Australia’s IOOF Hit with Class-Action Lawsuit

Australian wealth manager IOOF Holdings has been sued by shareholders who claim the firm allegedly breached stock market disclosure obligations and “engaged in misleading or deceptive conduct.”

The suit was filed in the New South Wales Supreme Court in Sydney by law firm Quinn Emanuel Urquhart & Sullivan.

Quinn Emanuel’s claim against IOOF stems from evidence given by the wealth manager at the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. The law firm said the evidence concerned breaches by IOOF’s directors and officers, and its subsidiaries, of their obligations as superannuation trustees.

According to the law firm, IOOF shares lost over 35% of their value “following these revelations at the Royal Commission, and the announcement of various proceedings against IOOF’s subsidiaries and officers related to those breaches by the Australian Prudential Regulation Authority (APRA).”

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In response to the lawsuit, IOOF said the claim against it was “speculative and without foundation.” The wealth manager also said it “takes its continuous disclosure obligations seriously,” and that it “does not engage in misleading or deceptive conduct.”

In December, the APRA announced a series of actions it was undertaking against IOOF entities, directors, and executives for “failing to act in the best interests of superannuation members.”

APRA Deputy Chair Helen Rowell said the regulator had tried to resolve conflict of interest concerns with IOOF over several years but decided it was necessary to take stronger action after concluding the company was not making adequate progress, nor was it likely to do so in a reasonable period of time.

“APRA’s efforts to resolve its concerns with IOOF have been frustrated by a disappointing level of acceptance and responsiveness to the issues raised by APRA,” Rowell said in a statement. “The actions we are now taking are aimed at achieving enduring change to ensure that the trustees of the superannuation funds operated by IOOF fully meet their obligation to put the interests of members ahead of all other interests.”

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Tags: IOOF Holdings, Lawsuits, New South Wales Supreme Court, Wealth Manager

Jonathan Gaabel

As much as $1 billion in assets may hit the real estate market as part of the Los Angeles County Employees’ Retirement Association’s (LACERA) review of its real estate portfolio.

There’s no event that’s prompting the potential sales, other than bringing core and value-added real estate strategies closer to their 7% target allocation, Chief Investment Officer Jonathan Grabel told CIO. “We’re not opining on individual properties, it’s just part of asset allocation, and these strategies happen to be overweight.”

“Subject to board approval, much of this could happen over the next 24 months,” Grabel added. However, despite the main goal of divesting to reduce the portfolio’s allocation, the pension still intends to execute a modest amount of new investment activity so that vintage year diversification can be maintained. In that case, LACERA’s investment staff sought board approval to allow up to $500 million to be invested by the fund’s existing separate account managers, Clarion Partners, Heitman, Invesco Real Estate, DWS, and Stockbridge.

According to Grabel, LACERA conducts structure reviews of its asset categories to optimize the implementation of each portfolio. The real estate structure review identified various initiatives including being a net seller during the 2019-2020 fiscal year, and states that for every $1 of new investment, $2 of sales should occur.

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The vacated space in the portfolio could be filled with LACERA’s other initiatives in its real assets outlet, including infrastructure, Treasury Inflation-Protected Security (TIPS), and natural resources, as well as its credit portfolio. The total real estate portfolio is currently valued at about $6.4 billion.

The sell-off is expected to include approximately $500 million worth of apartment assets. The full $6.4 billion real estate portfolio is illustrated below:

Source: LACERA

After the dust has settled, LACERA staff anticipates that at least 60% of the portfolio will be core real estate assets. They’re studying whether or not to gain access to office and retail exposure, since technological disruptions from online competition has “challenged mall holdings” in the past for other investors. They also intend to target niche, long-term strategies such as medical offices, senior housing, student housing, self-storage, and other investments.

Another key theme is for the pension to consider using more open-end fund vehicles, since they may improve liquidity, diversification, and have higher performance figures.

The $56 billion pension is in the midst of deploying its inaugural infrastructure strategy, part of which includes fulfilling a 2%, or $1.1 billion, target allocation.

Grabel joined LACERA in April 2017, replacing David Kushner, who resigned after a three-and-a-half year stint at the retirement system.

Tags: Jonathan Grabel, Los Angeles County Employees Retirement Association (LACERA), Pension, Real Estate