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Perpetual funds hit with ASIC stop orders

Fund manager Perpetual says it has stopped the sale and distribution of two funds the competition watchdog says might be too risky for retail investors.

The Australian Securities and Investments Commission on Friday issued an interim stop order on Perpetual preventing it from offering or distributing the funds to retail investors for three weeks.

The funds in question are the Perpetual Pure Microcap Fund, which invests in Australian companies with a market capitalisation of less than $300 million, and the Perpetual Geared Australian Share Fund, which employs leverage. It is able to take on debts of up to 60 per cent of the fund's total assets, a strategy that magnifies both risks and returns.

"ASIC made the interim orders to protect retail investors from potentially investing in funds that may not be suitable for their financial objectives, situation or needs," the regulator said.

The targets for both funds include investors interested in preserving their capital, those who intend to use the products as core components of their investment portfolio and those who need to withdraw their money on a weekly and daily basis, ASIC noted.

"Perpetual takes its regulatory obligations seriously and has taken immediate steps to comply with this interim stop order," Perpetual said in a statement.

Perpetual said it ceased the sale and distribution of those products, effective on Thursday, "until further notice".

It has engaged with ASIC to respond to the interim order, the company said.

ASX-listed Perpetual is one of Australia's biggest fund managers with $89.8 million in assets under management as of September 30.