Hypo pays pounds 300,000 into mispriced Jersey cash fund

HYPO Foreign & Colonial has been forced to pay nearly pounds 300,000 into a Jersey-based cash fund because its manager allowed it to be mispriced for nearly seven months.

Daniel Sheard, manager of the pounds 5m Jersey-based Reserve Asset Fund, resigned as soon as the under-valuation of the fund was uncovered this month.

In an internal memo, Mr Sheard blamed the mistake that led to the mispricing of the Jersey cash fund on the pressure he was under managing Hypo Foreign & Colonial's much larger Higher Income Plan.

The Higher Income Plan has attracted almost pounds 500m from 70,000 investors. It uses derivatives to pay a high level of income - now 9 per cent. It has been subjected to intense press and regulatory scrutiny because of fears that investors' capital would be used up in an effort to maintain the level of income.

In the memo, Mr Sheard said: 'I was suffering from great pressure of work at the time as a result of my work with the Higher Income Plan and this was another problem with which I could not cope.'

Simon James, Hypo Foreign & Colonial managing director, said that Mr Sheard had invested in a fixed-interest security that was outside the spirit of the rules governing the fund. 'Daniel bought a short-term note in February with a maturity date in October. The note was priced accordingly.

'In fact, the character of that note turned out to be significantly different. It was a hybrid note, which showed the volatility of a 34-year bond.'

He said the value of the fund was hit by the turmoil in the bond market earlier this year, but it continued to be priced at a higher level.

'When Mr Sheard went on holiday the mistake was uncovered, and he was confronted when he came back. He immediately offered to resign.'

Register for free to continue reading

Registration is a free and easy way to support our truly independent journalism

By registering, you will also enjoy limited access to Premium articles, exclusive newsletters, commenting, and virtual events with our leading journalists

Please enter a valid email
Please enter a valid email
Must be at least 6 characters, include an upper and lower case character and a number
Must be at least 6 characters, include an upper and lower case character and a number
Must be at least 6 characters, include an upper and lower case character and a number
Please enter your first name
Special characters aren’t allowed
Please enter a name between 1 and 40 characters
Please enter your last name
Special characters aren’t allowed
Please enter a name between 1 and 40 characters
You must be over 18 years old to register
You must be over 18 years old to register
Opt-out-policy
You can opt-out at any time by signing in to your account to manage your preferences. Each email has a link to unsubscribe.

By clicking ‘Create my account’ you confirm that your data has been entered correctly and you have read and agree to our Terms of use, Cookie policy and Privacy notice.

This site is protected by reCAPTCHA and the Google Privacy policy and Terms of service apply.

Already have an account? sign in

By clicking ‘Register’ you confirm that your data has been entered correctly and you have read and agree to our Terms of use, Cookie policy and Privacy notice.

This site is protected by reCAPTCHA and the Google Privacy policy and Terms of service apply.

Register for free to continue reading

Registration is a free and easy way to support our truly independent journalism

By registering, you will also enjoy limited access to Premium articles, exclusive newsletters, commenting, and virtual events with our leading journalists

Already have an account? sign in

By clicking ‘Register’ you confirm that your data has been entered correctly and you have read and agree to our Terms of use, Cookie policy and Privacy notice.

This site is protected by reCAPTCHA and the Google Privacy policy and Terms of service apply.

Join our new commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

Comments

Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged inPlease refresh your browser to be logged in