Following the precarious situation surrounding troubled Belgian broker Merit Capital and its financial problems, the management of its flagship Merit Capital Global Investment Fund has now been full transferred to Belgian private bank Dierickx Leys. The 400 million euro fund will be renamed Dierickx Leys Fund III.
Dierickx Leys CEO Filip Decruyenaere (photo) told Investment Officer Belgium that, subject to a number of changes, management of the Merit fund and all its sub-funds now rests fully with his firm. The fund is a self-managed sicav under Belgian law.
Renaming the fund was ratified at an extraordinary general meeting held last week. The sicav consists of several sub-funds that have also been renamed. Merit’s Capitam and Value & Dynamic sub-funds will retain their current names.
Merit’s demise
Antwerp-based stock broker Merit Capital this year became subject to a criminal investigation by Belgian police authorities. The probe is linked to disputed transactions with French-British hedge fund H2O Asset Management. H2O ran into trouble in 2019 after it invested more than one billion euro of its clients’ money in Tenor, a firm managed by controversial German financier Lars Windhorst. The Financial Times has reported that Windhorst’s Tenor recently missed a deadline to pay back this money and said some 1.6 billion euro is still trapped in so-called “side-pockets” that H2O had set up.
Several attempts to find a buyer for Merit failed earlier this year. Luxembourg’s Fuchs & Associés, pressed by supervisor CSSF, was forced to step back as a possible buyer in August.
Dierickx Leys now in charge
Merit Capital was the portfolio manager, promoter and distributor of the sicav until its replacement by private bank Dierickx Leys. The investment fund was the flagship of the exchange house and held about 400 million euro of the total 1.25 billion euro in assets under management at Merit.
The former Merit sicav will now be co-managed by Filip Decruyenaere and Sven Sterckx, respectively CEO and director at Dierickx Leys. Ben Granjé, CEO of the Flemish Federation of Investors since 2019, has been appointed as an independent director.
Belgian regulator FSMA has said that the controversial investments led to conflicts of interest at Merit. The firm’s governance violated the law on several counts. The replacement of the commissioner’s permanent representative was not published. Deadlines for handing over the necessary documents to the auditor and for convening the general meeting were not respected. Deloitte also reported that the annual report for the 2020 financial year was not submitted on time and the rules around the release of legal documents were violated.
Deloitte also spoke of “material errors” in calculating the net asset value of three sub-funds of the fund over a seven-month period in the sicav’s 2021 annual report. As a result, the value was overstated and investors paid too much on entry, but also received too much on exit.
Dierickx Leys Private Bank was founded in 1901. Over the last few decades, the institution evolved from foreign exchange agent over securities bank to today’s private bank. Dierickx Leys offers services such as advisory and discretionary management, asset management, wealth planning and proprietary funds. Dierickx Leys has 63 employees, spread across its branches in Antwerp, Mortsel, Ghent and Kortrijk in Belgium.
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