Investors in Basis Capital's embattled Cayman Islands fund have been dealt another blow with liquidators foreshadowing a potential claim for the fund's assets.
Proceedings in the New South Wales Supreme Court to clarify investor rights hit a snag yesterday after legal counsel for liquidators Grant Thornton said the firm is considering lodging a claim for a proportion of the pool of assets held by the Basis Yield Alpha (Master) Fund.
Legal counsel for Sydney-based hedge fund Basis Capital said this may cause the amount of money in the Basis Yield Fund, which was channelled into the Cayman Islands-based master fund, to be reduced and more time was needed to sort out the problem.
On December 19 the Grand Court of the Cayman Island placed the fund into official liquidation.
It collapsed as a result of the unwinding of the United States sub-prime mortgage markets through Basis Capital's exposure to pools of mortgage bonds packaged within collaratorised debt obligations.
BT Financial Group and custodians for Challenger Financial Group and the Commonwealth Bank of Australia have joined the proceedings to claw back investor funds in the Basis Yield Fund and the Basis Aust-Rim Diversified Fund administered through their wrap platforms.
Melbourne-based teachers' superannuation fund Combined Funds appeared yesterday as a fourth defendant.
ASIC lawyer Chris Croft informed the court the regulator would seek leave to appear amicus curiae (friend of the court) during the proceedings.
Investment and Financial Services Association chief executive Richard Gilbert told InvestorDaily the fund managers entered into the proceedings in good faith.
"We're surprised that this has occurred because [our members] went on the basis as volunteers as defendants to get the test case running," Gilbert said.
"This issue could adversely affect the interests of the investments they're seeking clarification on."
Latest estimates show that the Basis Yield Fund has a value of two cents in the dollar, based on the internal valuation policies of the Basis Pacific-Rim Fund's investment into the master fund.
The hearing will resume on April 7.
