AMP Capital yesterday released a number of “strategic and operational enhancements” that came about after a review of the China Growth Fund, performed by the responsible entity and Goldman Sachs.
The review was prompted by vocal concerns by a number of investors in the fund, notably including $2.7 billion hedge fund LIM Advisors.
In a statement to the ASX yesterday, AMP Capital noted that the discount to NAV of the China Growth Fund is less than that of its closest competitors – the HSBC China Dragon Fund (currently trading at a discount of 22.5 per cent) and the Morgan Stanley China A-Share Fund (29 per cent).
The planned changes to the AMP China Growth Fund include implementing the Shanghai-Hong Kong Stock Connect trading platform to provide the fund with enhanced liquidity for trading purposes.
AMP Capital will also alter the fund’s default dividend reinvestment plan election to allow new investors to opt-in rather than opt-out, which, it is hoped, will reduce the dilutionary effect of new issuances on NAV over time.
The appointment of a dedicated ‘head of investor relations’ is intended to improve the marketing of the fund.
When it comes to governance and disclosure enhancements, AMP Capital plans the following:
- Establishment of an ongoing Advisory Committee composed of external members to provide recommendations to the RE regarding strategic issues and governance matters.
- Providing daily NAV estimates to increase transparency of the fund’s performance.
- Clarifying the components of the fund’s management fee to help investors better benchmark these fees against other investment opportunities.
Chairman of the AMP Capital China Growth Fund Stephen Dunne said the changes are in “the best interests of all investors in [the fund]”.
“After detailed consideration, the RE [responsible entity] took the view that the fund continues to provide Australian retail investors with access to the China A-share market, which is consistent with its original purpose, and should continue to operate in its present form,” Mr Dunne said.
“However, we did consider that certain enhancements to the fund could be made that would be in the best interests of unitholders. Taken together, the RE believes these changes should be beneficial to existing investors.
“When reviewing directly comparable peers and the outcome of their significant capital management activities, we found these activities did not sustainably narrow the funds’ discount over the long term to the benefit of all unitholders.
“We were also concerned any capital management option for AGF involving a substantial redemption opportunity could reduce scale, trading liquidity and operational flexibility.
“We are confident the changes will help to further strengthen the fund’s performance, improve transparency for all investors and introduce flexibility in the fund’s trading platforms,” Mr Dunne said.
