Australia’s Watchdog Freezes Two Perpetual Funds Over High Risks

Harry Brumpton, Bloomberg News

Pedestrians in Sydney, Australia, on Wednesday, Dec. 15, 2021. Australian household sentiment declined this month as concerns mounted about the new omicron variant of coronavirus in the nation's recently re-opened eastern states of New South Wales and Victoria. Photographer: Brent Lewin/Bloomberg , Bloomberg

(Bloomberg) -- The Australian Securities & Investments Commission has moved to freeze two funds run by one of Australia’s largest wealth managers Perpetual Ltd., citing elevated risks embedded in both funds.

ASIC on Friday issued “interim stop orders” to stop Perpetual Investment Management Ltd. from offering or distributing its Perpetual Pure Microcap Fund and its Perpetual Geared Australian Share Fund to retail investors. Perpetual confirmed the order in a statement.

“Microcap equities carry a significant level of risk due to high price volatility, shallower market depth (with few traders and turnover in share transactions) and the limited operational history of microcap companies,” ASIC said. The geared fund meanwhile, with a mandate “able to take on debts valued at up to 60% of the fund’s total assets” likewise “increases the chances of investors incurring large losses,” it said.

“Perpetual takes its regulatory obligations seriously and has taken immediate steps to comply with this interim stop order,” the company said in its statement. “Perpetual has ceased the sale and distribution of these products effective 24 November 2022 until further notice.”

The orders are valid for 21 days unless revoked earlier, ASIC said.