AXA NZ suspends 3 mortgage funds, wants govt guarantee (Updated)

AXA New Zealand has suspended redemptions from three mortgage funds for 30 days because of uncertainty in the wake of the government's deposit guarantee scheme, which covers banks and finance companies but not mortgage trust and mortgage funds. AXA has also called for mortgage funds to be given the same government guarantee offered to banks and finance companies that also take deposits from the public to fund mortgages. (Updated to include confirmation from AXA NZ CEO Ralph Stewart and his call for mortgage funds to be guaranteed too) AXA New Zealand Chief Executive Ralph Stewart told interest.co.nz redemptions and new investments had been frozen for the Mortgage Distribution Fund, the Mortgage Investment Fund and the AXA Investment Portfolio, which had a combined NZ$225 million under management. Stewart said there had not been huge withdrawals from the funds since the October 12 announcement of a Government Deposit Guarantee for banks, building societies, credit unions and finance companies, but not for mortgage funds and other managed funds. He said AXA wanted to ensure fund members were treated fairly and equally during a period of uncertainty while the Reserve Bank and Treasury worked out the final details of the scheme. "Until they do it's not fair that they be left open because it will leave some unit holders with cash and some without," Stewart said.

AXA hoped the Reserve Bank and Treasury would view mortgage funds in the same way as they view banks and finance companies who also took deposits and fund mortgage lending. "The treatment of mortgages should be acknowledged as exactly the same between banks, finance companies and mortgage funds," Stewart said, adding he was surprised high yielding finance companies had been included in the scheme. "The New Zealand reaction has been flavoured by the savage failures of the finance company sector in New Zealand," he said. The closure of the New Zealand funds follows suspensions of withdrawals from Australian fund managers, including Commonwealth Bank of Australia's Colonial First State, which froze A$3.3 billion of funds invested by 61,000 savers over the weekend. AXA Asia Pacific suspended its mortgage and income funds in Australia last week. The deposit guarantee scheme has caused massive disruption to the funds management sector in Australia as investors rush to take money out of unguaranteed managed funds to put them into guaranteed bank accounts.  "While the details of the New Zealand scheme are yet to be finalised, as this stage it appears that most managed funds will be excluded," Stewart said in a statement issued later. "As a result of the exclusion of managed funds we anticipate an increase in redemptions. We believe it is prudent to act early and to make the right decision in relation to investors in the funds," Stewart said. "We are working with the funds' Trustees, the Public Trust and New Zealand GuardianTrust, and the Reserve Bank to explore all options available to the funds.''