Investors hit hard by the dismal performance of a Bank of Valletta property fund are adopting “a wait and see” approach after the bank was accused of negligence, according to industry sources.
In a judicial protest filed last week, Finco Treasury Management Ltd accused the investment company La Valette Funds Sicav plc, of which BOV is custodian, of misleading the investors of the La Valette Multi-Manager Property Fund.
Investors have seen the value of their shares drop dramatically from €1.07 per share in August 2008 when redemptions from the fund were suspended, to €0.52 per share in June this year, of which only €0.27 may be redeemed.
“The court protest is the first of its kind for Malta and the accusations are very serious. If proven they could have major repercussions on BOV, Valletta Fund Management and Insight Investment Management Ltd,” sources in the financial services sector said.
They added that investors were adopting “a wait and see approach”, expecting BOV to file a counter protest in which it would give more detail in response to the claims made by Finco.
In a brief statement on Friday, BOV insisted investors were kept informed of developments related to the property fund but did not give any details. The property fund included investments by the Belgravia financial services group, which is facing fraud charges in Jersey and was linked to a number of failed businesses. Part of the Belgravia Group is currently insolvent.
Finco claimed La Valette Funds Sicav misled investors and failed to fully inform them of all relevant developments in relation to Belgravia, in “an honest and transparent manner”.
The judicial protest also claimed that the investment exposure to the Belgravia funds was higher than the offering document would have allowed.
As custodian of the fund, BOV was also accused of “acting negligently without the necessary skill and care” when it breached its obligations and “failed to supervise and monitor the fund’s compliance with investment restrictions” detailed in the offering document.
Source said a number of meetings in which the bad situation was explained to investors were organised by the bank, however, they added it had to be seen how aware investors were of the extent of the problems.
“That is something for the courts to decide,” the sources said.
The judicial protest was filed against La Valette Funds Sicav plc, Valletta Fund Management Ltd, Valletta Fund Services Ltd, Bank of Valletta and Insight Investment Management Ltd.