Friday 17th of April 2009

I was hoping not to write about the ING credit funds for a while – or at least until their restructuring proposal is published – however some of the commentary in the industry has encouraged me to revisit what’s happening. Also I was thinking there is a similarity between the attention Tony Veitch had over bashing his former partner and ING. What similarity you may wonder? Well it seems to me Veitch has had a disproportionate coverage of his dreadful assault, as has ING over its credit funds. ING isn’t the only institution which has suffered massive losses in credit funds. Look at Credit Sails – it recently said its notes were worthless. Fortress Notes aren’t much better. There is a host of other failures, but have they had the same level of attention that ING has had? The answer, as you know, is no. Next is this barmy argument that there should be a “product recall” and ING should pay investors par for their DYF and RIF units. Sorry, credit funds aren’t like washing machines or toasters (well you could argue the money goes around and around or gets burnt, but I think you know what I mean with this comparison). The funds were never marketed as riskless. I also have some concerns over the comments about research. There are two points. The first is someone who has an axe to grind with a research house is using this story for that purpose, yet there is little disclosure about that. When you read some of the stuff out there just pause for a minute and think about who is behind it and their past and that will help you put things into perspective. Secondly, I’m afraid advisers can’t hide behind some report from a research house and say we put money into such-and-such a fund as that’s what we were told to do. Advisers must do their own research and be satisfied with what they see and do. Basic risk reward theory tells you that if a fixed interest investment is going to return a net 200 points more than the bank bill rate then there must be quite a bit more risk in the fund. Yes, it is probably not a low risk investment as touted. To go around and blame everyone else and not take responsibility for your own advice is unacceptable in a profession. My final point is that ING and ANZ are stumping up with maybe as much as half a billion dollars to sort out the issue. Sure they were too slow to do it, but hey, that’s a lot of money in anyone’s terms. Show me another organisation which is prepared to put that much into a problem investment like this. To put it into perspective one of ING’s strongest critics described the offer ING is making as “terrific”. Pity some advisers can’t see it for what it is.