Sarah’s mother died, leaving her entire estate to Sarah. Sarah was not in a position to manage the funds, so a trustee company invested Sarah’s money in a low-risk managed investment fund.
Sarah had always kept a careful watch on her inheritance and was cautious with her spending. Towards the end of 2022 the trustee company gave Sarah the financial accounts for the investment. The 2021 accounts showed Sarah had $480,000 invested, but in 2022 the accounts showed an investment of $450,000. Sarah complained to the trustee company that they had lost $30,000 and wanted the trustee company to withdraw her money from the investment before she lost any more money.
The trustee company explained that Sarah had not lost $30,000, but rather the decline in the investment’s value was caused by market volatility. The trustee company explained that the return was improving and declined to withdraw from the fund. Sarah did not accept the explanation and asked FSCL to investigate.
Dispute
Sarah said the trustee company had lost $30,000 and should have been able to predict when markets will be unfavourable and withdraw funds before this happens. Sarah said her bank term deposits were at a higher interest rate than her investment and she felt this indicated the trustee company had not been doing a good job.
The trustee company said that they had invested the money appropriately and the drop in value had been caused by market volatility.
Review
Under our terms of reference, we cannot investigate complaints about the investment performance of a particular fund.
We explained that while it might appear on paper that Sarah had lost money, because the investment had suffered a $30,000 decline in value, she had not actually lost the money at this stage. We would expect that, in time, the markets will recover and so would the value of Sarah’s investment. Although the trustee company could have withdrawn the money when the markets started to drop, we did not think this was a good idea because it would have crystalised the drop in the fund’s value, meaning that Sarah would then suffer a loss.
Although term deposits might be earning more interest at the moment, they are an entirely different product to a managed fund investment and are not a valid comparison.
Resolution
Sarah accepted our explanation and agreed to discontinue her complaint. Sarah said she finds it hard to trust people and just wanted to check that what the trustee company had told her was true.
Insights for consumers
Sometimes even low risk investment funds will ‘lose’ money. However, if you keep your money in the fund, over time the fund’s value should recover and, in the long term, produce a good positive return on your investment.
