to investors in this fund.
Moneyweb has seen the portfolio valuation of the $7.4 million NeFG cell, which shows that is invested in three underlying funds – The RE:CM Global Fund, Coronation Global Managed Fund, and PSG International Global Flexible Fund. These are obviously established vehicles and as all three are long only mandates dealing in listed securities, the underlying holdings are easily verifiable.
NeFG confirmed to Moneyweb that the fund is less than a year old, but since the speculation about Belvedere broke, they have ceased inflows into the portfolio. The custodian bank, Royal Bank of Canada, is also requiring full details of the ultimate beneficial owners of any investment before processing any redemptions.
According to NeFG, Lancelot Management has not played any decision-making role in the fund itself. Their involvement has simply been the provision of the Guernsey-domiciled vehicle, which includes the placing of investment trades.
Moneyweb understands that far from controlling the money in the fund, Lancelot has perhaps been too absent in its role as fund manager of the Trinity vehicle. It should play a day-to-day role in ensuring that the investment managers of the cells and the fund administrators are delivering the required service levels and meeting regulatory requirements, and it has not done so.
This is less of a concern with a fund like the NeFG Global Diversified Fund, which runs a long-only mandate, but for alternative investment vehicles that may deal in unlisted securities, it becomes very important for there to be oversight as price fixing is a constant risk.