ASIC issues interim stop orders to La Trobe Financial
La Trobe Financial has been told by ASIC to stop offering its 12 Month Term Account and 2 Year Account products offered under the La Trobe Australian Credit Fund, as well as its US Private Credit Fund.
The regulator said it is concerned that the target market determinations (TMDs) for all three offerings are deficient. The orders are in place for three weeks.
In relation to the 12 Month Term Account and 2 Year Account, ASIC said it is concerned the target markets for each suggest an inappropriate level of portfolio allocation given the risks of the fund, and do not include appropriate distribution conditions.
Both funds sit under the La Trobe Australian Credit Fund, which offers investment in seven different accounts with varied terms, yield and characteristics.
"The 12 Month Term Account and 2 Year Account are invested almost entirely in loans secured by registered first mortgages, with the exception of small cash and term deposit holdings held to meet cash requirements," ASIC said.
"These products are not bank deposits. The rates of return are not guaranteed and are determined by future revenue of the pool of assets that comprise the account, the investment may also not generate the expected income returns and there are conditions around withdrawals."
According to Rainmaker data, the 12 Month Account has more than $11 billion in funds under management, while the 2 Year Account has about $148 million.
In a statement on the ASX, La Trobe Financial said: "We take our legal duties and relationship with our regulator with the utmost of seriousness. We will, of course, comply with the interim stop order and pause the receipt of new investments into the 12 Month Term Account while we work to promptly address these issues."
For the US Private Credit Fund, ASIC said its TMD suggests an inappropriate level of portfolio allocation given the risks of the fund and does not adequately specify an investment timeframe for retail clients.
The fund portfolio is primarily comprised of senior secured first-lien term loans issued to US corporate middle market companies.
"These US companies are not rated by any rated agency and investing in these loans involves an above average amount of risk and volatility or loss of principal," ASIC said.
The fund was launched in early 2024. At August end it had about $260 million in assets, with additional funds held in Class B units.
In a note to investors, La Trobe chief investment officer Chris Paton said: "We wish to stress to investors that your investments with La Trobe Financial remain safe and under our careful stewardship. Our products are supported by granular, high-quality investments contained within highly diversified portfolios with embedded conservatism. These portfolios are carefully constructed to perform across the cycle and will continue to support the payment of consistent monthly income to investors."
"We take our role as responsible stewards of your capital, and the trust you have placed in La Trobe Financial, very seriously."
The stop orders follow ASIC's surveillance of private credit managers and their retail products, focused on fund transparency, governance, valuation practices, management of conflicts of interest and fair treatment of investors.
On September 3, La Trobe said it was revising the Product Disclosure Statements for the Australian Credit Fund and US Private Credit Fund to incorporate up to date terms and conditions. It said the updated PDSs would be released shortly.
This article first appeared on Financial Standard
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