ASIC lifts the ban on two major La Trobe Financial products, a decision that has opened the door for approximately 120,000 investors to access over $10.6 billion in funds. The freeze, which affected these financial products, was originally enforced due to concerns about the company’s target market determinations (TMDs).
These documents, which define the ideal investor for each product, were found to be insufficiently detailed. La Trobe Financial responded to regulatory concerns, and the matter has been resolved, allowing investors to access their funds. The changes were reported by Sky News as a positive outcome for both the company and its investors.
What Led to the ASIC Ban?
Last week, ASIC took action by imposing stop orders on three of La Trobe’s financial products: the 12-month and two-year investment products, as well as its US private credit funds. The corporate watchdog raised alarms about the suitability of these products for their target audience.
TMDs are essential documents that define the specific investor profile for a product, ensuring that only those who are financially capable of handling the risks are allowed to invest. Without properly defined TMDs, investors might be exposed to inappropriate risks, and that’s exactly what concerned ASIC.
The freeze primarily affected around 120,000 Australians who had invested in these products, preventing them from accessing their funds. To address the concerns raised by ASIC, La Trobe made necessary changes to its products, with the aim of aligning better with the intended investor base.
Changes La Trobe Made to Address ASIC’s Concerns
In response to the freeze, La Trobe Financial took quick action. The company reduced the percentage of an investor’s portfolio that could be allocated to the investment products from 50% to 25%.
This change was designed to better match the financial product with investors’ risk tolerance. Additionally, La Trobe introduced a questionnaire to further assess whether potential investors align with the updated target market.
However, it’s worth noting that not all is back to normal just yet. While the 12-month and two-year investment products are now available for redemption, the US private credit funds remain frozen, and investors still cannot access these funds.
At the end of June, La Trobe’s 12-month product had $10.5 billion in assets, while the two-year product had $142 million. These funds, once restricted, are now available again to investors, providing a much-needed opportunity for those who were affected by the freeze.
La Trobe’s Commitment to Transparency and Market Integrity
La Trobe’s CEO, Chris Andrews, strongly emphasized the company’s commitment to well-regulated, transparent markets. In a statement to Sky News Australia, he said,
We absolutely embrace well-regulated, orderly, transparent markets. That’s critical for investors, it’s critical for investment managers.
He further stressed the importance of adhering to regulatory standards for the overall health of the economy, adding,
Frankly, it’s important for the economy as a whole. So it’s incumbent on us as a regulated entity to engage with the regulator at the time they chose and in the manner that they chose.
Andrews also expressed satisfaction with the outcome of the engagement with ASIC, stating,
We’ve engaged with the regulator here (and) reached a really positive outcome and, from our perspective, that’s how these markets should work.
He also took the opportunity to clarify an important misconception: La Trobe is not a bank. Despite offering similar products to banks, the company has never sought to be one.
To be absolutely clear, we are not a bank. We have no desire to be a bank. We are an investment manager who has faithfully and, most importantly, transparently served our investors for decades – he stated.
What Does This Mean for Investors?
The lifting of the freeze by ASIC allows La Trobe’s investors to regain access to their funds, which is a relief for those affected by the regulatory intervention. However, the ongoing scrutiny of financial products will likely remain a focal point, especially given that the US private credit funds are still on hold.
La Trobe’s investment products, particularly those that are heavily exposed to property, have drawn interest from investors, especially those who might struggle to secure financing through traditional banks. However, this exposure to property means that investors need to remain cautious, particularly given the fluctuations in the real estate market.
