Military Super fails to outflank $8m fee

But the Victorian Supreme Court has ruled that the hedge fund, Agora Asset Management group, was fully entitled to charge Military Super the $8 million exit fee even though Military Super, aghast at the size of the charge, cancelled its redemption request.

In what amounts to a sobering lesson about reading the fine print, the court found that in 2007 when Military Super invested $150 million in the Agora Absolute Return Fund II it formally committed to paying "up to 5 per cent" if the assets were withdrawn. The actual amount would be at the discretion of Agora.

Concerned about poor returns under Agora's management prompted Military Super to request in December a redemption of all its $152.18 million, which represented 95 per cent of all the units in Agora's Absolute Return Fund II.

The investment was repaid in May but Military Super was stunned when it realised it had been docked $7.89 million as a "withdrawal fee".

The court heard Military Super's chief executive, Michael Seton, then tried to cancel the redemption but was told by Agora's managing director, Peter Apostolopoulos, that Agora would not consent to it being cancelled unless Military Super agreed to have some investments with the hedge fund.

Military Super, through Commonwealth Superannuation Corporation, sued Agora and accused the fund manager of capricious conduct and breaches of its duty.

Justice Jennifer Davies has ruled the terms of the constitution and information memorandum for the Agora Absolute Return Fund II specifically entitled Agora to charge the fee and to withhold its consent on the redemption reversal. Justice Davies said "Agora did not act other than in accordance with its fiduciary and contractual duties".

Neither Mr Seton nor Military Super's chairman, Tony Hyams, returned calls yesterday.

Mr Apostolopoulos declined to comment and suggested it was "a private dispute".

Military Super's latest assets summary shows that of the $962 million it had invested in Australian shares at June 30, $142.94 million was invested in the Agora Absolute Return Fund.

In the nine months to March, Military Super's investments in Australian shares returned 12.5 per cent. Its annual report will be published in October.