Bank of Valletta and its subsidiaries Valletta Fund Management and Valletta Fund Services in a counter protest in court today said that they were not to blame for a deterioration in the value of a property fund.
In a reply to a judicial protest by Finco Treasury Management Services, the companies also denied negligence.
They said that while the value of the fund had dropped, it was also well known that from the end of 2007, the financial markets had seen an unprecedented crisis, which also affected the property market. This crisis had caused chaos across financial markets.
VFM said that at the time that the investment managed by Belgravia Group were made, there was no shortcoming on its part and the sub-manager had the competence to seek the appropriate investment. Investment decisions were made on the basis of research, not newspaper reports.
The decision on investment in funds managed by Belgravia was made between February 2006 and October 2007 based on information available at the time.
At the time Belgravia had assets in excess of £1 billion.
VFM and the other companies said that despite there being no obligation at law, they had kept their investors regularly informed about their investments and developments.Between August 7, 2008 and July 5, July 10, 2010, 14 letters were sent to the investors, and two meetings were held for investors in the La Valette Multi-Manager Property Fund.
La Valette Funds Sicav held a class meeting for investors last July to authorise the use of a side-pocket of the fund.
The sub-investment manager had submitted an application in March 2008 to redeem part of the investment by La Valetta multi-manager property fund in Balgravia European Property Fund and , in August 2008, to redeem all the investment in Belgravia IFN China Property fund, but he was advised by Belgravia that the requests could not be entertained as the funds had been suspended.
The companies denied that they had violated the restrictions in the offering document and licence conditions with regard to the gearing values of the Belgravia European Property Fund.
Once the Belgravia Funds were suspended, VFM said it worked hard to resolve the issue as quickly as possible. In August 2008 there was no alternative but to suspend trading in order to protect investors and it sought more information from Belgravia and the Jersey Financial Services Commission (JFSC). However the JFSC refused to give information before all inquiries were concluded.
Bank of Valletta denied it had shirked from it monitoring role as custodian of the funds or that it was negligent in the observance of the investment restrictions, particularly the investment gearing ratios.
BOV said it had acted according to law and practice and at the time that the investments were made in the Belgravia European Property Fund, they did not exceed the gearing ratios laid down in the offering document.
On January 30, 2008, which was the first date when BOV could learn of any violation of the gearing ratio by Belgravia European Property Fund, trading had already been suspended and BOV could not do anything to remedy the situation.
Valletta Fund Services (VSS) said it was only a delegate of VFM and denied all allegations made against it.
The companies in their rounding up, pointed out that the offering document clearly stated that the La Valette multi-manager property fund was a professional investor fund and could only be promoted to experienced investors.
The document said that: "Pifs, being non-retail schemes, are not subject to the restriction on their investment or borrowing powers which retail schemes are normally subject to, and thus the degree of risk to which they may be exposed, makes them unsuitable for members of the general public. Hence, investors are advised that the protection normally arising as a result of the imposition of the MFSA's investment and borrowing restrictions, and the requirements to retail schemes, do not apply to Pifs. In addition, investors in Pifs are not protected by any statutory compensation arrangements in the event of the companies' or the funds' failure."
See also: 240 investors in waning VFM fund fight for their money back
http://www.timesofmalta.com/business/view/20100819/news/240-investors-in-waning-vfm-fund-fight-for-their-money-back