The Challenger Financial Services Group will be reopening its Howard Mortgage Trust and “recommence commercial lending” through a restructuring scheme.

The proposed restructuring of at least $500 million of the fund will allow small investors to withdraw 100 percent of their funds if their balance is $10,000 or less. Small investors comprise about 40 percent of the fund's 80,000 investor base.

The unfreezing of the fund to the small businessmen is expected to release about $150 million in funds. The offer is speculated to be repeated annually.

Under the proposed restructuring, Challenger will remove the current 5 percent quarterly cap on redemption requests. As a result, investors will be allowed to withdraw part or all of their invested money, subject to available liquidity reserves, which are believed to be at least $500 million.

Moreover, by restarting commercial lending, the Australian issuer of annuities will be able to lift returns in the fund from the current rate of 3 percent to about 5.5 percent per year.

The federal government introduced a guarantee on retail bank deposits in October 2008. The government move led most mortgage trusts to freeze redemptions in their funds to prevent an investor exodus. Challenger froze its mortgage trust in late 2008.

An estimated $15 billion in funds remain frozen and more than 70 funds remain frozen or with limited quarterly redemptions.

Shareholders have to vote on the proposal in a meeting scheduled this October. The investment management firm is expected to announce the proposed restructuring today.