Investors' new protest on BOV fund, Karm Farrugia rues 'dragging' investigation

The protest repeats arguments in previous judicial protests that La Vallette breached investment restrictions when it invested money in nine funds that had gearing levels of over 100% of their net assets.

The protest also reiterates allegations of breach of trust caused by redemptions from the fund between January and August 2008, including by a director of the Sicav.

Additionally, the protest refers to comparisons made by Bank of Valletta chairman Roderick Chalmers that withdrawals from the property fund were far less than those in property funds held by HSBC.

The protestants say that HSBC’s Property Investment Fund saw withdrawals of €548,176 (4% of the fund’s value) at year-end 31 March 2008 and €1.3 million (11%) as at 31 March 2009. “On the basis of this comparison it is manifestly evident that the redemptions from the La Valette Multi-Manager Property Fund for the ten months to 7 August 2008 of €16.2 million, representing 20% of the fund’s value, are far greater than that which one may reasonably have expected,” the protest, signed by Prof. Ian Refalo, states.

The duration of an investigation by the Malta Financial Services Authority into a depletion of some €50 million from the La Vallette Sicav’s multi-manager property fund still has investors asking why the regulator has not yet pronounced itself on the matter.

Veteran economist Karm Farrugia wrote to The Times Wednesday criticising Bank of Valletta’s choice of Insight Management to invest some 41% of the property fund in the Belgravia funds “without recognising fraudsters like Belgravia.”

Deflecting his criticism to Insight, the fund’s investment advisers, Farrugia wrote: “Acting negligently without the necessary skill and care will then become applicable to Insight. Hence the bank’s dilemma: loyalty towards whom, partners or investors?”

Farrugia, one of the investors whose own €20,000 investment in the fund was reduced to just over €10,000, has been critical of the bank’s muted response to numerous judicial protests by over 200 investors and stockbrokers Finco. But he also said that short of any conclusive proof that redemptions from the fund back in 2008 took place by ‘privileged shareholders’, he would not entertain any suspicion in the bank’s directors.

Investors claim Bank of Valletta is responsible for the way its La Vallette multi-manager property fund, once valued in excess of €84 million, was depleted to €24 million.

Specifically, it was a €17 million investment in the Belgravia European Property Fund lost in excess of 90% and is today estimated at €1.3m, while other investments originally valued at some €47 million have fallen to €18.5 million.

Farrugia had previously complained that other shareholders had been allowed to redeem their investments by the time the ‘temporary’ suspension was announ­ced. According to annual reports by VFM, some 14 million shares were redeemed between October 2007 and August 2008. “At this rate, had I been among the privileged, more than my original investment of €20,000 would have been recovered. But, of course, that would have been at the expense of those remaining unredeemed – the under-privileged whose trust in BOV stayed solid.”