The future of the entire unit trust industry hangs in the balance.
The latest developments in the Ovation Curatorship saga potentially have major ramifications for the entire unit trust and linked product industry and it is high time that the industry (ASISA and the FSB) woke up to that fact.
As I understand the development, the Fidentia Curators are wanting to block the application by the Ovation Curators to release investors funds from Ovation (90% at this stage with the balance to be released once the process is complete). The Fidentia Curators believe that Ovation owed Fidentia money. But Ovation has no money and so the Fidentia Curators want to claim the money from Ovation Investor’s unit trust funds. And here in is the issue.
Unit trusts have always been marketed on the grounds that investors own units in a trust fund. The money in the trust fund is just that; in a trust. It does not form part of the company’s assets. If the company goes down, the units in the trust are safe (this is a bit of an over simplification but serves the example).
Rightly so, the Ovation Curators don’t believe that the Fidentia Curators have a claim against investors’ funds – they are not and never were Ovation assets. Unfortunately for the industry, the regulators and industry bodies have been deathly silent on the whole issue – what they fail to grasp is that if the Fidentia Curators manage to convince the court that they can lay claim to investors funds (from their unit trusts) then the industry as we know (and love it) is forever changed. The whole attraction of unit trusts will be destroyed in one ruling.
It is high time that ASISA (which includes the old Association of Collective Investments as well as the Linked Investment Service Providers Association) wake up to this fact and do some public as well as behind the scenes lobbying – they can not afford not to. The future of the entire unit trust industry hangs in the balance.