Ireland’s failed investments

In all the years that I have been working in personal finance, there have been a number of crises when it comes to the financial institutions that we give our money to.

The Equitable Life

The first one I remember was with The Equitable Life. The Equitable Life was founded in 1762 and was a big insurer known for their With Profits funds (at a time when there was only 2 or 3 funds to chose from) and guaranteed annuity rates. It was these guaranteed annuity rates that caused their downfall. As open market rates fell, their policies had much higher guaranteed rates, that they were held to by policyholders. They tried to renege on them but the House of Lords found in favour for the policyholders. They had not insured or hedged against this cost, so it lead to them closing to new business in 2000 and having to sell the company.

Ireland’s disasters

The Equitable Life was a UK company with a presence in Ireland. When we look at the investment disasters in Ireland, I can list:

  1. Custom House Capital – Took clients money from cash and other investments without telling them to plug funding gaps in geared property investments in Europe. The Central Bank had seen this during an inspection and just told them to get investors to sign authorisation to do this, instead of shutting the whole thing down. Directors have been sentenced to prison for their role.

  2. Solar 21 – A renewable energy investment group, which raised €240 million from Irish investors to build a waste to energy plant in Yorkshire. The plan was abandoned due to delays after the planned technology company went into administration. There is a High Court scheme to sell assets to pay back investors but that is being frustrated by a moratorium imposed by the British government on new waste to energy plants. The whole thing is in limbo. Who, but the British government is going to buy a waste plant in Yorkshire?

  3. Blackbee Investments – Provider of a number of different investments, including nursing homes under Aperee Living. Three of these homes had their registration cancelled by Hiqa. Blackbee is in liquidation with their directors not co-operating with the appointed liquidators.

  4. Dolphin Trust – Investments in German property, that has turned out to be a Pyramid Scheme. Brokers were paid up to 20% for placing money with Dolphin Trust.

  5. Brendan Investments – Another German property play that launched just as the financial crises happened. With an entry point of just €5,000 (these type of investments usually have a minimum of €100,000), it attracted a lot of smaller investors. With nowhere to invest, instead of giving investors their money back, they became slum landlords in Detroit!

You can see a common theme running through these investments:

  1. All of them involve property, usually just one

  2. All of them involve borrowing

  3. All of them are with small investment companies

  4. All of them had poor corporate governance

 

In my limited experience in dealing with these companies, I have found out that there is a myriad of companies in place, often in other jurisdictions and you cannot find which company your clients money is in and which company is its parent company or subsidiary. Information is not readily available and investors are provided very limited information on how their investments are doing.

These are extremely risky investments that have been mis-sold to investors as being safe. Due to the poor corporate governance of these companies, when they do fail, it takes the liquidator years to untangle everything and to see who owns what and who owes what. Add in uncooperative directors and it is only bad news for investors.

 

In all these years working in personal finance, there has never been a scandal or collapse with one of the big equity funds. Yes, there has been stock market crashes, which is due to the global markets, but give it time and the money recovered. And investors always had access to their money.

Stick to the tried and tested, you will make money in the long term and you won’t risk losing it all.

 

Steven Barrett

10 June 2024