Miscalculation of yield on investment toppled interest-bearing fund of Celeres Asset Management

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The Finnish fund an asset management company Celeres is closing down its Celeres Alfa-Korko fund, and will distribute the remaining assets to investors.
     The company decided on the move at its own initiative without being prompted to do so by the Financial Supervision Authority. The move was prompted by the revelations of clerical errors in November-January. The company admits that it had given investors information of yields on investment that were higher than they really were.
     The discovery of the error about a week ago led some investors to start withdrawing their investments, and the capital in the mutual fund started to decline.
     Celeres decided that the best option under the circumstances was to close down the fund.
     Celeres Asset Management CEO Aki Kostiander says that the remaining assets in the fund will be paid to investors in proportion to their original investment in mid-April. By that time the interest-yielding instruments are to be converted into cash at the market price.
     
In late January the fund reported assets of EUR 32 million. After a surge in divestments, just over EUR 20 million is left.
     Celeres was founded by Kostiander and Ari Aaltonen, who has served as the portfolio manager of Celeres Alfa Korko. He has not explained the background of the calculation problem, because he is on sick leave.
     Kostiander said last week that the mistake was prompted by turbulence on the investment market and targets of investment, whose clear price is difficult to find.
     
Not all are satisfied with what many see as vague clarifications by the company.
     Eufex, a Finnish brokerage house, which gives support and advice to investment funds in Finland, suspects that the last word is not out on the affair. Eufex has asked Celeres to provide additional information, and has asked for further reports from the Financial Supervision Authority as well.
     On its website, Celeres says that its Alfa Korko fund was doing very well until November, when a dip took place.
     Eufex investment director Anders Ekholm questions the time-line, noting that the situation began to become more difficult in markets for corporate loans already in June and July, and yields began to decrease.
     He feels that it is strange that yield on the Celeres fund would have remain as high as reported through November.
      Alfa Korko had invested a large portion of its assets in loans granted to Finnish and international companies. Their risks began to increase in the summer, as a result of the credit crisis in the united States.
      "I hope that there will be a thorough examination of the matter, so that no parties will be left with uncertainty about the events", Ekholm says.
     
Eufex has its own reputation at stake, as it had recommended money market funds managed by Celeres to its companies, as they had done well in last year's comparison.
     Another Celeres money market fund - Celeres Korko, which is still operating - has also suffered from problems in accounting.
     The Financial Supervision Authority is closely following developments in the case of Celeres.


Previously in HS International Edition:
  Finnish fund and asset management company reports overly optimistic returns (5.2.2008)

Links:
  Celeres Asset Management

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