When an investment fund goes bad
Thousands of people saw their life savings wiped out when the "low-risk" fund into which they had put their nest eggs imploded last year. Benjamin Robertson looks into the murky world of LM Investment Management and what its collapse should signal to the investing public
Every day at dawn, Justine Clark saddles up her charges at the Sha Tin racecourse and takes them out for a morning gallop. Looking after thoroughbreds can be a dangerous business; her husband, Steven, works alongside her and once broke his leg putting the horses through their paces.
The 40-year-old mother-of-two had hoped to have her own home back in Australia by now, and be financially secure. Those plans ended abruptly last year, when the family's life savings disappeared in a scandal that decimated the finances of thousands of expatriates across Asia.
"I didn't want [a high-risk investment] as I didn't want to lose the money we had saved," says Clark, sitting in an apartment provided by her employer, the Hong Kong Jockey Club, near Fo Tan MTR station. "It was meant to be low risk. It was sold like a term deposit in a bank."
In 2007, while working at a stud farm in Hokkaido, northern Japan, the Clarks put their entire savings - 17 million yen (HK$1.1 million) - into an Australian investment fund called LM First Mortgage Income Fund, after seeking advice from expatriate financial advisory firm Global Wealth Management (GWM). The fund invested in Australian mortgages.
Two years later, during the global financial crisis, the fund was suspended, meaning investors could not take any of their money out. The Clarks would have to wait patiently to reclaim their nest egg, they were led to believe.
In March last year, though, disaster struck. The fund's Brisbane-based management firm, LM Investment Management, collapsed, blindsiding 12,000 investors worldwide and triggering an investigation by the Australian Securities and Investments Commission. LM had A$3 billion (HK$21.7 billion) in assets, according to company literature.
Clark is now trying hard to save money for her family's future.