Macquarie to compensate investors in failed Shield fund

Macquarie accepted fault in the debacle for failing to place Shield on a watch list for heightened monitoring, despite overseeing $321 million in investments to the fund through its wrap platform.

Around 3000 clients, who have been unable to access their funds since February 2024, will be compensated in full.

The Australian Securities and Investments Commission also commenced Federal Court proceedings against Macquarie, which has admitted it contravened the Corporations Act.

It failed to act efficiently, honestly and fairly because it knew Shield was a new fund with no track record, but still allowed people to invest in it and did not put it on a watchlist for heightened monitoring, said ASIC deputy chair Sarah Court.

"Macquarie was aware of liquidity risks. Macquarie was aware that there were potential conflicts in the fund," Ms Court told reporters on Thursday.

"This is an extremely important outcome from our perspective. It stems the significant losses that have threatened the retirement savings of thousands of Australians."

Of the $480 million in funds invested in Shield from 2022 until ASIC shut the scheme down in 2024, $321 million was facilitated through a super wrap platform hosted by the financial services conglomerate's subsidiary Macquarie Investment Management. 

Super wrap platforms allow mum and dad investors to choose from a wide variety of investment options hosted by a trusted financial provider.

But concerns have been raised that the model has led to confusion among investors, who believed they were investing in the platform's host, rather than from a range of more speculative vehicles.

The collapse of Shield, as well as the recent failure of First Guardian, has raised further questions about the oversight of the system.

At least 5800 total investors put their money in Shield, while another 6000-odd were affected by the First Guardian Collapse.

ASIC continues to investigate First Guardian, as well as Shield's responsible entity Keystone Asset Management, superannuation trustees, lead generators, financial advisers, and the research house which rated Shield.

Macquarie said the payment spared investors from a likely multi-year wait as the complex liquidation process to recover funds plays out.

"The approach of providing immediate certainty and an improved outcome for investors benefits all parties," it said in a statement.

Although Macquarie failed its trustee obligations, ASIC is not seeking a civil penalty against the Millionaires' Factory because the company proactively came forward to reimburse investors, which was the regulator's primary concern, Ms Court said.

Macquarie promised to make all payments in full by Tuesday.

Financial Services Minister Daniel Mulino welcomed the news that investors would be reimbursed in full and said Treasury was working with ASIC to implement reforms to better protect consumers.

"We are seeing failings at every step of the value chain, including from lead generators, financial advisors, superannuation trustees, auditors, managed investment schemes and research houses," he said.

Australian Associated Press