Crunch To Get Worse, Packer Fund Warns

The Age

Tuesday August 19, 2008

Vanda Carson

JAMES Packer's listed hedge fund, Ellerston Gems, has warned unit holders that the "credit crunch is going to get worse", and is holding 20% in cash to preserve capital.

In a newsletter marking the fund's first anniversary, Ashok Jacob, Ellerston's chief financial officer and Mr Packer's right-hand man, cautioned investors that "schizophrenia is back".

"Extreme discontinuities are emerging and it's the same old story - the US is transporting volatility, and Europe and Asia are becoming terrified about the US financial contagion and various meltdown scenarios," he said.

Mr Jacob has been a stock picker for Mr Packer and his late father, Kerry, for many years and a director of private family company Consolidated Press Holdings for nearly a decade. James Packer owns 14% of the fund and Ellerston Capital, which manages the fund, also oversees a further $800 million of private Packer family funds.

The Gems fund has lost just under 4% of its value in its first year, but has outperformed major indices, including the S&P/ASX 200, the S&P 500 and the MSCI World index - a benchmark for global stock funds - all of which lost about 13%.

Ellerston listed last year with its units priced at $2.50, but traded as low as $1.66 on March 17. The units yesterday closed down 3.5 at $1.78.

The report said the fund "continues to maintain a low net exposure in an effort to preserve capital".

As its unit price sank in recent months, Mr Packer's private investment company increased his stake to 14%, from 8%.

© 2008 The Age

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