ASIC imposes interim stop orders on La Trobe Financial funds, freezing about 120,000 investors

The Australian Securities and Investments Commission placed interim stop orders on three La Trobe Financial fund offerings last week, effectively freezing around 120,000 investors from making new investments while the regulator investigates whether the products were offered to the right type of buyers. The orders target the company's flagship 12-month term account, its two-year account, and the US Private Credit Fund, and come as ASIC assesses target-market determinations and product disclosures across the funds.

The regulator said deficiencies in the target-market determinations raised concerns that high-risk loans to property developers were marketed to retail investors as safe, stable products. The affected accounts are valued at roughly $11.5 billion in total. The interim stop orders will remain in place for 21 days, or until ASIC’s concerns are addressed, whichever comes first. ASIC stressed that the action is meant to protect consumers and retail investors from products that may not be suitable for their financial objectives, situation, or needs.

La Trobe Financial promotes itself as one of Australia’s premier alternative asset managers, with about $20 billion in assets under management and more than 120,000 investors. The company has paused accepting new investments in response to the stop orders. On its site, La Trobe emphasizes that the interim stop order does not reflect on the performance of its assets, portfolios, or product design, and notes that since 1989 none of its portfolio accounts has experienced liquidity gates or withdrawals being frozen.

La Trobe’s chief investment officer, Chris Paton, addressed clients in a video message after the interim orders were announced. He reassured investors that the money is safe and described the products as backed by small, carefully chosen loans spread across different borrower types. “We manage these investments cautiously to reduce risk,” Paton said. “These portfolios are designed to perform across the cycle and have performed for investors for over 35 years.” He added that the company would continue to manage portfolios conservatively while working with ASIC, and that monthly interest would continue to be paid to investors as before. Paton also said maturing investments would be paid on time and in full, with ample liquidity to meet obligations.

Industry observers note that the 2021 laws require financial products to be suitable for the recipients and that enforcement actions like this highlight ongoing regulatory scrutiny of alternative-asset offerings marketed to retail investors. While the interim measures are in place, ASIC’s review will determine whether the stop orders should be lifted, continued, or expanded to additional funds.