Grinning all the way to the bank – until watchdog started sniffing


IT WAS a case of the little fund that could. During the height of the global financial crisis, as cashed-up investors were reeling in a world of financial pain, the Astarra Strategic Fund somehow managed to buck the trend and keep clients’ returns rolling in.

A Canadian baseball freak, Shawn Richard, 34, the gun investment manager for Astarra, was hot property. He and his New Jersey-born partner, Eugene Liu, 32, came through the downturn unscathed, ending up with $1 billion of funds under management.

But the dream run may be coming to an end. The corporate regulator has opened an investigation into several funds – including Astarra Strategic, one of the best-performing hedge funds in the Australian market – following a clampdown on similar funds by US regulators in the wake of billion-dollar fund collapses and the $US50 billion Ponzi scheme run by Bernie Madoff.

Main: Astarra’s Shawn Richard and inset, Eugene Liu.Photo: Peter Braig

The investigation into Astarra Managed Funds, the parent of Astarra Strategic Fund, by the Australian Securities & Investments Commission comes as the corporate regulator examines ”red flag” issues such as non-standard business models and the use of in-house registries among some of the industry’s smaller funds management operations.

ASIC yesterday issued an urgent interim order forcing Astarra Managed Funds – an Albury-based group with more than $1 billion under management – to remove its product disclosure statements from its website immediately.

The products under investigation include the Astarra Strategic Fund, run out of an office in Sydney’s MLC Centre with sweeping harbour views, which happens to be on the same floor as the offices of the former prime minister John Howard.

Over three years Astarra Strategic Fund has been one of the best performers in the investment market and as recently as April was rated as four-star – the second-best rating – by the asset consultant Morningstar.

Yesterday’s orders came one week after the regulator filed charges against the managers of the $118 million Strategic Fund, Mr Richard and Mr Liu, in the equities division of the NSW Supreme Court.

ASIC has been barred by the judge from commenting on the case or even making its existence public.

The Strategic Fund’s assets are held in a special-purpose entity in the British Virgin Islands, and the investment manager has been allowed an exemption by the regulator Austrac from all sections of the Anti-Money Laundering and Counter-Terrorism Financing Act.

That means the fund does not need to verify the identity of its customers and to report transactions to the regulator. The fund was designed to invest in multiple hedge funds, based mostly in the US.

Retail investors could invest in the Strategic Fund with as little as $1000, and were often advised to do so by financial planners, who received an up-front commission of up to 4 per cent. In addition, several margin lenders allowed them to leverage their holdings in the Strategic Fund.

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