Investment manager MFS Group froze redemptions in the MFS Premium Income Fund, which had $771 million in assets under management at December 2007. There are more than 10,000 investors in the fund.
Business Spectator reported that MFS is to send out a letter to the investors in the fund explaining the decision, which follows an increased number of people wishing to redeem their investments in the past few weeks.
MFS will tell its investors that it expects the freeze to be lifted in a much shorter time frame, hopefully as soon as its debt position can be stabilised once an agreement to sell all or part of its Stella property group can be finalised.
Guy Hutchings, chief executive of MFS Investment Management told the
Courier Mail the fund was withholding redemptions because it has received more than double the usual number of requests. The fund usually gets requests for 20 per cent of maturities, but as of last Friday it had received requests for 43 per cent, the newspaper reported.
The December investment report shows the Premium Income Fund has 37 per cent of its funds invested in commercial loans, eight per cent in property managed investment schemes (some of which may be with other MSF entities), 11 per cent in fixed interest and four per cent of cash.
MSF Group, which owns MFS Investment Management, has taken a drubbing on the stock market and no doubt sullied its reputation after an abortive effort to negotiate a merger with City Pacific two weeks ago that in effect fell apart the day it became public. MFS is also seeking to sell its troubled Stella travel group. The board of directors forced the resignation of its chief executive at the beginning of last week, and no doubt all the adverse publicity has created the surge in requests for redemptions.