AMP Capital China Growth Fund should be wound up
LIM Advisors has rejected AMP Capital's view that its AMP Capital China Growth Fund (AGF) is "fit for purpose" and has requested AGF to be wound up.
The second largest independent unitholder of the fund requested that the responsible entity (RE), AMP Capital Funds Management Limited, to let unitholders decide whether it should be wound up at an extraordinary general meeting in late July.
LIM portfolio manager, Nick Paris said LIM had rejected AMP Capital's announcement that the fund was "fit for purpose" last month because it had underperformed its benchmark index since its launch and because the average discount on the units since launch had been an unacceptable 20 per cent.
In August last year, AMP Capital announced a discount reference point of 15 per cent (from 20 per cent) on AGF units and asked unitholders to give their strategic enhancements six months to work.
However, LIM called on the fund (with support from other unitholders) to impose a 10 per cent discount ceiling on AGF as they believed the change would not be sufficient.
He noted that the RE had proposed to re-engage AMP Capital to manage the fund without needing unitholders to vote on it.
"This is another example of the weak corporate governance surrounding the way that this fund is run as there is little independent oversight on our RE," Paris said.
"We believe that AGF unitholders should have the chance to review the success of the fund now that it is close to 10 years old.
"As a result we have requested that the RE add a resolution at the July meeting that AGF be wound up."
Commenting, AMP Capital Funds Management chairman, Adam Tindall said as the RE AMP Capital had always acted and would continue to act in the best interest of all unitholders in the fund, not just those of a single investor regardless of its size.
“During our exhaustive consultation with more than 700 unitholders earlier in the year, the majority were in favour of keeping the fund in its present form. They like the exposure it gives them to China – one of the world’s most dynamic economies,” Tindall said.
“The RE, with the assistance of the fund’s independent advisory committee, separately analysed whether AGF meets its original purpose: to provide Australian retail investors with access to the China A-share market to generate long-term capital growth.
“The results of this analysis determined that it does remain fit for purpose.”
Tindall noted that AGF was one of the few pathways Australian retail investors could gain actively managed exposure to China’s growth story.
“We have presented to unitholders a package of enhancements that we believe are in their best interests and will help to further improve the performance of the fund,” he said.
“We considered more than 40 options – including a wind up – and concluded with the benefit of broad investor input that the enhancements recommended are in unitholders’ best interests, and we stand by that decision."
AMP Capital said some of the enhancements included:
- Reducing the management fee from 1.65 per cent to 1.35 per cent;
- Increasing the flexibility of the fund’s investment mandate;
- Giving investors the option to receive 100 per cent of their annual distribution in cash; and
- A one off capital management opportunity: a one-off redemption of up to 15 per cent of units on issue and an on-market buy back of up to five per cent of units on issue.
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