Finnish fund and asset management company reports overly optimistic returns

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The December-January yields of two mutual funds of the Finnish fund and asset management company Celeres have turned out to be less than what the company has announced to its investors.
      On Monday Celeres sent a letter to the shareholders of one of the mutual funds explaining that the profits accumulated by the fund were lower than what was previously reported.
      At the end of December, Celeres announced that the value of one share for the Celeres Korko mutual fund was EUR 108.64. The new revised value is EUR 105.63, in other words 2.8 percent less than first announced.
      For the Celeres Alfa-Korko fund the difference between the announced and the actual yield was even larger.
     
Celeres Korko is a short-term interest fund, which are usually considered to be low-risk. A 3% change to the yield of such a fund can be considered substantial.
      In all, the Celeres Korko fund is worth in excess of EUR 160 million. In other words, in one night, after the revised calculations, EUR five million vanished from the item's value.
      Celeres managing director Aki Kostiander explains that the redefining of the portfolio values relates to the "turbulence" in the financial market.
      In Kostiander’s view the problem lies in the fact that Celeres Korko has invested in funding market instruments and debentures, the "unambiguous prices of which are difficult to calculate".
     
Celeres’s difficulties in determining the correct price for its investments effects those having invested in the company’s funds in two different ways.
      If an investor has bought into Celeres Korko or Celeres Alfa-Korko in December-January, he or she has been overcharged for the investment. Now, after the redefinition of the share price, this overcharging will be corrected by issuing the investor additional shares of the redefined value.
     
Likewise, those who have sold their shares in the same time period will have reaped higher profits than they were entitled to.
      Celeres will simply replace the loss caused by these oversized compensations by paying money in to the two funds.
      Kostiander refrains from revealing the exact amount to be injected.
      Daniel Pasternack, head of development of an unlinked asset management company, has never before heard of a similar re-evaluation of investments into an interest fund.
      "This is serious. I cannot understand how such a substantial difference could have gone unnoticed for such a long time", Pasternack says.
     
According to head of department Tarja Ikonen, of the Finnish Financial Supervision Authority (FIN-FSA), a value miscalculation has taken place at Celeres.
      FIN-FSA has gone through the re-evaluation of the investments together with Celeres.
      "This is perfectly normal. These things happen from time to time", Ikonen states.
      "This time the mistake happened because of the highly exceptional market situation", Ikonen concludes.


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