A country accounting firm gets caught in a Sydney money mystery

afr.com:

Every year, in August, staff at DMG Partners, a modest accounting firm in Gippsland, Victoria, bake cupcakes and cookies for their colleagues.

For the cost of a gold coin, which is donated to the RSPCA, the team contribute to their community’s broader welfare. The quiet country town of Sale, where DMG is headquartered, has repaid the favour by keeping the firm in business for almost 40 years.

DMG Partners directors Ben Lancaster and Charles Bagguley from Sale, Victoria, discuss their new relationship with PAC Capital in a promotional video last December. YouTube

Late last week, DMG’s managing director, Mathew Johns – known around town as Johnno – and two directors, Ben Lancaster and Charles Bagguley, sent a note to clients that may have confused some who haven’t been following news about PAC Capital, a racy Sydney funds manager.

The email reported on two DMG investment funds which Morningstar data says are responsible for $240 million – much of which is presumably the retirement savings of residents of Sale and the greater Gippsland region.

The two DMG funds had each invested 13 per cent of their assets – an estimated $31 million – in other funds managed by PAC Capital, the email said. Some of this money was now going to be withdrawn, it said, “due to the departure of a key portfolio manager at PAC Capital”.

The current members of a committee that oversees the funds’ investments were named, and the funds’ solid returns for the last financial year: 7.53 per cent for the low-risk DMG Diversified Portfolio and 11.53 per cent in the more-daring Clearwater Dynamic Portfolio.

The note sounded like the business of making money was operating as usual. Except it is not. Many things about PAC Capital and DMG are unusual, which is