The Providence funds went into administration last August after all of the directors of the funds and its manager Providence Investment Management International resigned. The Guernsey Royal Court appointed Deloitte as administration managers.
The closed-ended absolute return fund aimed to provide investors with annual returns of between 7% and 14.25% from investments in Brazilian debt, specifically the factoring of receivables (the purchase of debt) of small and medium-sized businesses.
The fund lent money to the factoring company based in São Paolo for between 30 and 180 days. The short term debt was purchased at a discount of more than 2% per month with the returns collected at par.
In the latest update from Deloitte, published at the end of December, administrators revealed it is “highly unlikely” any investments would be recoverable.
“The offices used by the two debt factoring companies in Sao Paolo have been vacated, and all employees have left,” said Deloitte administrator Alex Adam.
He added that any money that is recovered would be funnelled through the company’s network of US and Asian subsidiaries and would go to Antonio Buzaneli, chief executive of US-based parent company Providence Group.
“There may also be competing claims on any remaining assets from parallel fund structures in the US and Asia, meaning that it is highly unlikely that there will be any recovery to PIF investors,” said Adam.
Campaign group, the Providence Bonds Investors’ Action Group, has been set up to represent around 230 investors.
According to The Telegraph, the group is targeting Independent Portfolio Managers (IPM), a company regulated by the Financial Conduct Authority (FCA), over their role in marketing the investments.
Jersey’s financial services regulator has already shut down local IFA firm Lumiere Wealth, which was majority-owned by Providence Global, after an investigation into the sale of Providence funds to its clients.
As a result, Lumiere Wealth’s founder and managing director, Christopher Byrne was arrested in October, charged with a £1m ($1.2m, €1.1m) fraud linked to the funds. He last appeared in court on 19 December on charges ranging from fraud to misleading regulators.
In September last year, Providence Financial Investments, the Miami-based parent of Providence Global came under fire for defrauding investors out of $64m.