Mystery deepens over missing Trio funds

The ARP Growth Fund has as its major investment $52 million invested through the British Virgin Islands in a fund of hedge funds. The investment vehicle, Professional Pensions ARP Ltd, also based in the islands, uses a Hong Kong company, Empyreal Holdings, as its investment manager.

"We have not been able to, atthis point, establish the value," a PPB partner, Neil Singleton, said yesterday. PPB was appointed administrator of the ARP Growth Fund after regulators swooped on Trio Capital on December 17 and removed it as the responsible entity or trustee from $426 million in investments.

Continuing uncertainty about ARP Growth follows difficulty by administrators and regulators in tracing $118 million invested through another Trio Capital managed fund, Astarra Strategic.

Establishing the existence of ARP Growth's major asset has been slow because of negotiations on a confidentiality agreement requested by the British Virgin Islands-based Professional Pensions on January 20.

Another PPB partner, Mark Robinson, said documents had been delivered later to show that the investments and the documents were being examined. Even once assets have been established, valuing investments in hedge funds ranging from the Denholm Hall Russia Arbitrage Fund Class A, the Alpstar Secured Bank Loan Fund and the Fairfield Ludgate Hill Asian Arbitrage Fund remains extremely difficult.

Professional Pensions has asked the British Virgin Islands for approval to wind up the fund, raising the prospect of hard-to-sell hedge fund assets being sold at discount.

Philip York, a director of Empyreal Holdings, said he had answered all the administrators' questions and provided details of transfers of moneys by a custodian, Fortis.

Mr York said the investment by Professional Pensions, which about 70 people rely on for their superannuation savings, was an agreement known as a "total return swap" entered into with Bear Stearns in 2005. He said the money, which was invested in a series of hedge funds, was now held by JPMorgan due to JPMorgan's takeover of Bear Stearns. Under the total return swap the investors benefit from a "synthetic" exposure to a basket of hedge funds, while JPMorgan holds the assets.

Mr York said he had provided evidence of Empyreal's contractual relationship with JPMorgan to ASIC. "We have provided ASIC with information supporting the existence of those assets. We have provided PPB [with] all the documents we have in relation to the valuations and shareholdings."

A former investment manager of ARP Growth Fund, Paul Gresham, said: "I have seen the swap agreements so has ASIC."