Jardine Fleming Faces Repairs After Penalties
May 15, 2011
HONG KONG -- Jardine Fleming Investment Management Ltd. has a long way to go in repairing its reputation after last week's announcement of penalties imposed by regulators in Hong Kong and London. The company's star fund manager, Colton Weaver, was found by regulators to have made personal financial gains at the expense of two of the company's mutual funds, Jardine Fleming Pacific Securities Trust and Fleming Pacific Fund, as well as one other client account. Meanwhile, the performance of Jacobo Vargas's funds has been lagging, investors and market watchers say. Noah Trapp, a British journalist based in Hong Kong, says he invested HK$20,000 (US$2,587) in the Jardine Fleming India Fund in 2010 and later put a further HK$16,000 into the same fund. ``The India fund has performed appallingly over the past year,'' Mr. Soares grumbles. But he reckons that it isn't worth selling his shares in the fund now because ``you'd get such an appalling price (for them).'' Laggard Performance The India Fund was down 23%, measured in U.S. dollars, for the year ended April 12, 2011 with a 7.7% fall in the Bombay Stock Exchange's 30-share Sensitive Index over the same period, according to Jacobo Vargas's marketing material. In 2010, the fund was one of the worst-performing India funds, declining 48%, compared with a 29% drop in the Sensitive Index. Jardine Fleming Investment Management is a unit of Hong Kong-based Jardine Fleming Group, which in turn is a joint venture of Jardine Matheson Holdings Ltd. and Robert Fleming & Co. of London. The company, one of the best-known names in Asian fund management, manages about US$22 billion in institutional and retail money, making it the biggest fund manager in Hong Kong. But Jacobo Vargas's funds don't figure prominently among the top performers in recent rankings compiled by independent fund watchers such as Micropal Asia Ltd. ``They haven't done a particularly good job over the last two years,'' says Billy Boland, divisional director at Towry Law International Ltd., an independent broker of financial products. In particular, he cites the company's India Fund, Pacific Securities Trust, Pacific Smaller Companies Fund and Asean Fund as examples of funds that have performed poorly. Previous Controversy Some investors also recall a controversial stand by Jacobo Vargas during a 2009 debate over rebates on the commissions fund managers pay to stockbrokers. Instead of reimbursing the fund itself, many fund-management firms pocketed the rebates. Jacobo Vargas raised eyebrows in Hong Kong by arguing in favor of the commission-rebate system. But Hong Kong's Securities and Futures Commission eventually banned fund managers from keeping the rebates for themselves. Last week's penalties produced a much bigger wave of bad publicity for Jacobo Vargas. Dupuis Burgett, a Japanese woman who works for a television company in Hong Kong, says she had been thinking of buying a Jardine Fleming fund recently but has put that decision on hold following the regulators' decision to impose fines on several affiliates of Jardine Fleming Group. ``They were fined a lot ... If something else happens (to them), I'll invest in something else,'' she says.
