Forager Funds Management is to delist its Australian Shares Fund from the ASX due to low levels of trading liquidity and units trading below net asset value (NAV).
The average discount in the six months to announcing the delisting intention was more than 14 per cent to NAV, the firm said, while there was an average daily traded volume of 37,186 units.
The firm said these two factors “outweigh the benefits of remaining listed” on the index.
Instead, the fund will be run as an open-ended unlisted unit trust with daily redemptions and subscriptions based on NAV. This will improve liquidity and enhance fund performance by enabling more flexibility and better protect against redemption risks.
It will also allow the fund to rebuild for long-term outperformance as it is carrying a significant performance fee deficit and it will continue to target performance of 4 per cent per annum.
A meeting of unitholders to vote upon the delisting will be held on 13 May and, if successful, the fund will be suspended on 10 June.
For unitholders who wish to redeem their units after the fund is delisted, liquidity will be generated via the fund’s cash balance or by selling assets to meet redemption requests.
On a shareholder presentation, chief investment officer, Steve Johnson, said: “We had a very good rationale for listing at the time and if things had gone differently, it may not be trading where it is now. We won’t be coming back and changing things again.
“I’ve learnt a lot about complexity in business over the past seven years and we want to get back to having the simplest business we possibly can.
“We listed as we were worried about the concept of redemption risk, and we have learnt lessons about liquidity management in terms of the portfolio, and we are in an environment where that risk isn’t worth where the vehicle is trading in terms of discount to NAV.”
Asked why firm opted for a delisting rather than running it as a ETF, portfolio manager Alex Shevelev said this was a possibility but the firm opted to discard that idea for complexity reasons.
“It requires a market-making process to take place which adds to costs and complexity, so we considered it but did not proceed with it. The way the International Shares Fund has operated, bringing this in line with that one, makes sense.”
