However, International Adviser understands that the loan to Drake, which was described by the Australian as having been part of some A$301m of "related party loans" that had been made by an LM Group entity, LM Managed Performance Fund, "to entities associated with directors of the group", is not news, but in fact has been known about for some time. It is mentioned, for example, in the fund’s annual report for the year ended 30 June, 2012, which may be viewed on the LMIM website.
The loan is thought to have been made to Drake in connection with a buyout, by him, of other early investors in the business.
LMIM officials did not immediately respond to requests for comment, and most if not all of the company’s foreign offices are thought to have been closed or in the process of being wound down.
Before it put itself into “voluntary administration”, LMIM raised A$740m from retail investors, the Australian said. As recently as the third quarter of 2012, LMIM’s marketing material said it had AUM of A$3bn.
Creditors’ meeting
News of the administrators’ comments followed a meeting of LMIM creditors on Tuesday in Australia, at which an 11-member committee of creditors was reported to have been appointed, largely comprised of financial advisers.
FTI Consulting administrators John Park and Ginette Muller told the creditors that the fund that the loans had been made from operated outside Australian company law, another publication, Narrowmine News, reported.
FTI has applied to the Queensland Supreme Court for an extension to the standard 30-day timeframe normally alloted to administrative investigations "due to the ‘complexity of the structures and investigations required to be undertaken’", the Australian noted in its report.
The Supreme Court will hear the application on 12 April.
As reported, before it began to run into problems, LMIM expanded rapidly into the international market, and it is said to have clients in more than 73 countries. In addition to Australia, it had offices in New Zealand, Hong Kong, Bangkok, London, Dubai and South Africa in addition to Australia.
Eight funds
LM Investment Management was structured as the holding company for eight funds, into which it put money it received from investors. These included the LM Managed Performance Fund, LM Australian Income Fund and LM First Mortgage Fund, according to the report in the Australian, which details how the firm was structured, down to the way its international offices were run. ("Those offices were typically staffed by one or two employees, who were primarily responsible for raising funds for the company".)
The story goes on to quote Drake as having "lamented" that he had been "largely unable to secure positive media coverage for his products in recent years".
Investors in LMIM’s funds are being told that they may keep track of further developments by checking a new website, www.lminvestmentadministration.com, which will be kept updated. Those with queries are being told they may email [email protected].
